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BusinessDay
Nigeria's leading finance and market intelligence news report.

Nigeria faces acute job losses as COVID-19 incapacitates employers

...unemployment rate may reach 40-45% by end 2020, says LCCI

Nigeria may be facing its worst unemployment crisis since independence as helpless employers retrench millions of workers due to the pervasive impact of COVID-19 on their margins.

Weeks of lockdown have hiked logistics costs for employers, forcing reductions in output, revenue and profits. Bars and clubs are still under lock and key, pushing brewers to the brink while hurting their capacity to retain workers. Firms struggle to move their products to customers as many open markets across Nigeria remain partially open. Movement of raw materials and finished goods is increasingly being restricted by states and security agents, preventing them from reaching their markets.  Consumer wallets are becoming emptier due to lack of regular salary payment and loss of profits by firms, especially small businesses. The supply chains have been dislocated while misery deepens in Nigeria, world’s poverty capital, according to the Brookings Institution, suppressing the capacity of consumers to afford what is being offered by firms.

“Many companies are not in production today,” said Ambrose Oruche, acting director-general, Manufacturers Association of Nigeria (MAN), which has over 2,500 firms employing more than 100,000 workers. “There are high job losses already and nothing much will happen until we are back to normal.”
Oruche explained that many manufacturers can only pay workers part of their salaries, with others furloughing staff.

He further said that the Nigeria Customs Service has raised import duties for food, basic metals and other raw materials from 5 percent to 20 percent, stressing that the action would only cripple an already stressed manufacturing sector.

He asked the government to create a stimulus package for manufacturers as other economies have done to save firms from total collapse.

Nigeria’s unemployment rate as of the third quarter of 2018 stood at 23.1 percent, according to the National Bureau of Statistics (NBS). Chris Ngige, minister of labour and productivity, said in May that unemployment could reach 33.5 percent in 2020. It was not clear how he arrived at that number, but current retrenchments in firms could validate that claim. Forty-two percent of hitherto employed Nigerians have lost their means of livelihood to COVID-19 pandemic, according to a June 2020 report by the NBS.

Timothy Olawale, director-general, Nigeria Employers’ Consultative Association (NECA), told BusinessDay that jobs have already been lost in critical sectors of the economy, noting, however, that averting more job losses requires that the government adopt urgent measures to mitigate the debilitating effect of COVID-19 on businesses and employers of labour.

NECA is the umbrella body of employers in the formal sector of the Nigerian economy and one of the five interest groups that constitute the Organised Private Sector (OPS).

Olawale said while the effort of the Central Bank of Nigeria (CBN) in providing stimulus to businesses is commendable, “we make bold to say that much more could be done to keep businesses afloat and further reduce the risk of massive job losses”.

He noted that governments in other climes have taken specific measures to protect local industries and guarantee job security for their citizens and Nigeria must do same.

“In Australia, government provided tax-free cash flow for employers. Up to $25,000 is available to help pay wages or for investment to protect against downturn in activity. This is excluding wage subsidy and instant asset write-off for businesses with turnover of less than $500 million,” Olawale said.

“In China, SMEs were exempted from payment of pension contributions, unemployment and work injury insurances, while same had been halved for large companies and also extension on the tax reporting period, exemption from import tax on goods and materials,” he said.

The International Labour Organisation (ILO) had projected over 22.7 million jobs may be lost globally as a result of the COVID-19 pandemic.

In Nigeria, even before the outbreak of COVID-19, the unemployment situation had been worrisome, and NECA believes it doesn’t have to get worse. The situation could worsen poverty in Africa’s most populous country where 87 million people live from hand to mouth.

BusinessDay found that some employers are thinking of adopting more technology, which will see job losses. Others said they could change their business.

“Some of my friends are thinking of moving their brick-and-mortar business online. Others I have spoken with said they could just change their business or move them to new locations,” said Ike Ibeabuchi, CEO of MD Services Limited, who produces chemicals and runs a services firm.

According to a survey done by the Lagos Chamber of Commerce and Industry (LCCI) on the impact of lockdown of businesses, 64 percent of employers said they lost below N500,000 daily, while 16 percent lost between N500,000 and N1 million each day during the five-week lockdown. Similarly, 12 percent lost above N5 million each day, while 7 percent incurred between N2 million and N4 million loss daily during the period.

The LCCI found that 63 percent of respondents planned to downsize operations to minimise losses while 18 percent were willing to cut capital spending.

“This suggests that unemployment rate is expected to increase drastically post-lockdown except government takes urgent steps to support business owners towards surviving and ensuring business continuity,” LCCI said in the report breakdown signed by Muda Yusuf, its director-general.

The chamber explained that cost-cutting measures adopted by firms today might see unemployment rate surge to 40-45 percent by end of 2020.

“This has ripple effect on the Gross Domestic Product given that private consumption by households accounts for about 60 percent of national output,” LCCI further said.

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