Introduction
Nigeria is one of many African countries to order a lockdown amidst the growing COVID-19 pandemic, and like other countries with a vast informal economy, the economic consequences have been dire. The growing tensions and issues of insecurity increases daily. Therefore, a legitimate question that is gaining momentum is whether the health implications of the COVID-19 crisis significantly outweigh the socio-economic cost of the lockdown?
In the presidential address to the country on April 13, 2020, President Muhammudu Buhari confirmed what many Nigerians had indeed been expecting– an extension of the lockdown in an attempt to ‘flatten the curve’. An important deduction from the speech that may have been overlooked is the reference to the impending policy document to be formulated. The policy document will be the most vital tool in determining how the country strategically intends to deal with the current situation. Accordingly, a comprehensive policy document targeting the informal economy, particularly the small and medium scale enterprises will be a key tool in detailing how the country intends to deal with the current crisis and outline steps that will be adopted for the post-COVID-19 economic recovery.
Read also: COVID-19: Buhari seeks speedy trial of cases
Economic Impact of COVID-19 on Nigeria
The International Monetary Fund projects a recession for sub-Saharan Africa in 2020 with an estimation that the Gross Domestic Product is expected to contract by 1.6% this year, which stands in stark contrast to the 3.1% growth experienced in 2019. While Mckinsey predicts that the pandemic could affect a third of the 440 million formal and informal jobs in Africa. These statistics are attributable to the lockdowns and curfews currently being imposed by various governments across the continent of which Nigeria is no different. The IMF has taken steps to provide immediate emergency funds to other African countries such as Ghana and Senegal who were given $1 billion and 442 million dollars respectively. The Honourable Minister, Zainab Ahmed disclosed that the Nigerian government was currently seeking a combined $6.9 billion loan from the IMF, World Bank and African Development Bank to be able to curb the effects of the crisis. The loans are intended to provide the much-needed fiscal assistance that will be essential to deal with the current crisis and take steps for an effective post-COVID-19 economic recovery. Evidently, despite the urgent necessity, it appears that the country is yet to receive the assistance from the IMF.
Factors that should influence the COVID-19 Policy
The policy response to the COVID-19 crisis in Nigeria will need to take into account not only the overhaul of the current health care system but the most effective strategies to deal with the most economically vulnerable of the population. The latter poses a unique set of challenges as the large and densely populated informal settlements require a very definitive policy response. This customised policy response will be strategically employed to tackle the current challenges in the Nigeria economy, which include the large informal sector, the fiscal position, public debt and overall low operational capacity. Thus, the issue of policy formulation is one that must be paid keen attention during and post the COVID-19 crisis. In ensuring that this is done effectively, the policy must take into account the structural features of the country, these include:
– The size of the informal sector;
– The nature of jobs; and
– The predominance of small and medium-sized enterprises
Firstly, while it is important that the fiscal policy is aimed at increasing the capacity of the health system to provide adequate and affordable medical attention to individuals affected by the crisis, it is also important to consider that the majority of the population engaged within the informal sector lack benefits such as health insurance and paid leave. These individuals need to work daily for survival, and thus a prolonged lockdown though geared towards the “greater good” might result in significant harm. The implementation of social protection programs to support workers, particularly those in the informal sector is crucial. For instance, the Central Bank of Nigeria (CBN) fiscal stimulus package which includes a 50-billion-naira credit facility to households and small-medium enterprises most affected by the pandemic can be effectively monitored through the use of social capital mechanisms. This is primarily due to the fact that a significant proportion of individuals in the informal sector do not have bank accounts or a means of identification, thus, the use of the Bank Verification Number (BVN) might significantly limit the access of many individuals to the package.
Secondly, as earlier mentioned, the utilisation of social capital is a fundamental policy instrument which should be effectively employed. Authorities must realise that the foundations of social capital have a higher margin for ensuring compliance. There should be a collaboration with the state or the local governments. Communities, groups, even markets usually have leaders who can assist in legitimising the intentions of the government amongst the vast majority of their followers. In essence, informality does not necessarily equate to disorganisation and as such, social capital mediums can be an effective tool for social stability and ensuring that citizens adhere to the restrictions laid down by the government. More importantly, they increase transparency and allow for higher levels of accountability which is essential for effective development.
Thirdly, the policy must think beyond debt relief and re-emphasise the strengthening of regional value chains. Many African countries have shown remarkable industrial development and ingenuity as a result of the COVID-19 crisis, and it is imperative that these are harnessed, and leveraged post the crisis. For instance, countries such as Kenya and Ghana have utilised the textile industry to supply fabric manufacturers with material to produce face masks. Essentially, the policy approach adopted by the government must emphasise inclusive growth and the African Development Bank President, Akinwunmi Adesina put it perfectly when he stated that “Growth must be visible, Growth must be equitable, Growth must be felt in the lives of people”.
Africapitalism to the fore
Notably, it appears that the term africapitalism will gain credence now more than ever before as it has become imperative to rethink policy in line with the bulging youth population. Africapitalism, as the name suggests, is the intersection between African values and the core capitalist principles. Rather than being merely just a catchphrase, it is gradually being perceived as an economic policy geared towards the encouragement of a robust private sector-driven economy with a developmental-focused approach. In essence, this economic policy seeks to develop Africa’s private sector to generate both economic prosperity and social value. The main proponent of africapitalism, Tony O. Elumelu, highlights key features which make it an important paradigm shift in development policy. For instance, the shared purpose nature of africapitalism allows for an emphasis on more inclusive growth and reduced inequality. Long-term investments, particularly in strategic sectors in key sectors such as manufacturing, transportation, agriculture and health, will ensure that the country will overtime develop the right level of competitive advantage. Most importantly, the prioritisation of entrepreneurship as the key to unlocking the potential of Nigeria will ensure that the youth are effectively utilised as an engine of economic growth.
Conclusion
Therefore, a comprehensive policy framework will include means of ensuring increased job opportunities for the youth. This will be achieved through encouraging a system that fosters entrepreneurship particularly one that encourages partnerships of like-minded individuals who are seeking to solve a current problem within their societies or communities. The policy recommendations though not exhaustive is a step in the right direction towards creating a sustainable public policy that can be implemented over the long haul. Most importantly, economic policies must be geared towards ensuring future resilience, economic diversification, inclusive growth and sustainable development. More than ever before, it is evident that the public and private sector will need to collaborate to resolve the post-COVID-19 social and economic challenges.
ADAOBI ONI-EGBOMA
