Surviving global supply restrictions in really bad times
It has been about two years since the murderous COVID-19 hit, and the world is still in awe of its inhumane effects.
Both developed and developing nations of the world had their fair share of the pandemic. However, the advanced nations seem to be getting a better hang of the after-effects of the global massacre despite being worse hit by the virus. On the other hand, developing countries are still trying to figure out precise ways by which they may gain full recovery after the global health misfortune struck the entire world.
The deadly virus took the world by storm by enforcing a standstill in almost all global activities. Major industrial and manufacturing production activities were halted, services were disrupted, and global supplies suffered. COVID-19 instilled a significant disruption on international supply chain activities, and the world is still paying a great price for hosting the unwelcomed visitor whose presence is still much feared.
The global lockdown order following the spread of the pandemic was meant to stall further blow out of the virus. However, the mandatory charge was also followed by production halts, restriction of movement by people and goods, border closure, logistics constraints, and a slowdown of trade and other business activities.
While the restrictions lasted, retail and trade activities were paused, manufacturing and industrial plants closed. Inventories, equipment, or machinery could not be replaced nor replenished, neither could manufacturing capacities be utilised.
Importers and exporters found it challenging to deliver or bring in goods from abroad due to restrictions at the seaports and the slowdown of industrial activities of major trading partners across the globe.
Indeed, global supply chains have been vulnerable to shocks that occur in major countries of the world. Events such as trade wars, pandemics and other health-related crises, domestic political vices, and natural disasters are critical occurrences that can disrupt the free flow of productive exchanges across nations.
As vaccination rollouts became more popular, many nations began to open up and resume economic activities to make up for the lost times. Nigeria’s experience since the world began to breathe again has been marred by domestic shortcomings, which were exacerbated by the pandemic effects.
Nigeria’s current stance showcases an economy that is barely living within its means. Currently, the inflation rate of the country records 17.38 percent (July 2021 estimate), the unemployment rate is 33.3 percent, underemployment and youth unemployment stands at 22.8 and 42.5 percent, respectively, GDP growth rate stands at 5 percent (Q2 2021, much contested) after a 0.5 percent growth recorded in the previous quarter. The current debt stock in the country is at N107 trillion, while the poverty rate in the country is 40.1 percent (2020 NBS estimate).
Also, Nigeria’s stagflation economy is further plagued with insecurity challenges, especially in the major food processing areas of the country, land border closure that lasted for months, deregulation in the downstream oil sector that led to a hike in the prices of petroleum products, upward review of energy tariffs, upward adjustment of the exchange rate relative to the local currency which eventually fed into higher imported prices, an infrastructural deficit that resulted to logistics problems in the rural farming communities, unchecked monopoly and oligopoly practices among market union association leadership which engages in inefficient price-setting activities.
The ability of Africa’s frontier economy to develop supply chain resilience in the face of a heated ecosystem lies in the hands of sovereign leadership to devise efficient policy alternatives that will champion the cause for a post-pandemic balance.
Settling the dust on stagflation in Nigeria will require a supply-side intervention that is set to ensure sustained growth that is employment-generating and poverty-reducing at the same time.
For instance, increased efforts in vaccination acquisition and rollouts and increased awareness, especially at the grassroots level, is important to ensure that a good proportion of the population is vaccinated within a decent time frame. As the government and private employers continue to debate the compulsory vaccination by workers and citizens in general, full vaccination of a sizable proportion of the nation will ensure that economic and business activities will continue to occur unhindered. Success in this drive is set to impact positively on both individual and aggregate earnings and welfare.
Many countries of the world have already made it mandatory for travellers to show proof of vaccination before gaining entrance into their countries.
Accommodative monetary policy that will stimulate credit expansion and boost recovery in the short run is another course of action that must be prioritised. A targeted increase in sovereign financing towards critical sectors like agriculture, manufacturing, electricity, and micro, small and medium scale enterprises (MSMEs) should be encouraged to spur supply-related activities in these sectors. If appropriate government spending is funnelled, the incidence of inflation will be dampened by the supply surpluses emanating from increased activities in these critical sectors.
Furthermore, inward-looking strategies, given government support, can be adopted by the private sector. Transnationals and other corporates can consider restructuring their outsourcing strategies to supply essential input resources that will be useful in domestic operations. This is set to help private businesses mitigate the risk of potential disruptions that may emerge from any shock, be it internal or external.