Nigeria’s economy is tied to China’s health; enter the coronavirus

Combined with disrupted supply chains and the threat of the 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.

“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.Nigeria confirmed its first coronavirus case last week, wiping some 300-billion naira 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.

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 International Monetary Fund revise growth down from 2.5% to 2%, but I think it will be closer to 1%.” Nigeria’s depleted buffers and shaky exit from a 2016 recession, with growth about 2%, could make this setback harder for it to weather.

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