Abstract
This study was on Covid-19 and inflationary effects in Nigerian economy, the following objectives were made: To determine the relationship between COVID19 and inflation in Nigeria, to determine the relationship between COVID19 and unemployment and to find solution to inflation caused by COVID 19. These results suggest that policymakers may consider intensifying the implementation of public policies in response to the pandemic for preserving the stability of prices when the sanitary situation of the COVID‐19 deteriorates. While confirming that international prices are among the key drivers of inflation in Nigeria, our findings also reiterate the importance of regional cooperation and coordination for fighting the adverse socioeconomic impacts of the COVID‐19 pandemic.
Chapter one
Introduction
1.1Background of the study
The corona virus outbreak, later coded as Covid-19, hit the world like a thunderbolt towards the end of December, 2019. At its inception in Wuhan city in China, it was regarded as a regional health challenge whose global potential risk was summarily underestimated. Although, many countries were in solidarity with China upon this health disaster, Covid-19 was nonetheless not perceived as a threat with a global scale. In fact, the World Health Organization (WHO) declared that the health crisis in China had no global potential threat. However, given that the modern world is entrenched in the concept of globalization and the position of China as the manufacturing hub of the world; a seemingly less risky Chinese health issue metamorphosed into a global scale with lethal consequences (Price and van Holm, 2020; Ezeaku and Asongu, 2020). As at the 20thof June3 2020, statistics showed that the total global confirmed cases of Covid-19 were 8,753,853 while the global death toll was 463,281. This indicated a 5.29 percent fatality rate and about 20 percent recovery rate (WHO, 2020).
Africa, being a highly vulnerable continent, soon recorded imported cases of Covid-19. As at the time of writing this paper, the total confirmed cases of Covid-19 in Africa stand at 287,385 cases; with about 132,959 recoveries and 7,708 deaths recorded (WHO, 2020). These represent a 46.3% recovery rate and about 2.3% fatality rate, respectively. However, there have been a lot of debates on the reasons for the low cases of Covid-19 recorded in Africa (World Bank, 2020; OECD, 2020; Diop and Asongu, 2020). This seems ironical given the level of public health infrastructure, governance structure, porous borders, weak institutions, inter alia, in the region. It was rather argued that the low number of confirmed cases of Covid-19 recorded in Africa was due to low testing capacity and not necessarily because of location or the effectiveness of containment policies.
The outbreak of the coronavirus disease 2019 (COVID‐19) has caused major disruptions of global value chains and economic recession in Africa (AfDB, 2020; Ozili, 2020) and more specifically in Nigeria (Bouraima et al., 2020). As part of their responses to the COVID‐19 crisis, governments of Nigeria have implemented social distancing measures for containing the spread of the virus. The Nigerias’ package of policy responses to COVID‐19 also includes economic support measures aimed at easing the financial burden of the pandemic on businesses and the most vulnerable households (Levy et al., 2020). However, the government policy responses to the COVID‐19 pandemic and the COVID‐19 disease itself may have undesirable effects on consumer prices (Banerjee et al., 2020). In fact, the injection of liquidity into economies for supporting liquidity‐constrained firms and households may increase the quantity of money in circulation in the economy. This may cause excess demand and therefore stimulate inflation (Blanchard, 2020). In the same vein, the panic following the detection of the first confirmed case of COVID‐19 coupled with uncertainties about the pandemic and the speed of the spread of the virus may generate panic buying of various goods including toilet paper, oil and food and thereby stimulate inflation (Ebrahimy et al., 2020). However, the collapse in commodity prices combined with stumbling oil prices, and a depressed labour market due to anti COVID‐19 measures (social distancing) is likely to decrease the consumer price index (CPI). Overall, the theoretical impact of the pandemic on inflation is ambiguous, something which should motivate the estimation of the empirical impact of COVID‐19 on consumer prices to inform policy responses to the pandemic.
Yet, the emerging literature on the socioeconomic impacts of COVID‐19 (Ayittey et al., 2020; Breisinger et al., 2020; Gondwe, 2020; Levy et al., 2020; Ozili, 2020) has so far remained relatively silent about the impact of the pandemic on the general level of prices for Nigeria economies. This is surprising because inflation in the Nigeria economies is likely to be affected by the COVID‐19 pandemic due to variations in both demand and supply of goods and services from the disruption of global supplier chains and increases in unemployment caused by the COVID‐19 crisis. To our knowledge, there are two studies on the economic impacts of the pandemic, including effects on inflation, for Nigeria economies (ECA, 2020a; Kinda et al., 2020). However, the studies of ECA (2020a) and Kinda et al. (2020) have not analysed the role played by the spillover effects from government responses to COVID‐19 in other countries in the variation of the CPI in the host country. Basically, the domestic responses to the COVID‐19 pandemic may cause spillover effects in other countries through the economic spillovers across the economic blocs (Kohlscheen et al., 2020) due to the economic and trade interdependences between countries of the same economic bloc. Based on this background the researcher wants to investigate Covid-19 and inflationary effects in Nigerian economy
Statement of the problem
The growth of the inflation rate in Nigeria is stimulated by increases in food prices observed in almost all countries in west Africa due to disruption of supply chains caused by the implementation of anti COVID‐19 measures. The food raised from 1.8% in 2019% to 1.5% in the first quarter of 2020% and 3% in the second quarter of 2020 (BCEAO, 2020b). In sum, the inflationary pressures have exacerbated with the outbreak of the COVID‐19 pandemic in Nigeria. The inflation has even attained a level beyond the upper bound level for the inflation target of the Nigeria during the second quarter of 2020. The control of inflation is imperative to safeguard the capacities of government to mobilize financial resources from financial markets for financing the government policy responses to COVID‐19 as the pandemic evolves. Indeed, a high rate of inflation reduces the net yield of bonds and consequently discourages investors from buying government bonds. The evolution of inflation needs to be monitored in the Nigeria because when consumer prices increase, this erodes the purchasing power of households and thereby increases their demand of financial transfers from governments, in an era of downward government revenue pressures due to the COVID‐19 crisis.
Objective of the study
The main objective of the study is to investigate Covid-19 and inflationary effects in Nigerian economy. The specific objectives are;
- To determine the relationship between COVID19 and inflation in Nigeria
- To determine the relationship between COVID19 and unemployment
- To find solution to inflation caused by COVID 19
Research Hypotheses
The following research hypotheses are formulated to guide the study;
H1: There is no relationship between COVID19 and inflation in Nigeria
H2: There is no relationship between COVID 19 and unemployment
H3: There is no solution to inflation caused by COVID19 in Nigeria
Significance of the study
The study will give a clear insight on the Covid-19 and inflationary effects in Nigerian economy. The study will be beneficial to students, policy makers and Nigeria government. The result of the study will education especially Nigeria government on how to get out from inflation and suggest a possible solution to the situation. The study will also serve as a reference to other researchers that will embark on the related topic
Scope of the study
The scope of the study covers Covid-19 and inflationary effects in Nigerian economy. The data will be collected from CBN
Definition of terms
COVID19: Coronavirus disease (COVID-19) is an infectious disease caused by the SARS-CoV-2 virus. Most people who fall sick with COVID-19 will experience mild to moderate symptoms and recover without special treatment. However, some will become seriously ill and require medical attention.
Inflation: Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
Economy: The state of a country or region in terms of the production and consumption of goods and services and the supply of money.
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