On February 27, 2021, the covid-19 pandemic clocked a year in Nigeria. The anniversary underscored the unpleasant experiences that have characterized the virus since the first case was discovered in the country.
From restrictions on movement of people to lockdown of most sectors of the economy, maintenance of social distancing, upscaling of hygiene practice, and usage of face masks, Nigeria joined several other countries in the enforcement of non-pharmaceutical protocols, aimed at curbing the speed of contagion and rate of deaths from the coronavirus, in March 2020.
The World Health Organisation (WHO) defines covid-19 as “the disease caused by a new coronavirus called Severe Acute Respiratory Syndrome (SARS-CoV-2)”. The first case was reported in Wuhan, in the People’s Republic of China on December 31, 2019; and in less than three months, it spread to most countries in such a way that the WHO had to pronounce the novel coronavirus a pandemic on March 11, 2020.
The lockdown on economies and associated measures taken by several countries to contain the negative impact of the virus culminated in output contractions, which invariably led to economic recession in many countries, and to the dip in global output in 2020 (estimated to be minus 4.3% by the World Bank, or minus 3.5% by the IMF).
One year after the first reported case and after the WHO raised the virus’s risk to its highest level, there are indications that the journey to “normalcy” for the domestic and global economies has commenced.
Major reasons for this optimism include:
• Vaccines development and deployment: Vaccines to boost people’s immunity against the coronavirus have been developed. According to the WHO, “as of 18 February 2021, at least seven different vaccines across three platforms have been rolled out in countries… more than 200 additional vaccine candidates are in development, of which more than 60 are in clinical development”.
The deployment of the vaccines has also started, though currently slow and reportedly impeded by protectionism. We, however, expect the rollout to be faster and more equitable in the coming months as more vaccines are approved and the number of required jabs reduced from two to one. A case in point is the vaccine by Johnson and Johnson that requires only one shot to build people’s immunity.
• GDP growth forecast: With the vaccine development and rollout, all leading research institutions have projected a return of the global economy to growth this year after a record output contraction last year. For instance, while the World Bank projects the global economy to grow by 4.0% this year, the IMF expects output growth to be 5.5%. The growth outlook is despite the new variants of the coronavirus, which have forced further lockdown of some economies this year. Already, the Q4 2020 GDP reports of some leading economies showed output growth e.g. the United States (4.1%), the United Kingdom (1%), Germany (0.3%), China (6.5%), and Nigeria (0.1%).
• Oil price rally: China’s early return to growth, and the positive output growth forecasts for the country and both the developed and emerging economies, the commitment to oil production cut by OPEC+, and the hope of a return to “normalcy” later this year have continued to contribute to the new rally in oil prices. A barrel of oil that was below US$30 a year ago, now trades above US$60. Typically, increase in oil price indicates an improvement in oil demand by manufacturing companies since refined petroleum products are an important input for companies’ operations.
• Manufacturing PMI: The manufacturing purchasing managers index (PMI) has improved significantly.
The J.P. Morgan global manufacturing PMI, which fell to an 11-year low of 39.7 in April 2020, rose to 53.9 in February 2021. PMI is a summary of survey sent to purchasing managers of major companies across sectors that contribute significantly to economy. The survey comprises a list of questions that gauge the expectations of the companies on five areas: level of production, level of inventory, request for new orders, deliveries by suppliers, and employment level.
It is a leading indicator: accesses the projections of the managers on whether business conditions will improve, remain the same, or deteriorate. A reading below 50 shows expectation of business contraction, while a reading above 50 shows expectation of business expansion.
The February 2021 edition of the PMI, compiled by IHS Markit, released earlier this week, showed a PMI reading of
✓ 57.9 in February, rising from 54.8 in January for Eurozone: reportedly the “fastest growth of eurozone manufacturing sector for three years”;
✓ 60.7 in February, up from 57.1 in January for Germany: reportedly the “highest in 37 months”;
✓ 55.1 in February, rising from 54.1 in January for the United Kingdom;
✓ 58.5 in February, down from 59.2 in January for the United States: the reading reportedly showed the “second strongest improvement in the health of the manufacturing sector in nearly 11 years”;
✓ 57.5 in February, up from 57.1 in January for India;
✓ 56.1 in February, rising from 51.6 in January for France: reportedly the “fastest improvement in business conditions since January 2018”;
✓ 54.8 in February, up from 54.4 in January for Canada;
✓ 56.9 in February, up from 55.1 in January for Italy: reportedly the “highest in 37 months”;
✓ 58.4 in February, up from 56.5 in January for Brazil;
✓ 51.5 in February, up from 50.9 in January for Russia; and
✓ 55.3 in February, up from 53.2 in January for South Korea: reported to be the “highest level since April 2010”.
So, one year after the devastating impact of the covid-19 pandemic, the ray of hope for a gradual return to the pre-coronavirus infections output level has become brighter. Even though this does not mean the world will see an end of the pandemic this year, it raises expectations that people, businesses, commerce, and economies will be in far better positions this year. In addition, the significance of good hygiene practice, healthy exercise and eating habits, work-life balance, business innovation, cyber security, and other lessons learnt during the period have become an important part of “the new normal”.
Now that Nigeria has taken delivery of nearly 4 million doses of the AstraZeneca vaccine, the outlook for domestic economic recovery, which started in the second half of 2020, has become brighter. While this first batch of vaccines is grossly insufficient for the country’s population of about 200 million, the expectation that the “vaccine nationalism” that has plagued rollout, especially to the developing countries, may be lifted later this year when dozens more vaccines will have been approved, raises hope that more Nigerians will receive covid-19 vaccines in the next one year.
All these suggest that, indeed, businesses and the economy will not only do well this year, but also perform better next year, all things being equal.
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