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Microsoft Word - Harvard help sheet The Nigerian Investment Promotion Commission (NIPC) reported a 67 percent decline in investment in H1 2020, compared to H1 2019. The decline saw investment fall to US$5.06 billion compared to US$15.15 billion in the preceding year². Top destination sectors include Transportation & Storage (39%) as well as Information & Communication (32%) sectors. However, the overall weak economic activity in top donor countries like United States of America (USA), which account for 43 percent of inflows contributed to the decline. Understandably, the lockdown measures and low oil price have slowed existing investment prospects and caused multinational enterprises to reassess new projects which will affect development. Going forward, investment is likely to continue to decline given that these conditions are unlikely to give way until the pandemic ends. Nevertheless, the NIPC should use the pandemic as an opportunity to promote investment in traditional and new opportunity areas including health, food and agriculture, and tech-related sectors. Furthermore, the NIPC should develop an online one-stop shop for investors in the absence of inter-country travel.

Microsoft Word - Harvard help sheet

The inflation rate for the month of June rose to 12.56 percent from 12.40 percent in May¹. The rise in inflation was driven by a rise in all components of the headline index, as food sub-index rose by 0.14 percent to 15.18 percent and the core sub-index rose by 0.01 percent to 10.13 percent. On a state level, headline inflation was highest in Bauchi (15.02%), Sokoto (14.88%) and Ebonyi (14.60%), while Cross River (10.95%), Lagos (10.78%) and Kwara (10.03%) recorded the slowest rise in headline inflation. The rise in the core sub-index was driven by an increase in the price of medical and hospital services, as well as motor cars and passenger transport by road which is intuitive given the upward pressure on the demand for these services. Given that the borders are still closed and restrictions to inter-state travel remain, we expect the demand for local medical services and road transport to remain high, thus causing suppliers to raise price and further increasing inflation. The monetary authorities will have to address the inflationary pressure while providing loans to the private sector with low interest rates to mitigate against the pandemic.

The Central Bank of Nigeria (CBN) recently announced a ban on the importation of maize/corn1. This ban adds maize to the list of 41 other products some of which include rice, cement, margarine, and palm kernel that had earlier been banned2. The embargo comes as a means to further encourage local production, stimulate economic growth as well as secure local jobs and livelihoods. Available data shows that Nigeria imported 400,000 tons of maize in 2019 the same as it did in 20183. However, forex restrictions on the importation of rice, coupled with the closure of the Nigerian land borders to neighboring countries, has seen the country move from a major importer to the largest producer of rice in Africa.⁴ By extension, it is expected that the addition of maize to the forex restriction list will help to stimulate its domestic production and thus reduce or eliminate dependence on imported maize. Consequently, this effort is also expected to limit domestic demand for forex and curb the exchange rate volatility.

According to the Debt Management Office (DMO), the outstanding public debt declined by 5.65 percent from $84 billion to $79.3 billion between December 2019 and March 2020¹. The reduction was driven by a 9 percent decline in domestic debt from $56.4 billion to $51.6 billion during the same period². Meanwhile, the change to external debt was minimal as it tapered around $27.6 billion in both periods. While the decline in domestic debt is as a result of the redemption of Nigeria Treasury Bills (NTBs), the stagnation of external debt stems from the government’s need to limit its exposure to exchange rate volatility. However, the $3.4 billion in emergency support received from the IMF in April as well as the reliance on domestic debt to mitigate the impact of the pandemic will increase public debt in the near term. In this context, effective debt management is important not only with regards to the terms of borrowing but also in debt use and transparency.

Digital technologies have proven to be a crucial factor in the fight against covid-19, and response strategies to reduce the social and economic impacts of the pandemic. With the restriction in human interaction and closure of international borders to curtail the spread of the virus, usage and reliance on digital platforms has become the only medium of human interaction and economic transaction to mitigate and minimize the disruptive effect from the covid-19 virus. While the scope and scale of digital usage varies across countries based on extent of digitalization, some form of adoption of digital systems are witnessed in every country, including Sub-Saharan Africa countries with the lowest internet connection.  

Like every other part of the world, digital economy plays four critical roles in response to COVID-19: surveillance, sensitization, social welfare intervention and substitution. These are couched as 4Ss as discussed below:

• Surveillance: Although the reported number of covid-19 cases are relatively low on the African continent, the pandemic has created a need to efficiently and promptly track and trace persons who might have been exposed to identified carriers of the virus, to curb further infection. At a regional level, the Africa Centres for Disease Control and Prevention, an umbrella body, provides intelligence support and cross border monitoring for member countries of the African Union. Countries within the region have also resorted to relying on a combination of different digital applications, call records and software for contact tracing. Some examples include; SORMAS which is used in locations in Nigeria and Ghana, COVI- ID solution deployed in South Africa, and a mobile tracing app used in Uganda. In addition, digital platforms have been helpful in enforcing compliance with social distancing regulations and reporting cases of default.

• Sensitization: Digital platforms have also been instrumental in creating awareness and sharing information about symptoms, preventive measures, personal hygiene, and other health and government advisory related to the pandemic. African countries have adopted a wide range of media in disseminating information to citizens. For instance, South Africa set up an interactive WhatsApp chat service in various local languages to respond to general queries about covid-19. A free online tool is available to Nigerians to assist in self-assessing health risk category based on users’ symptoms and travel history, and this helps reduce unnecessary calls to the disease control hotlines. Also, other means of digital communication such as government websites, social networks, mass text messages, radio and television jingles, have been adopted across the continent during this period, to ensure citizens are constantly informed.

• Social welfare delivery: Livelihoods have been negatively impacted due to the effect of reduced economic activities, especially for vulnerable individuals and those operating in the informal sector who have suffered job loss, and their savings are inadequate to cater for such an unexpected event like the pandemic. Therefore, African states have had to expand or introduce new social protection programs to provide relief in various forms to affected citizens, ranging from tax breaks, to fund transfers, food banks, extended loan repayment periods, interest rate freeze, and so on. Although some countries adopted cash-in-hand relief payments, digital channels have been quite popular in distributing stimulus packages, in order to minimize queues and comply with social distancing rules. Countries such as Togo, Malawi, Zimbabwe among others, have offered intervention funds which can be accessed through mobile banking or online platforms.

• Substitution: The disruption in daily activities has triggered the use of digital alternative measures to cope with the changing landscape. Some of these substitutes include working from home, increase in online grocery and food shopping, education delivery using e–learning platforms and other digital channels, legislative and government functions conducted via teleconferencing, medical check-up through virtual consultation, increased reliance on social media as means of interacting and connecting with friends and family, and so on. All of these digital alternatives have been used across African countries.

Weaknesses and gaps in Africa’s digital economy exposed

While the renewed importance of the digital economy offers opportunities for Africa, it however has its downside. The level of misinformation spread through social networks has been alarming, and difficult to curb, thereby posing a real problem to governments and health officials across the region during this period. The effect of such cases of false news has been far-reaching, creating public distrust and making some citizens doubt the severity of the virus, while some others have erroneously consumed harmful products touted as cures for covid-19.        

In addition, the transition to dependence on digital technologies threatens to cause further exclusion as not all citizens are able to leverage digital alternatives in combating the impact of the pandemic. There are reported cases across the region of uneven access to digital services for educational needs, business operations, and so on. A number of factors are responsible for the digital gap within the continent:

• High costs: Due to high incidence of poverty, a significant proportion of citizens are unable to access the internet because they cannot afford data charges and expensive smart devices. Based on the 2019 report on the state of broadband published by United Nations Educational, Scientific and Cultural Organization and International Telecommunication Union, the cost of 1GB of data for the poorest 20% of Africa’s population is equivalent to almost half of their monthly income. As a result, the proportion of Africa’s population that use the internet is significantly lower than the global average.

• Poor digital skills: Africa has a low literacy rate and this has an impact on digital competencies of its citizens, thereby limiting digital usage. Individuals who operate in the informal economy and earn income on a daily basis such as petty traders, subsistence farmers, pastoralists, artisanal miners, among others, have been severely impacted by recent changes in daily activities, but are unable to adapt business operations due to limited education and lack of digital skills, as well as other factors. An estimated 85.8% of Africa’s workforce operate in the informal sector and rely on physical interaction for their livelihood.

• Poor broadband penetration: According to the United Nations Economic Commission for Africa, rural and remote communities within the region are grossly underserved with low levels of broadband connectivity. The World Bank also estimates that about 100 million Africans live in areas without mobile networks. This trend can be explained by the fact that investments in broadband and mobile networks tend to be targeted at profitable urban regions with substantial economic activities rather than less commercially viable rural areas. Also, due to inadequate telecommunications infrastructure, certain regions even in urban areas although connected, have suffered from unreliable broadband coverage during the lockdown, thereby limiting access to the internet.

• Lack of digital identity: Digital identification is usually used to verify an individual’s identity online and often linked to official or legal forms of identification, biometrics and other online personal information or activities.  However, approximately half of the continent's population do not possess government issued identification nor digital profile, thereby restricting access to entitlements for which a means of identification is a prerequisite, such as accessing relief packages, public services, financial services and so on during the lockdown.

The above constraints have ripple discriminatory effects on daily life, schooling options, means of livelihood for micro and small businesses, access to welfare funds, and so on. For instance, it could worsen pre-existing inequalities in the region’s educational systems, as vulnerable students in public schools are more likely to experience difficulty in accessing digital learning due to lack of digital infrastructure, broadband connectivity and digitalized teaching content.

Urgent need for data governance and greater inclusion

Data gathering and information sharing continues to be an indispensable part of research to curb the spread of the virus, monitor its impact and finding preventive or curative medicine. However, with more data flying across the web, the risks of data breaches and human rights violations have become more visible. In the months following the lockdown, there have been several reports in various African countries on dangers of digitalization in relation to hacking, financial fraud, disinformation, exploitation of youths, among others. Even before the pandemic started, the African Union had estimated an annual loss of $3.5billion from cybercrimes across the continent. Although free flow of information across the region is essential at this period, and for long-term regional cooperation and integration plans like the African Continental Free Trade Area, it is imperative to promote a trustworthy mechanism that ensures protection of citizens civil rights.

This problem underscores a need for comprehensive data governance to support rising digital economy in Africa. If effectively implemented, data governance can address challenges in the areas of privacy, misinformation and alignment of cross-country data regulation to curb cybercrime among other concerns. A report by the Centre for International Governance Innovation reveals that most African countries are yet to enact laws and regulations for digital data protection and security, and for the few countries that have existing data governance structures, these structures are either not fully operational or not up to global standards required to ensure real digital transformation. Effective data governance has therefore become increasingly important at both national and regional levels.

The African Union recently issued a digital transformation strategy for the next ten years (2020 to 2030), which provides policy recommendations for improved data protection to be implemented by member states. Still, a lot more work is required. National data governance frameworks need to define responsibilities and ownership of data assets, specify processes for mitigating data infringement, ensure accountability, integrity, transparency and stewardship, safeguard data privacy and security, protect human-rights and empower citizens to make informed decisions regarding data sharing, discourage unfair practices, while still facilitating free flow of information for innovation and growth of the digital economy. Technologically driven innovations should be encouraged while having regulations that mandate responsible data collection and usage. A policy regime that is thorough, yet flexible, such that it promotes creativity.

Therefore, policy reforms and digital infrastructure investment drive bordering on data governance and digital inclusion are necessary as Africa, and indeed the world gradually readjusts, and recovers from the effects of the pandemic. African countries need to collaborate to ensure all citizens have reliable and secure digital access in order to be competitive in the new economy. Public/private partnerships and investment might be the way forward to ensure inclusion of underserved rural communities. As we embrace international or cross-border integration, data privacy and localization laws are essential. Also, data localization presents a viable tool for governments to exercise control and partake in the value associated with data generated within national borders. Overall, this calls for the right balance in order not to be too restrictive and discourage integration.

The manufacturers Purchasing Managers Index (PMI) declined by 3 percent to 41.1 index points between May and June 2020, indicating an increased shrinking in the sector¹. The slowdown was noted across 9 of the 14 surveyed subsectors and was attributed to continued decline in production levels, supply deliveries and new orders within the manufacturing sector. Conversely, the non-manufacturers PMI rose from 25.3 to 35.7 index points albeit lower than the 50-point benchmark. This was driven by an increase in employment, inventories and overall business activity. This rise follows the gradual removal of the lockdown measures and is expected to persist as next month’s business outlook for the manufacturing and non-manufacturing sectors is 2.7 and 2.4 percent higher respectively². Firms should be prepared to shift their supply chains and adjust to the new business environment. For instance, as remote working becomes the new normal, the increased demand for computing infrastructure is an opportunity firms can seize.

According to the CBN, crude oil price has risen to $42.94per barrel, a 33 percent rise compared to $32.25 per barrel in the previous month.[i] The rise comes just as many economies are reopening, recording a marginal increase in demand. However, world oil demand is still expected to drop by 9.1 million barrels per dollar.[ii]  OPEC and its member countries have agreed to drop oil production in order to control market supply and consequently price. With this agreement, the revenue gains from increasing oil price for Nigeria could be marginal as the country is expected to cut production by about 22 percent to 1.4 million barrels per day which may also hinder the realization of the revised 2020 budget considering that the crude oil production estimate is 1.7 million barrels per day. To ensure performance of the 2020 budget, concerted efforts must be in place to ensure optimum collection of non-oil revenues by blocking leakages and non-remittances through improved administrative and monitoring mechanisms.

Total trade declined by 17.94 percent to ₦8.304 billion in Q12020 compared to Q42019¹. The decline was driven by a drop in both total imports and export value which fell by 21.08 percent and 14.42 percent quarter on quarter, recording a deficit of ₦138.98 billion. A decline in total trade was recorded in energy and manufactured goods. While the value of agricultural goods exported grew by 85.36 percent quarter on quarter, and the value of agricultural imports by 12.02 percent concurrently. Trade in Q12020, although marginally higher than Q12019 total trade, reflects the lower economic activity experienced during the quarter. The volume of trade is expected to continue to decline as economies across the world turn inwards due the pandemic. However, the private sector can leverage on the pandemic to boost trade in services such as ICT services, as well as professional, scientific, and technical services which is more resistant to political and economic forces that threaten trade in goods. Given the large wage differentials in the service industry across countries, Nigeria stands to benefit from a service-based global integration.

The growth of digitalization and digital technology adoption in Africa holds the key to strengthening and diversifying economies across the continent. Although these developments offer potentially life-changing benefits for consumers, businesses and governments, the inherent flaws in the digital market mean these benefits are not guaranteed. As most gains from the digital economy are largely concentrated in the United States and China, the digital divide may widen the gap between the Global North and the Global South. 

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