With Lagos and Ogun states’ businesses and firms projected to lose N1.08 trillion and N119.5 billion respectively, in terms of productivity during the two-week Federal Government-ordered lock-down, Sunday Vanguard sought the views of Dr. Muda Yusuf, the Director-General of Lagos Chamber of Commerce and Industry on the economic impact and implications on the people and industries in the two states, Nigeria, as a whole, and the West African sub-region. Excerpts:
The lock-down of Lagos has far-reaching implications for the Nigerian economy, the Lagos economy, the welfare of the people, government revenue, business losses and many more.
The impact is far beyond Lagos. Being the commercial nerve centre of the country, Lagos feeds the other states with many products used either for consumption or production.
Lagos is an economic and commercial hub, not just for Nigeria, but for the sub-region. Lagos ports hosts over 80% of the imports into the country.
The economic cost of the Lagos lock-down, therefore, will run into trillions of naira. There will surely be significant job losses. Not many small businesses can afford to retain [for long] staff that are not working.
Those of them that are magnanimous may pay for a few weeks; but majority may not be able to afford that. Besides, Lagos is host to a huge informal sector. They account for over 50% of the Lagos economy.
Many of them live on daily income to survive. The lockdown, therefore, will greatly hurt the informal sector players. They are perhaps, the most vulnerable group.
The lock-down cannot be staggered otherwise the objective will not be achieved. It is a sacrifice that we must make to avert a major health and economic crisis. It is this non-pharmaceutical solution that had worked in China to ensure the containment of the pandemic. Government does not have many options in this matter.
The lock-down adversely affected all sectors, including the industrial sector. However, it is noteworthy that the lock-down increased the demand for essential products. Citizens prioritized their spending on food, medicaments etc.
It would thus appear that the food segment of the food and beverage sector experienced a surge in demand for their products following the outbreak of the pandemic.
The challenge, however, would be in the area of replenishment of their stocks because of the disruptions in the global supply chains.
However, industries that depend more on local raw materials will benefit much more at this time. They will generally be more competitive given the exchange rate depreciation.
Working remotely can be very cost effective and efficient. One of the major benefits of this current experience is the fact that it compels many companies to adopt the remote working model for their operations.
There are some operations that could work well with this model.
I am sure after the pandemic disruptions, many firms would embrace the practice or culture of working from home. Things have to evolve. In a cosmopolitan city Lagos, this practice needs to be imbibed by many organizations.
It would reduce the traffic congestion on Lagos roads. It is also good for the welfare of the workers because it saves them the stress of driving through the sometimes-horrific Lagos traffic.
Food security will be at risk if there is no proper coordination and control about the various directives by state governors closing interstate borders.
This is recipe for chaos. It would compound the hardship of the citizens and may create a food crisis. For instance, a cosmopolitan city like Lagos, with a population of over 20 million depends largely on other states for food supply.
This closure of interstate borders would create a major problem of food shortages across the country. Such closures are not in consonance with the presidential directive on exemptions of some vehicular movements in the country. There is a lot of work to do to ensure the coordination of states restriction policy.
There is a major problem with the appropriateness of the palliatives announced by the President. The school feeding programme for instance is not relevant at this time.
All schools are closed already. There is the issue of the currency of the database of the vulnerable people. It was compiled few years ago.
The segment of the vulnerable that should be targeted at this time are the urban poor, many of them are in the slums of Lagos especially, and other states currently on lock-down.
This was the expectation around the palliatives that was anticipated in the wake of the pandemic and eventual lock-down. The pre-COVID 19 pandemic palliatives should be markedly different from what should happen at this time.
There is need for a comprehensive review of social intervention programmes to bring it in alignment with the current social crisis resulting from the Corona virus pandemic. The context has changed; therefore, the intervention model should change as well.
A stimulus package of N3. 5 trillion is staggering and unprecedented. There were additional policy measures announced by the CBN to cushion the effects of the coronavirus outbreak on the Nigerian economy.
It is an initiative that is laudable. But effective targeting is important to achieve the desired outcomes. Certainly, it would have positive enterprise level impact on businesses that can access the facility.
It will impact their liquidity and operating cost. Other complementary measures announced by the apex bank include a one-year moratorium on CBN intervention facilities; interest rate reduction on intervention funds; creation of N50 billion credit facilities for SMEs; restricting and refinancing opportunities for existing facilities; activation of N1.5 trillion InfraCo project for building infrastructure; N100 billion facilities for pharmaceutical companies and healthcare practitioners, and N1 trillion loans to boost local manufacturing and production across sectors.
The health sector component of the fund is particularly laudable because the most critical issue at the moment is the fixing of the looming public health crisis.
Therefore, focusing on the health sector is perhaps the most important thing to do at this time. This is a time to prioritize measures that can deliver quick wins.
It is also important to ensure seamless access to the funds, especially by the small businesses [without compromising the security of the funds]. Many SMEs have complained in the past about difficulty of access to the intervention funds
However, like in most economic challenges, monetary intervention can only fix a fraction of the problem. There are fundamental macro-economic issues that investors would still have to contend with.
These are issues around the impact of the coronavirus pandemic on crude oil price, exchange rate depreciation, and depletion of foreign reserves, inflationary pressures, stock market slump and general investors’ sentiments.
These are critical drivers of investors’ confidence. Unless the external sector normalizes, there is very little domestic policy responses can do to fix these disruptions, especially in the light of the vulnerabilities of the Nigerian economy.
The interventions are focused largely on the supply side of the economy. However, a supply side stimulus needs a complementary demand side fortification otherwise there would be the unintended outcomes of unsold inventories build up. It is therefore, important to bolster purchasing power of citizens which has been decimated by the slump in economic activities. Both fiscal and monetary measures are imperative to make this happen. Meanwhile, we await the guidelines that would spell out the details of how the facilities would be managed.Read Full Story