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A woman wearing a face mask sells bottled water to passengers at Obalende bus station in Lagos, Nigeria, on May 5, 2020.Sunday Alamba/The Associated Press

Africa’s largest economy, Nigeria, is facing one of the biggest crises in its history as it struggles with a surging pandemic and collapsing oil revenue that threatens to destroy its capacity to respond.

Nigeria’s confirmed cases of COVID-19 have nearly doubled over the past 10 days, reaching a total of almost 5,000 cases, the third-biggest number in sub-Saharan Africa. But because its testing capacity is severely limited, the true number of cases is believed to be far higher.

The West African country, the continent’s biggest oil producer and most populous country, is heavily dependent on oil for about half of the federal government’s revenue – and its oil revenue has tumbled by 80 per cent as prices crashed.

Tankers filled with Nigerian oil have been floating at sea for weeks, without any buyers. Nigeria’s rainy day fund, the Excess Crude Account, has shrunk to a historic low of US$72-million.

“The government is about to go broke,” said Matthew Page, an Africa analyst at the Chatham House think tank in London, in a report this week. “A fiscal crisis of historic proportions is just beginning to unfold.”

Some of Nigeria’s state governments, which are already heavily indebted and reliant on a share of national oil revenue, might be forced into insolvency, he said.

The fiscal crisis, in turn, could make it difficult for Nigeria to respond to its security threats: the Boko Haram insurgency in the northeast, violent clashes in other parts of the country, widespread poverty, extreme inequality and rapid population growth.

Nigerian Finance Minister Zainab Ahmed warned this month that the country of more than 200 million people is facing a “double whammy” from the oil price crash and the coronavirus pandemic.

Nigeria’s oil is relatively expensive to produce, partly because of widespread crime and corruption. The price of its high-quality crude oil, known as Bonny Light, is now as low as US$12 a barrel, barely half of the estimated cost of producing it.

Late last month, the International Monetary Fund announced US$3.4-billion in emergency funding for Nigeria, but this is only half of the US$6.9-billion that the country has sought from multilateral institutions. The rest has not yet been obtained.

“Nigeria very much falls into the category of countries that are going to be hit the hardest as a result of the outbreak of the pandemic, plus the sharp decline in oil prices,” IMF African department director Abebe Aemro Selassie told a briefing last month.

Even if Nigeria secures all of its requested multilateral financing, along with its newly announced efforts at domestic borrowing and privatization revenue, this “still leaves a major hole” for the government, according to an analysis by NKC African Economics, a consultancy.

The pandemic has led to temporary lockdowns and curfews in several major cities and a ban on interstate travel, further damaging Nigeria’s economy. The country is also hurt by a drastic drop in remittances from Nigerians who work overseas. And its currency, the naira, continues to weaken on black-market currency exchanges.

Until this year, the country had been slowly recovering from a recession caused by the previous slump in oil prices in 2016-17. Its growth had been projected to reach 2.5 per cent this year. But now, as a result of the oil price collapse and the pandemic, Nigeria forecasts that its economy will drop by 3.4 per cent this year, worse than most other African countries. The IMF is forecasting a decline of 1.6 per cent across the sub-Saharan region.

Some analysts believe the decline could be even worse. Nigeria is unlikely to return to its prepandemic gross domestic product until 2024, according to NKC’s projections.

Risk consultant Ronak Gopaldas, in an analysis published by the Africa-based Institute for Security Studies, said Nigeria is facing a “perfect storm” of economic and security threats. The country will need to prepare for possible unrest in the oil-producing Niger Delta, potential resistance to pandemic lockdowns, and threats from Boko Haram and other extremist groups that could seek to exploit the crisis to launch new offensives, he said.

The spread of the COVID-19 pandemic, meanwhile, is almost impossible to measure in Nigeria because the country has conducted fewer than 30,000 tests – a relatively tiny number.

The government has officially recorded 4,971 coronavirus cases and 164 deaths. One of the deaths was Abba Kyari, the powerful chief of staff to President Muhammadu Buhari.

Some officials have admitted they missed an outbreak in Kano, one of the country’s biggest cities, where hundreds of people who died of suspected coronavirus were buried without tests. A team of government investigators later confirmed that most of the deaths were likely to be linked to the virus.

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