The Economic Implications Of Coronavirus In Nigeria

The Economic Implications Of Coronavirus In Nigeria
It is said that there is nothing new under the sun, but it was sunny in Nigeria when we had a new tax legislation (in the Finance Act 2019) and an outbreak of a new strain of coronavirus disease (COVID-19). Change of course is the only constant thing, hence, what matters most is how we react.

The change in legislation was necessitated by needs such as increase in government revenue, alignment of the Nigerian tax laws with global best practice, support for small businesses in line with the Ease of Doing Business reforms etc. While adequate reaction/proactivity to the outbreak of Coronavirus remains to be fully seen globally, its effect on individuals, businesses, tax administration and governments must not be ignored.

Coronaviruses (CoV) are a large family of viruses that cause illness with symptoms such as fever, cough, shortness of breath and breathing difficulties to more severe diseases such as Severe Acute Respiratory Syndrome (SARS). The current outbreak of coronavirus disease (COVID-19) was first reported in Wuhan, China, on 31 December, 2019. According to the situation report published on 3 March 2020 by the World Health Organization (WHO), the disease has rapidly spread to 72 countries (including Nigeria) with 90,870 confirmed cases globally.

For businesses, just as COVID-19 has thus far defied national boundaries, it likewise has no choice industry – be it manufacturing or service. Based on the mode of transfer - which could be via droplets, physical contact with contaminated surfaces or infected persons, - businesses of the service industry such as hotel catering, tourism, education and training may be more susceptible to the spread. The spread of coronavirus can be mitigated via several means. Notes and coins in circulation could be withdrawn with new ones minted and issued due to their risk of being contaminated. Restriction of movement has been adopted in critical cases. Generally, face masks and alcohol-based sanitizers have been employed globally. This presents an opportunity for importers, manufactures and distributors of these products as they tend to become scarce due to increase in demand or hoarding due to panic.

As far as tax administration in Nigeria goes, increase in revenue generation and collection typically takes top spot among the list of issues to consider. On the bright side, though volume of transaction generally declines due to scarcity, the increase in price which accompanies increase in demand would only translate to an increase in transaction taxes. More importantly, products such as face masks and alcohol-based sanitizers are considered necessities in situations such as that of Coronavirus outbreak. This means even at higher prices, their demand is expected to remain high. Higher sales margin for such businesses should thus result in higher profit and consequently higher taxes on profit. Unfortunately, the same results cannot be expected when other factors such as manpower, workspace, cost of connectivity are considered. The impact on global economic activities has been adverse as can be evidenced by the reaction of many governments to take fiscal measures such as cutting interest rate.

In the face of bleak statistics that fuels panic, it is paramount to increase awareness and curb the spread of fake news as there have also been significant number of cases of recoveries reported. Care must be taken to keep holistic sight of reforms particularly in support of businesses that may struggle with local and international scarcity of raw materials and products. Furthermore, governments should be wary to avoid putting the cart before the horse as it is only a healthy society with thriving businesses that can sustainably contribute to the national purse.
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