By Okechukwu Chukwuebuka
There is a cost to any economy when there is a major health concern. In recent years, the world has been, thankfully, free from epidemic and pandemic of pathogens. Where there has been an outbreak, the WHO has moved swiftly to deliver services and supply nations that have been hit hard.
Outbreaks such as Sars and Ebola have been confined to small geographic areas and were able to be dealt with swiftly and successfully, only having a relatively small impact on national economies where the outbreak occurred. However, the current outbreak COVID 19 and the subsequent rapid contagion around the world will have more serious implications on supply chains.
Crude oil spot prices
It hasn’t helped the economy because there is a current glut of crude oil in the world. OPEC is splintered and as a result, there is overproduction and a price war underway between Russia, the USA and Saudi Arabia which has resulted in the price of a barrel of oil tumbling to 22.47 US dollars.
Demand for oil may see short to medium term drops in the price as a result of reduced demand caused by the spread of COVID 19. As increasing pressure is placed on governments to stem the tide of infection rates, countries are going into lockdown. The result is fewer journeys made by car, bus and train as people are forced to remain indoors.
Businesses that sell products and services online will probably see little if any interruption to their revenue streams. Companies that operate online and supply to virtual services to a global consumer base will see little if any interruption. Internet service providers such as cyberspace and Netcom Africa do not rely on physical contact between supplier and consumer. Internet security companies such as Sprinkle and BlackSentry may actually see an increase in demand for their services.
Likewise, online gaming company Netbet and others like them will probably see increased demand from home and foreign markets as people have more time on their hands while this crisis continues.
Governments may be forced to reduce exports of many products, not just to prevent the spread of the virus, but to maintain a supply line to their own people. Countries that are heavily reliant on goods from abroad, which to an extent is the situation in Nigeria, there may come a day – sooner, rather than later – where essential items may have to be rationed or, worse still, not be available.
The physical world will be hard hit by the current pandemic and as such there may be serious consideration given to supply chains, their current complexity and thought given to how supply chains can be simplified. With some $100million worth of IT and phone hardware stranded in China at the time of writing, the toll on supply chains is beginning to be felt.
The Nigerian federal government’s means of generating revenue via taxation will be severe as oil prices continue to slide as is expected. Because of the resultant decreases in goods from China, the level of import duty will significantly decrease. From a balance of trade point of view, it could be a much-needed uplift for the government at this difficult time.