For Tunde Akinloye, a 45-year-old vulcaniser in Apapa, Lagos State, Nigeria’s best defence against the coronavirus would be the worst scenario for him and his family of eight who depend on his N5,000 a day income for survival.
“I learnt that the government is encouraging people to stay indoors and avoid public gatherings. I can’t, man must wack,” Akinloye told BusinessDay, explaining that a stay-at-home would mean hunger for his family.
Nigeria is yet to announce a full lockdown like India, but the Federal Government on Monday closed all land borders, suspended all government meetings and urged all Abuja and Lagos residents to stay at home, avoid mass congregation of any kind as well as non-essential outings until further advice is given.
Measures so far implemented to curb the spread of the diseases, which has affected 36 people and killed one person as of noon Monday, are halting commercial activities for the country’s largely services-based and informal economy.
Social-distancing, self-isolation and quarantining have been encouraged, especially in Lagos State, Nigeria’s commercial hub, which accounts for more than half of the cases in the country.
The state government over the weekend asked its civil servants, from grade 1-12, to work from home and reduced passengers allowed on its BRT public buses to 50 people, after asking schools to shut down and limited social gatherings to 50 people.
But as businesses shut down and more people stay at home, the state could lose up to N33 million in internally generated revenue (IGR) per day while the country could count losses of as much as N200 billion assuming a severe lockdown in the fashion of Italy’s is enacted.
Without cushions in place, the impact of such a slowdown on Nigerians would hasten the World Bank’s gloomy prediction of worsening poverty levels in the absence of reform.
Too poor to isolate
The informal sector, which is at least 41 percent of the Nigerian economy, largely relies on face-to-face interaction for transactions to be complete.
Akinloye is a participant in the informal sector; his wife, Adeola, is a caterer in Oshodi and she relies on Suleiman, a bus driver, to get to her shop.
Her shop owner depends on her rent fees and probably would have another business dependent on them too. This is the chain that a shutdown would disrupt.
Many of the businesses in the country are Medium, Small, Micro Enterprises (MSMEs) which account for around 96 percent of firms in the country, 84 percent of employment and 49 percent of the GDP.
A shutdown of the economy would deal the biggest blow to the country’s poor masses and would worsen hardship for the average Nigerian – yet it is the best option to curb the deadly disease.
“Flattening the curve” to limit spread of the coronavirus to a manageable number will be difficult to implement where around 90 million people live below the poverty line.
Isolation would be a very expensive exercise for the ordinary Nigerian, without support from the government, which is largely unable to finance a major stimulus.
Less than 4 in 10 Nigerians are able to spend discretionarily once they get past spending on the essential commodities, according to estimates by Lagos-based SBM Intel.
In a report by SBM Intel, 63 percent of respondents said after spending on food, they had nothing left to spend. About 71 percent of households sampled earned between N30,000 and N120,000 every month.
Only four years ago, Nigeria Deposit Insurance Corporation (NDIC) said only 2 percent of Nigerian bank account owners have at least N500,000 in their account.
Since that time, per capita income growth has slowed with population growing faster than the economy.
This means the opportunity cost of investing in health kits like face mask, hand sanitisers and soaps would be high for many Nigerians – especially in the North.
With an average family size of eight, self-quarantining would be an uphill task.
‘Nigerians left on their own’
Unlike Nigeria which has basically left its citizens on its own, other countries are putting in place effective economic response with a ‘Whatever it takes’ motto to preserve lives and reduce impact of the pandemic on the poor.
The United States is planning a stimulus package that would involve direct cash transfers to citizens and help businesses stay afloat while the UK and much of Europe have announced plans to spend big to support businesses too.
The Central Bank of Nigeria (CBN) announced a N1.1 trillion package to help businesses in healthcare and manufacturing respond to the coronavirus outbreak but poor consumers are “on their own”, said Bongo Adi, economist and senior lecturer at Lagos Business School (LBS).
Adi said that the lack of a database would make it difficult to identify the poor and even if that were possible, the lack of transparency in the system would see the money diverted for something else.
“The smart thing will be to go the IMF or someone for an emergency bailout but we know that is not happening,” another economist, who pleaded anonymity, told BusinessDay.
Real sector too fragile
A lockdown following the outbreak of coronavirus will also take a heavy toll on the real sector, particularly manufacturing, believed to be the economy’s growth engine.
Bad as the current Covid-19 lockdown is on the economy, particularly the real sector, what are the stopgap measures?
Muda Yusuf, director-general of Lagos Chamber of Commerce and Industry (LCCI), said the government needs to look beyond tax credit in its quest for complementary funding sources for infrastructure.
“We should be looking more in the direction of equity financing. But for this to happen, the policy and regulatory environment must be right,” Yusuf said at a forum on the “Implications of coronavirus outbreak on the Nigerian Economy” organised by the LCCI in Lagos.
The LCCI chief also recommended that Public-Private Partnership and Public-Private Dialogue should be deepened to harness quality ideas on how to manage this rather scary situation.
He, however, added that it is also important not to respond to the situation in panic mode to avoid a disproportionate response which could do even more harm to the economy.
Long drought awaits oil sector
For countries like Nigeria, highly dependent on oil prices, the anticipated long-term bearish run for the oil market will continue to crimp revenue and roil the economy.
Lower oil earnings will hurt any national response of lockdown to coronavirus as a rash of new cases reveal the country’s poor preparedness to deal with a pandemic that has claimed thousands of lives.
It is easy to see why the economy is vulnerable. More than 90 percent of Nigeria’s foreign exchange earnings are from crude oil and gas. Oil is also the major driver of accretion to the foreign reserves. But the price of oil has been tumbling, hitting an all-time low of $25 per barrel last week.
Although the dramatic dip in oil price is not entirely caused by the coronavirus pandemic, the demand for Nigeria’s oil and gas has reduced significantly. China is the world’s second-largest consumer of oil and its demand for oil alone has reduced by 20 percent.
Last week, Nigeria’s external reserves fell below $36 billion, touching its lowest levels in 29 months. The reserve which shows the country’s ability to weather external shocks dropped to $35.9 billion from a $36.02 billion level on Tuesday, 17 March, according to Central Bank data.
States in a dilemma
States are also in a similar quandary. Most economists have said the lack of a coherent and special social protection initiative specifically to deal with the individual economic challenges of Nigerians may work against the fight against the spread of the infection.
Data compiled by BusinessDay show that state governments on the average rely on allocations from the federation account (FAAC) for virtually 86 percent of their revenue, a pointer to how vulnerable their finances would be in the wake of the current collapse in oil prices.
A decline in the revenue from oil would invariably mean that state governments would have less to spend.
DIPO OLADEHINDE, SEGUN ADAMS (Lagos) & TONY AILEMEN (Abuja)