Is Africa ready for a third covid wave?
India, Brazil, South Africa are facing the significant problem of a 3rd covid wave and the variant has spread to 41 other countries. Ironically, India is the medical capital of the world and the largest producer of the vaccines. This poses a threat to Nigeria as India is the country’s major export trading partner and largest importer of oil.
More worrisome is that there is a strong possibility that Nigeria and other African countries will have the Indian experience as vaccine supply and the rate of inoculations remain low. Of the 1.3bn people in Africa, only 20mn have been vaccinated. With the growing concern of embattled health care systems and distrust of people in the safety of the vaccines, macroeconomic instability looms in Africa. Bearing this in mind, the federal government of Nigeria has taken a rather proactive approach by ordering a phased restriction despite the declining trend in daily infection cases and fatality rate. Truthfully, Africa cannot afford a third wave of covid cases as it indicates a further rise in the debt burden by 8% to $720.1bn from $666.3bn in 2020.
Insecurity has become ubiquitous in Africa
In the past few years, the problem of insecurity has escalated in Africa. Recently, the Chadian president of 31 years, Idriss Déby was killed in a rebel combat. There is now a military coup in Chad and Mali. More so, the unrest in Tigray is disrupting the livelihood of Ethiopians living in the region and Nigeria is facing a rise in attacks/kidnappings by Boko Haram, bandits and herdsmen. The disturbing increase in insecurity would be a major setback on the path to economic recovery. While analysts attribute this to the high poverty and unemployment levels in Africa, it is important that governments tackle the problem abruptly. This is because these countries face the high risk of credit rating downgrades and being declared a pariah state.
Nigeria’s inflation going with the flow
At 18.12% Nigeria’s rate of inflation relative to others is very high. However, the 5bps drop from 18.17% after 19 consecutive months of increasing is noteworthy. Therefore, directionally Nigeria is flowing with the SSA continental trend whilst having to confront major structural problems. One data point (April) does not form a trend, therefore we still need to observe the inflation data for May and June. Whilst some analysts believe that the April drop resulted from base year effects, our view is that inflation will rise again before declining later in 2021.
This edition of the FDC Afriscope provides interesting economic and political stories in Africa.
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