Impact of COVID-19 and Oil Prices on Economic Policy: Evidence from Nigeria and South Africa

Resumo

The spread of COVID-19 has brought unprecedented distortions to the global economy, leading to the loss of income and a high unemployment rate. These distortions pose serious challenges to policymakers, due to wide-scale uncertainties faced by low and middle-income countries. As such, this study employed the vector autoregressive model (VAR) to capture and compare the relative impact of COVID-19 shock and crude oil prices on policy uncertainty in Nigeria and South Africa using daily confirmed cases and deaths. We concluded that the number of new cases/deaths of COVID-19 has no significant effect on policy uncertainty in Nigeria and South Africa in line with earlier studies. Furthermore, crude oil prices tend to reduce economic uncertainty in Nigeria, contrary to theoretical and related findings, meanwhile, crude prices increase economic uncertainty in South Africa. As a recommendation, both countries should reinforce the existing fiscal and monetary measures such as increasing subsidies to businesses as well as improving access to credit schemes for firms, especially as the second wave of COVID-19 is resonating around the world. This will further cushion the effect of the dwindling crude oil prices, thereby, reducing the policy uncertainty in both countries.