By Libby George and Karin Strohecker
LAGOS/LONDON, March 6 (Reuters) - Yetunde Oluyide has run a
gift shop in bustling Lagos for nearly a decade, but with
coronavirus curtailing imports of Chinese goods, she is losing
more than 2 million naira ($5,555) a month.
Oluyide's reliance on China to fill the shelves of
Yetty-Jewel Ventures reflects the close ties between the world's
second largest economy and Africa's most populous country.
"For the past two months, we have not been able to ship in
anything," Oluyide said. "I'm anxious."
China accounts for around a quarter of Nigerian imports,
greasing much of the country's supply chain, and is funding and
building much-needed infrastructure.
China's economic health is also crucial for oil prices,
which make up more than half of government revenues for Africa's
top producer, and have tumbled more than 20% since January.
At close to $50 per barrel, oil prices are below the $57 per
barrel budget benchmark. And on Thursday, OPEC backed the
biggest cut to oil supplies since the 2008 crisis, meaning
Nigeria could have to reduce output. Combined with disrupted supply chains and the threat of
coronavirus spreading within Nigeria, this threatens to torpedo
growth in its economy and boost borrowing costs just as the
country plans to return to the Eurobond market.
Nigeria's Finance Minister Zainab Ahmed expressed concern
this week at the drop, saying that if it is sustained, the
record 10.59 trillion naira budget could become unsustainable.
"We will do the mid-term review and if the revenues are so
significantly affected we will have to do some revisions by way
of budget adjustment," she said.
DOUBLE WHAMMY
Nigeria confirmed its first coronavirus case last week,
wiping some 300 billion naira ($980 million) off the value of
the local stock market. If the virus spreads, and workers and
shoppers stay home, much-needed revenue from a higher VAT rate
passed last year will evaporate. Economies across Sub-Saharan Africa, with just a handful of
cases, are all at risk. Angola exports the bulk of its oil to
China, while Kenya relies on Beijing for billions in
infrastructure funding.
Kevin Daly of asset manager Aberdeen Standard Investments,
who holds Nigerian debt, said China's broken supply chain, and
the hit to oil, represent a double whammy.
"We have seen the IMF (International Monetary Fund) revise
growth down from 2.5% to 2%, but I think it will be closer to
1%," he said.
'MORE VULNERABLE'
Nigeria's depleted buffers and shaky exit from a 2016
recession, with growth around 2%, could make this setback harder
for it to weather.
Moody's, which downgraded Nigeria's outlook in December, has
warned that its debt, which has ballooned to 26 trillion naira
($85.5 billion), quadruple the 2008 level, made it particularly
vulnerable to external shocks. Last week, S&P also downgraded Nigeria, citing declining
external reserves. could increase Nigeria's borrowing costs as it plans $3
billion in new Eurobond offerings. Aberdeen's Daly said he
expected Nigeria would have to pay an extra 25 basis points over
the current curve if it sold fresh debt now.
The yield of Nigeria's XS1910828182=TE 2049 dollar bond
rose by one percentage point from mid-February to end-February.
"Nigeria is getting even more vulnerable – quite
significantly so," said Charles Robertson of Renaissance
Capital.
For Oluyide, few vendors outside China can offer the
products she wants at the right price. But she is committed to
keeping her customers happy.
"We are hopeful that the virus will clear," she said. "But
if not, we are already looking at other alternatives."
($1 = 306.0000 naira)
Nigeria's economy - tethered to crude https://tmsnrt.rs/2x6hl4u
Nigeria's Total Public Debt https://tmsnrt.rs/2Ttvi5z
Nigeria's External Reserves https://tmsnrt.rs/2IjKGe3
Nigeria dollar bonds lag peers https://tmsnrt.rs/39mKiHL
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