COVID-19 & poverty crisis in Nigeria: Possible short-term solutions!
With a very weak health sector for a rapidly growing population of about 200 million people, Nigeria faces enormous health and socio-economic challenges with the increasing COVID-19 epidemic. While primarily a health problem, the nature of COVID-19 particularly the rate and mode of spread clearly demonstrates that it is far more than just a health challenge. It is complex with far reaching negative socio-economic impacts and risks on both global and African economies including Nigeria.
In a bid to contain the spread, the global economy including Africa and Nigeria are on lockdown and all sectors are affected from transport to manufacturing and from financial sector to agriculture. It is really a low frequency, high impact global risk with IMF stating that about $114 billion will be required in 2020 to fight COVID-19 in Africa. In a continent where about 1/3 (about 422 million) of her population live below the global poverty line, it is estimated that about over 20 million formal jobs and 250 million informal jobs will be at risk.
With Sub-Saharan Africa likely to experience about 5.1 percent contraction, output losses range between $37-$79 billion. Mckinsey projects that Africa might lose between $90-$200 billion and experience the first recession in 25 years! Impact on household are severe and dramatic with welfare losses of 7 percent in a best-case scenario. Agriculture will decline by about 2.6-7 percent, food imports between 13-25 percent. The same decline will be the case with Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), consumption expenditure, manufactured goods, utilities, transport, energy and services. With major disruption of supply chains, exports will likely decline by about 30 percent. Even foreign aid, remittances will all decline in addition to massive capital flight with Nigeria projected to lose over 50 percent of her revenue from oil in 2020! It is really a tough period!
As the above African scenario is the same for Nigeria, it means that we are in for very challenging times. The situation in Nigeria might even be worse than many African countries given that we are the poverty capital of the world with almost half of our population living in extreme poverty. The question is what we should do to mitigate the emerging disaster! From the way things are going the era of our governors and states relying mainly on the Federal government for monthly revenue allocations is going and might be difficult to sustain least in the next two years. To survive through this crisis, there is need for strategic thinking and innovation from our leaders particularly the governors. As majority of Nigerians live in villages and farms, there is no better time to jumpstart the mitigation strategies than now, the beginning of the farming season!
COVID-19 presents opportunities for some sectors and products to thrive, it is another low hanging fruit for some of our governors to tap into
With global food prices already rising due to COVID-19, an immediate short to medium term measure is for the governors through the Nigeria Governors forum in collaboration with the federal government to identify about 100 agricultural products that will be allocated two to three per state for massive cultivation and production based on the state’s agricultural comparative advantages. To address the short-medium term revenue impacts, the focus for this agricultural season will be on crops with three – six months gestation period. Crops like maize, yam, cassava, sweet potatoes, beans, and others fall into this category. In a recent study on the business opportunities of some of these crops, it was noted that the gaps between demand and supply are huge. For instance, while the gap in the demand and supply of Garri in a year is over N430 billion, for Maize flour processing, it is about N240 billion. While Netherlands makes about N285 billion from potatoes every year, the 2020 total budget of Plateau state is about N172 billion. Interestingly as Plateau potatoes are perceived to be of better quality than the ones from Netherlands, it means that Plateau can afford to bid goodbye to the revenue from the federal government and still achieve a higher budget.
Just as it is with potatoes, so it is with other agricultural products. While Kenya and Ethiopia make about $1 million each from fresh flower, Germany and Spain exported pork meat worth about $4.4 billion and $4 billion respectively in 2018. If they are achievable in other places, so it should be in Nigeria. The factors lacking are effective leadership, strategic leadership and innovation from our governors. As majority of our people are hungry and poor, all that is required from our governors is to provide the required support for people to farm particularly security of life and property. In addition to security of life and property, other key factors include availability of improved seedlings and access to land in terms of roads and other infrastructure such as evacuation and storage facilities. These the state governors can easily provide once there is seriousness and commitment.
In addition, as COVID-19 presents opportunities for some sectors and products to thrive, it is another low hanging fruit for some of our governors to tap into. For instance, as facemasks will be in high demand from now to at least 24 months, it is an opportunity states like Abia should grab with two hands. With Aba boys already in the frontline of manufacturing locally made facemasks, what is required is for Governor Ikpeazu to provide all the necessary support to ensure that Aba will account for over 50 percent of the facemasks to be consumed by over 1 billion people in Africa. This is also the case with the protective wears used by our health workers that costs about N70,000 for one.
With a clear strategy and partnership with the private sector, Abia state can generate over N200 billion from facemasks and other clothes used by health workers. By implication, COVID-19 has presented an opportunity for Abia state to strategically generate higher than their 2020 total budget of about N137 billion. While COVID-19 poses immense health and socio-economic challenges to Nigeria and states, a little responsible leadership, strategic thinking and innovation from our leaders particularly the governors can help us mitigate the challenges especially the revenue gaps. As they say, where there is a will, there is a way and the time to act is now!
Franklin Nnaemeka Ngwu
Dr. Ngwu, is an Economist/Associate Professor of Strategy, Risk Management & Corporate Governance, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- email@example.com,