The impact of the novel coronavirus, COVID-19, on sectors of the Nigerian economy and ways to manage this crisis has dominated discourse in the last three months. However, prior to the pandemic, Nigeria suffered some underlining challenges which have further exposed her status as the giant of Africa as a mere mirage. These fundamental limitations have also played in determining the severity of the current crisis on the economy.
The COVID-19 pandemic has revealed basically gaps in the society, businesses and government which explains years of snail-paced growth and development. Proactive economies are focusing on closing up these gaps to unlock economic potentials and ultimately development.
Even as the Nigerian government and businesses respond to the COVID-19 crisis and execute reopening strategies, leadership and foresight will also be required to shape the path to the “next normal” reckons McKinsey, in a recent report.
One path will be to accelerate digital investment and transformation in Nigeria. The emergence of COVID-19 pandemic has disrupted activities, hence the need for a paradigm shift to digital transformation. Impressive growth in the telecommunication and fintech space gives an insight to the growth potentials a digital-driven Nigerian economy could unlock. The adoption of digital processes in every sector of the economy will boost sectoral output, plunge cost and impact remarkably on the bottom line of firms, giving them better valuations in the capital market.
Also, Nigeria has largely been import dependent, with little activities in her export space. This has largely pressured down the value of the naira against the dollar given the high demand from importers and manufacturers. The response of the central bank was the restriction of foreign exchange for 43 items and the closing the land borders in a bid to lessen demand and stimulate local production.
This hasn’t fixed the problem. Many domestic manufacturers have raised concerns over how less competitive and below standard their products are in the international market. This points to the fundamental challenge of low productivity and competitiveness in the Nigerian manufacturing sector. As a result, growth in the sector has been unimpressive in the last 4 to 5 years. The sector has barely recorded a 2 percent growth across quarters in the years under review.
Fixing this will require efforts from the fiscal and monetary authorities as well as businesses within the sector to tackle long-standing barriers to industrialisation and cooperate to seize new opportunities. Nigeria cannot rely on doing business as usual to come back from the brink. The aim will be to strengthen the sector’s competitiveness through consolidation and innovation while reshaping manufacturing with a focus on self-reliance.
In the words of Ngozi Okonjo-Iweala, former Finance Minister of Nigeria and one of the African Union’s COVID-19 special envoys, “this crisis has shown that globalisation may have led us to over rely on global supply chains. There will be a big rethink worldwide – not just because of politics, but also because of countries’ ability to meet their basic needs.” Nigeria must develop stronger supply chains locally to become more competitive globally.
Lastly, another path to Nigeria’s development will be the formalisation of her informal sector. The Nigerian informal sector is a major contributor to the Nigerian economy, accounting for a significant portion of employment and GDP. The IMF says the sector accounts for some 65 percent of the nation’s GDP.
In other words, we can afford the collapse of one or two large corporates, but not the informal sector. The COVID-19 pandemic has put the survival of many small businesses under threat and may result in job losses for many. The consequences of COVID-19 present an opportunity to accelerate the formalisation of micor, medium and small enterprises – and so improve their productivity, access to finance, and integration into the supply chains of larger businesses and the public sector. This will also improve the tax income of the government when these businesses are captured in the tax net.
