Chief executives of major companies in Lagos are worried about the devastating impact of COVID-19 on the state’s economy, expressing concerns that the imminent recession, job losses, foreign exchange scarcity and taxes could rob Africa’s fifth largest economy of its allure.
“One of our major challenges now is access to foreign exchange,” said Roy Deepanjan, CEO of Lagos-based Chi Limited, manufacturers of beverages, at the Private Sector Interactive Webinar with Lagos State Governor organised by the Lagos Chamber of Commerce and Industry (LCCI) on Wednesday.
“In the short to medium term, I think there will be importation of raw materials and pressure of the naira. Secondly, we need to look at what we can do to retain our jobs,” Deepanjan, who manages the company recently acquired by Coca-Cola, said.
He called for palliatives to factories to enable them stay afloat and save the country from its worst unemployment crisis since Independence.
COVID-19 is peaking in Nigeria with a total of 17,148 cases and 455 deaths as at Wednesday. Lagos has 44 percent of all the cases and about 18 percent of all the deaths. The state is significant, being the country’s biggest economy with 8.4 million small businesses, and headquarters most of the large enterprises. The country is certain to fall into its worst recession in 30 years, according to the International Monetary Fund (IMF) projections, and Lagos would be the hardest as it has the largest concentration of businesses.
Heads of businesses are seeing erosion of their revenues and profits due to the pandemic, and fear the worst impact of recession, continuing job losses and taxes on their survival.
“We see visits of different agencies coming to do inspections,” said Prakash Keswani, CEO of Artee Group, owners of the retail Park ‘n’ Shop.
“As the owner of a retail shop, I do get a lot of calls from these agencies. I think government has to come out with clear guidelines as to who is responsible,” he said.
According to Oyeyimika Adeboye, CEO of Cadbury Nigeria, the concern is how Lagos State will manage the imminent recession to ensure it does decapitate businesses in the state.
Toki Mabogunje, president of the LCCI, is worried that the pandemic and the various containment measures have caused severe dislocations and losses to businesses, and it will take a while for many firms to recover from the consequential shocks.
Mabogunje explained that the situation has led to breach of contracts, inability to retain staff, cost escalation due to naira depreciation, burden of loan repayment and loss of consumer purchasing power.
“We will appreciate the intervention and consideration of the state government in supporting the recovery of businesses from these disruptions and dislocations,” she recommended.
Alan Sinfield, CEO of telecoms firm 9Mobile, said naira depreciation is hurting the firm as it does most of its network infrastructure transactions in dollars.
COVID-19 has forced down oil prices as countries retreat from purchases, concentrating rather on halting the spread of the virus. Brent crude price was $40.74 per barrel at 2.48pm on Wednesday, according to Bloomberg data, representing a 33 percent drop from early in 2020. This is hurting Nigeria, a mono-product economy, which depends on oil for over 70 percent of foreign exchange and revenue. Oil inflows into Nigeria have slowed, leading to naira depreciation and high foreign debt profile. Manufacturers are scrambling for FX to import inputs.
Nigeria is already battling high unemployment estimated at 23.1 percent in the third quarter of 2018. The private sector predicts a 40-45 percent unemployment rate by end of 2020 due to the continuing spread of the pandemic, its worst since 1960. The Federal Ministry of Finance has predicted 8.9 percent cut in GDP growth in 2020.
Boye Olusanya, chief operating officer, Flour Mills of Nigeria plc, stressed the importance of ramping up testing in the state to clear uncertainties. He further said that the private sector’s biggest headache is restarting the Lagos economy to avoid the damaging impact of job losses.
The private sector particularly commended Governor Babajide Sanwo-Olu of Lagos for taking proactive steps to curb the spread of the virus.
Sanwo-Olu, on his part, said absence of data has fuelled the spread of COVID-19 as it was impossible to verify fake data given by returnees who had contacts with the index case.
He explained that the state plans to triple testing from the current 1,000 to 1,200 every day and would raise molecular labs from five to 12 in the coming weeks.
He assured the private sector that he would take the conversation of cooling down taxes and fees with relevant heads, disclosing that the state is building the biggest rice mill that would take care of 25 percent of its rice demand.
