- Blog Post
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The Buhari administration has been moving energetically to respond to the coronavirus and the collapse of international oil prices. The finance ministry has moved quickly to recalculate the national budget to account for an estimated price of oil of $20 per barrel, down from a previous estimate of $57. It has also reduced the estimated daily production of oil from 2.1 million barrels to 1.7 million. The oil shock cannot be overstated. Oil has provided more than 60 percent of the Nigerian state's revenue and more than 90 percent of its foreign exchange. But to meet short-term liquidity issues, the federal government has secured a loan of $3.4 billion from the International Monetary Fund. Finally, the central bank has devalued the national currency, the naira, from 305 to 360 per U.S. dollar.
With respect to the coronavirus, the Buhari administration moved quickly to implement the now-standard protocols. Airports and borders were closed; Lagos, Abuja, and Ogun—early hotspots of the virus—were put on lockdown; and a small, hardship payment was authorized for the very poor. Separately, governors imposed lockdowns on their states and inter-state travel was restricted.
But there is only so much that good leadership in a time of crisis can do. Because up to half of the population is unbanked, the distribution of emergency payments has proved difficult to do. There are also complaints about failures of delivery of other assistance, especially food, or that the food delivered was expired. Further, it is estimated that the informal economy in Nigeria accounts for 65 percent of GDP. For those in the informal sector, if they don't work, they don't eat. Given these realities, the Buhari administration has eased lockdown restrictions in Lagos, Abuja, and Ogun state, even though cases are still rising. Though with much of the urban population packed into slums, "social distancing" had been all but impossible. Governors are following suit.
The director general of the Nigeria Center for Disease Control, Dr. Chekwe Ihekweazu, has been unusually candid about the country's lack of preparation for the disease. However, he has also been pro-active and imaginative in securing testing equipment and other materials from donors abroad. Health agencies, federal and state, have been actively applying the lessons learned from HIV/AIDS and Ebola, especially contact tracing.
Up to now, there have been relatively few cases of coronavirus and related deaths. Nigeria had conducted almost 24,000 tests and recorded 3,500 cumulative positive cases with 107 deaths as of May 7. It has seen new reported cases in the hundreds each day for the past two weeks. Though the true extent of the disease is unknowable at this point, it is likely greater. The early steps taken by the Buhari administration may have helped, the disease may merely be late in coming to Nigeria and the Southern Hemisphere, or there may be other explanations. There is also speculation that the relative youth of Nigeria's population and that about half of it still lives dispersed in rural areas may mitigate the spread of the virus. It remains to be seen what the trajectory of the disease in Nigeria will be and whether the fiscal measures taken to respond to the fall in oil prices will be enough. Many observers predict more massive devaluations of the naira will be required. As of May 7, the naira black-market rate was 427 to the U.S. dollar (sell) and 425 (buy), and indication that the currency remains over-valued. Nevertheless, credit must be given to the Buhari administration's quick response and its candor.
But these commendable steps in the current crisis do not, and cannot, address the more deep-seated challenges Nigeria faces. An elite cartel long ago "captured" the Nigerian state to personally profit from government oil revenue and government offices with lucrative salaries and benefits. The retirement packages for some state governors, for example, includes paid-for maids, cooks, and chauffeurs, and annual pensions multiple times their salaries that can reach as high as half a million dollars, more than the salary of the U.S. president. For all its faults, this system has kept the country together with no repeat of the 1967-70 civil war, which resulted in some 2 million dead. In a society organized by patronage-clientage networks, oil revenue was shared by patrons with their clients, and patrons were also clients of other patrons. So oil moved up and down the patronage-clientage food chain and kept the system lubricated.
Despite its enormous oil wealth over time, the federal government has never provided services for the mass of the population. That is an underlying driver of the nearly incessant insurrections that plague the country, ranging from Boko Haram in the north, the oil patch (where residents benefit hardly at all from oil but now live in an environmentally degraded area) in the south, and the intercommunal and criminal violence in the Middle Belt. Insurrections have not resulted in revolution because the population is divided among 350 different ethnic groups and is split between Christians and Muslims. Nigerian national identity, which could help channel collective grievances, is weak compared to ethnic and religious loyalty.
The coronavirus should be added to the witch's brew. The disease appears to be striking the cartel disproportionately, as they are more likely to have contracted the disease during overseas travels. This is particularly significant for the political class. Buhari's influential chief of staff, for example, died from the disease, and numerous governors and members of the National Assembly are sick. Up to now, it hardly mattered to them that there were only rudimentary medical services available; they went to London, Dubai, and Johannesburg for medical care. Now, they are forced to weather the storm at home. There is anecdotal evidence of poplar anger against elites in general who are being held responsible for introducing the disease into Nigeria.
The leadership of the moment cannot overcome the generations of poor leadership and corruption that have left underdeveloped public health services, social safety nets, and trust in government. So, Nigeria is in unchartered territory, with the confluence of the virus and the collapse of oil prices directly challenging the political economy of the country.