The Excessive Debt Burdens of COVID-19 Development Financing in the Pandemic

As African governments attempt to battle the economic impacts of COVID-19, they must re-imagine development financing which will translate into efficiency in public expenditure and foresight in public investments that go hand in hand with inclusion, accountability and transparency as political norms and values. 

Uyo, Nigeria—Ubong Abasi is a Keke driver in the capital of Akwa Ibom State, a state in Nigeria’s oil-rich Niger Delta region. As with many informal businesses that are characteristic of Uyo’s non-oil economy, Abasi’s livelihood has been severely affected by both the spread of COVID-19 in the city and efforts to contain it. Since the detection of Nigeria’s index case, in February 2020,both the federal government as well as several state governments have imposed several lockdowns, the most recent being during the last quarter of 2020. These lockdowns had devastating impacts on the business activities and livelihoods of Abasi and others that, like him, operate in the informal economy and therefore depend on daily income without having any savings buffer. The most recent unemployment data from the Bureau of Statistics (NBS) shows that unemployment rose from 27.1 per cent in second quarter of 2020 to 33.3 per cent in the fourth quarter of the same year. The government also expects that the pandemic could cost Nigeria more than 39 million jobs.

Beyond Nigeria, the COVID-19 ‘tale of hardship’ is common across much of Sub-Saharan Africa, where according to the IMF, the informal sector accounts for on average 34 percent of the overall economy. Sub-Saharan Africa has the highest share of informal economic activity in the world compared to 9 and 15 per cent in North America and the OECD respectively. In Nigeria, the Bank of Industry estimates the share of the informal economy to be as high as 65 percent. Moreover, according to the ILO, the informal sector absorbs more than 66 per cent of sub-Saharan Africa’s total employment, in urban areas. The pandemic and its economic ripple effects are expected to push an additional 87 million people into poverty in Sub-Saharan Africa, amounting to 520 million people compared to 433 million as of 2018.