Assessing the Macroeconomic Impact of COVID-19 Pandemic on the Nigerian Economy through the Lens of SIR-Macro Model

The COVID-19 pandemic caused economic and social disruptions in Nigeria forcing the government to implement certain containment measures to reduce the severity of the epidemic. The containment measures triggered economic recession leading the government into a policy dilemma of choosing between reducing fatalities and stabilizing the economy. Thus, the key objectives of this research focused on analyzing the macroeconomic impact of COVID-19 pandemic on the Nigerian economy and evaluating the effectiveness of government containment policies in reducing the infection rates and their attendant trade-off with economic performance. To achieve the objectives, this study implemented the SIR-macro model to study the interaction between agents’ economic decisions and COVID-19 epidemic. The parameters of the models were calibrated based on the characteristics of Nigeria’s economic structure to analyze the implications of containment policies on the severity of economic recession and the dynamics of the epidemics. The result showed that the population of those infected peaked at 5.56% in week 34 while economic activities dipped by 5.18% in the no-containment model. However, in the benchmark containment model with treatment and vaccination, the population of the infected peaked at 3.09% in week 42 while economic activities declined by 22.32%. The study found that government containment policies were effective in reducing the severity of the epidemic in terms of the spread of the disease and number of deaths. The containment policies on the other hand exacerbated the severity of the economic recession. Given the findings, it was concluded that the predictions of the model are qualitatively sufficient in explaining the macroeconomic outcomes in Nigeria during this period. The study suggests that government should consider the socio-demographic characteristics of the country in the selection of policies in an epidemic condition. The government should strengthen the health care system with adequate infrastructure to prevent large case fatalities.