The Covid-19 pandemic has left businesses and individuals around the world counting losses. In Nigeria, which has 665 cases confirmed as of 21 April, thousands of businesses have had to close temporarily due to movement and commercial activity restrictions.
Many state governments have issued directives to contain the spread. International flights have been suspended around the world, including within and outside Nigeria. Interstate transportation and movement has been banned by governments, with borders shut, all to check the spread of the pandemic.
The big question in Nigeria, and for many other countries, is how long these restrictions will last. Because the numbers of infections continue to escalate, the uncertainty of the situation keeps increasing within the Nigerian populace.
The pandemic has already dampened the economic outlook of the country and there is a near economic recession looming. This is largely due to a decline in crude oil prices and the depressed state of the economy. Further to this, in March 2020, S&P downgraded Nigeria's credit rating into junk territory, with a B-rating, down from B/B. This will affect future foreign direct investments into the country and expected foreign portfolio investments. Therefore, in addition to the life-threatening and health risks of the pandemic, the socio-economic impact is also a threat, with many workers likely to face job loss, job cuts, salary cuts, and redundancy.
It would be hard for businesses to sustain salary payments beyond April 2020 if restrictions remain in Nigeria
If the outbreak is not contained, the circular flow of income within the economy will be impeded or blocked and disposable income will shrink drastically, impacting on small and medium-sized enterprises (SMEs) who depend on the spending of salary earners.
It would be hard for private organisations and businesses, especially SMEs, to sustain salary payments beyond April 2020 if restrictions remain in Nigeria. Additionally, by the time this is over, the number of people that will be able to retain or go back to their jobs might likely experience a sharp decline. Currently, the disruption to air travel has adversely impacted the aviation industry, with airlines already recording huge losses. Some Nigerians already have, and will, lose their jobs even before this outbreak is over. Airlines are already fighting and struggling for survival due to travels ban globally; likewise other key sectors.
Globalisation will be extremely difficult to achieve with the level of travel restrictions announced to contain the pandemic. In economic terms, the spread of products, technology, flights, bilateral relations, foreign exchange earnings, access to goods, services and jobs across national borders and cultures have been greatly hindered and negatively impacted by this pandemic.
Lagos, the economic centre of the country and the SME hub of the nation, has issued restrictions as well, with a partial closure of markets and businesses because of the recognition of the strength of SMEs to the economy. SMEs and entrepreneurs there are experiencing far-reaching consequences because the outbreak has forced them to slow or halt operations, impacting on business continuity. SMEs have fewer customers, who in turn have less money to spend. There are also challenges with weak supply-side manufacturing, supply shortages, disruption to factories, restocking and logistics due to the restrictions.
In Nigeria, working from home is unlikely to be effective because of poor power supply and infrastructure. If this goes on for much longer, there will be extreme financial hardship for millions of Nigerians, and poor citizens who live on daily income from their micro-businesses will face a spike in food insecurity.
In Nigeria, working from home is unlikely to be effective because of poor power supply and infrastructure
Unemployment in Nigeria was rising even before the outbreak. In May 2019, Senator Chris Ngige, Minister of Labour and Employment, disclosed that Nigeria’s unemployment rate could reach 33.5% by 2020. Senator Ngige said this while declaring open a two-day workshop in Abuja on ‘Breaking the resilience of high unemployment rate in the country’.
Therefore, with the global risks we are facing, it is certain that the senator’s projected figures are likely to be exceeded and continue to grow. The rate of growth and the eventual outcome will depend on how fast the government contains the spread of the virus. Many sectors have already been impacted: hospitality, tourism, real estate, manufacturing, retail businesses, transportation, and the travel industry.
In the context of this article, ‘unemployed’ is defined as those who are without, but available for and seeking, work, including those who have voluntarily left work. Recall unemployment is generally regarded as a symptom of basic microeconomic disequilibrium. If no stimulus package is considered to reduce the impact of the inevitable job losses, the poverty level in the country is expected to increase. Poverty implies inadequate resources to satisfy basic needs or the inability to buy or otherwise secure essential foods, housing, clothing, transportation, education, and health care.
The available data indicate that over 60% of the total population of the country are youths, many of whom are vulnerable and out of gainful employment. Opportunities for jobs for these youths are scarcely available and this problem will grow as the outbreak continues. This is a huge concern and a precarious situation for the country and government because the pandemic is already triggering an economic crisis and it would compound the already high unemployment rate in the country.
In Nigeria we currently have deficits in housing, water, sanitation, food, healthcare, and education, among others. Covid-19 will more than likely spike up the level of these shortfalls. Consequently, a surge in criminality is unavoidable. Lowered tax revenue is likely for the government with the following consequences: increased demand for substandard goods and services, a weak currency regime and high inflation, amongst others. This affects all citizens.
Dr Timi Olubiyi holds a PhD in Entrepreneurship and Small Business Management. He is an investment coach and a financial literacy specialist.
@drtimiolubiyi
drtimiolubiyi@gmail.com
We need to see government and stakeholder palliatives, policy reforms, initiatives and social intervention programmes targeted at reducing the effects of the pandemic, and eradicating unemployment and poverty. In addition, the pandemic requires priority attention and a collaborative mechanism to flatten the curve of the progression of Covid-19 incidences and also yield measurable results. Government must be more aggressive in providing measures aimed at containing the spread of the virus. Time is running out!
The original version of this article was published in P.M. Express. Updated and republished with permission.