Many nations implemented assistance measures to reduce economic harm, and many more are doing the same to restore their economies. The world economy is currently experiencing a strong bounce in part because of this, although it is unclear how long it will last. This tenuous recovery might be severely undermined by a fresh variant of Covid-19 called Omicron with a subvariant called XBB.1.5.
It’s difficult to conceive a future where China and growth don’t go hand in hand since they have been associated for so long. China’s almost two decades of fast progress seem to be ending due to a unique convergence of circumstances. The country has been battered by the covid epidemic, the consequences of climate change, and a variety of internal economic issues, from excessive local government debt to a collapsing real estate sector. The harm has been well recorded. However, a significant and less well-known ripple effect is also occurring worldwide. Both great and small nations are unprepared for the consequences.
The impacts of a slowing global economy will be exacerbated for the country’s most dependent on exports, especially those in South and Southeast Asia and Africa, by a declining China market. Others may find new markets as trading patterns move to the quickly developing nations of India and others, but these changes will take years to fully manifest. Since the globe can no longer rely on China’s growth to generate its own wealth, international leaders will need to reconsider their own economic strategies.
The Troubles Inside China
- Zero- Covid Policy: Zero-covid policy, which has forced hundreds of millions of people into obligatory lockdowns and caused a lack of food and medication as well as a stifling of economic activity, has been the main cause of China’s economic problems. Covid outbreaks have hampered economic activity across industries in several cities. Major services are under strain because people are also not spending money on items like food and drink, shopping, or tourism.
- Real estate crisis: Homebuyers have been refusing to pay their mortgages on partially constructed structures, and some aren’t sure their homes will ever be finished. The decline in demand for new dwellings has decreased the requirement to import building materials. Home prices have fallen by more than 20% last year in dozens of locations despite Beijing’s attempts to support the real estate industry. Property developers are under pressure, therefore government action to restore trust in the real estate market may need to go further.
- Loss of Investors: Young employees have lost their jobs, adding to the unemployment rate among those between the ages of 16 and 24. Long-term, this may be detrimental to China’s productivity and growth. Due to the severe covid outbreak in China, investors have no choice but leave due to low productivity or returns on their investments made in the country which proves detrimental to the economy of China and in turn can affect their growth.
Inflation and the Nigerian Economy
According to the National Bureau of Statistics, Nigeria’s Inflation rate increased to 21.47% in November 2022 from the 21.09% recorded a month earlier, as food and energy costs continued to rise for the 10th consecutive month. Since some gas stations have either refused to supply petrol or have sold them at exorbitant prices, Nigeria’s ongoing fuel shortage has gotten worse. The shortage has increased transportation costs, which has an impact on goods and commodities.
The annual inflation rate in Nigeria accelerated for the 10th straight month to 21.47% in November of 2022 from 21.09% in October and above market estimates of 21.15%. It was the highest reading since September of 2005, attributed to food supply disruptions, import cost hikes due to currency depreciation and a rise in production costs. Main upward pressure continued to come from prices of food & non-alcoholic beverages (24.13% vs 23.72% in October), by far the most relevant component in the CPI basket. Insecurity, climate change and the devastating impact of severe flooding on farmlands this year coupled with the ongoing Russia-Ukrainian war remain the key factors weighing on the country’s agricultural sector. Significant upward pressure also came from prices of transport (19.5% vs 19%); miscellaneous goods & services (18.1% vs 17.7%); housing & utilities (17.3% vs 16.8%); restaurants & hotels (16.7% vs 16.5%), among others. Compared to the prior month, prices increased by 1.39%. source: National Bureau of Statistics, Nigeria
The report’s findings demonstrate that Nigeria’s economy did not expand and perform as predicted because of structural economic shocks and difficulties brought on by the world’s decline in oil prices, which was a result of the Russia-Ukraine war. As a result, the economy must be fixed in the following year, which will be extremely difficult for the new administration. According to experts, to guarantee that the nation meets its OPEC production quota, expand exports, and obtain more foreign currency, the new administration should focus on increasing oil output, which is at an all-time low because of crude oil theft operations.
Food inflation rate in November stood at 24.13% on a year-year basis according to the National Bureau of Statistics, Nigeria. According to the bureau, price hikes in bread and cereals, oil and fat, potatoes, yams, and fish were to blame for the rise in food inflation.
Development of Africa’s supply chain disruptors
Only a seamless supply chain network can deliver the products and services that Africans require. The African supply chain industry is still in its infancy, even though many Africans can be expected to utilize consumable and non-consumable commodities such as food, drinks, sugar, and refined energy products daily. Supply chain disruptions are now more pervasive and pose a threat to the stability of the African economy in addition to being an industrial issue. Prices for food, gasoline, and building supplies have risen because of shortages and rising input costs. To weather the storm, flexible and robust supply networks will be encouraged.
The vulnerability of the global supply chain architecture that predominated in African trade, according to analysts, has been starkly exposed by the Covid-19 outbreak. This strategy was dependent on several suppliers, the majority of whom were based in China and other remote regions of the world.
As a result of the prolonged lock-down orders implemented in China and other exporting nations to Africa, a security measure to stem the spread of the lethal coronavirus, the supply lines to many African countries were cut off and till this very day various African economies haven’t fully recovered due to the cut off.
Implications for the Construction Industry
Due to the disruption in supply, material and labour costs increased drastically to the extent whereby contractors are asking for a “rise and fall” clause to be included in contracts and seeking extensions for completion of projects due to the shortage of materials available in the countries.
Implications for the Food Industry
Food prices have increased because of supply chain shocks. Seasons and weather dictate a precise schedule for agriculture. The productivity and yield of succeeding seasons may be negatively impacted by a minor disruption in the first season.
Implications for the Fuel Industry
As a result of the continuous conflict in Europe, tighter oil markets, and a rise in demand for transportation fuels following the epidemic, there is uncertainty, a rise in price, and disruptions to supply chains for gasoline. As several African nations shift away from Russian oil, supply networks had to be reorganized in those nations. This has led to rises in both wholesale and retail costs.