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Some economists are worried that any further delay in removing restrictions and the lockdown will not only spell doom for the Nigerian economy, but it may also even push the economy into recession earlier than anticipated
By Anayo Ezugwu
THE move by the federal government to extend the nationwide lockdown for another four weeks has come as a shock to some Nigerians. Some Nigerian economists and policy analysts expected the government to fully reopen the economy to help save the country from impending recession.
The federal government had on Monday, June 1, announced the extension of the lockdown for additional two weeks. Boss Mustapha, secretary to the government of the federation, SGF, and chairman, Presidential Task Force, PTF, on COVID-19, said the gradual easing of the COVID-19 lockdown across the country was extended because the global epicenter of the pandemic has shifted from China to Europe, the US and was now showing a shift to South and Central America.
“This shift to South America with virtually similar climatic and demographic similarities with Africa, is a cause for concern when we consider the fact that earlier projections pointed to Africa as likely to be the worst hit continent, by the pandemic,” he said.
According to Mustapha, based on the overall assessment, including available data on the public health considerations and resultant economic impacts, the PTF is of the opinion that. “Nigeria is ready to allow SCIENCE and DATA determine her cautious advancement into the second phase of the eased lockdown for a period of four weeks.
“After considering all factors mentioned above, the PTF submitted its recommendations and President Mohammadu Buhari has approved the following for implementation over the next four weeks spanning June 2 to June 29, 2020, subject to review.”
But some experts pointed out that other countries worst hit by the pandemic are seriously opening up their economies for business, while Nigeria is still restricting the movement of persons. For instance, organised labour has called on the government to reopen the economy while implementing the best workplace practices to protect the health of workers and other citizens.
Ayuba Wabba, president, Nigeria Labour Congress, NLC, argued that the epoch of the global fight against the novel coronavirus disease was made possible by the contribution of frontline workers, especially healthcare workers who had become the only buffer between deaths in thousands and deaths in millions.
“We are not concerned by the fear of the unknown, but our concern is the reciprocation of the enormous sacrifice made by workers by government and other employers of labour. This is not the time to stop or deduct from workers’ salaries. Such an action would be both illogical and illegal as workers’ salaries are core elements of employment contracts and collective bargaining agreements. We have asked our affiliates and state councils to resist any salary deduction on account of COVID-19,” he said.
On its part, the Organised Private Sector, OPS, is advocating for cut in taxes and the introduction other incentives to save the economy from total collapse. Muda Yusuf, director general, Lagos Chamber of Commerce and Industry, LCCI, emphasized on the need for the federal government to cut taxes, create enabling environment for both the formal and informal economy for the gradual opening of business to succeed.
He said it was important that for the government to completely reopen the nation’s economy because of the differing situations. “It’s really important that the Federal Government gets the economy open as safely and quickly as possible as this partial reopening will have profoundly negative impact on the Nigeria economy,” he said.
Emma Ugboaja, general secretary, NLC, said any measure, which would stifle the economy, is not what is needed at the moment. “We are for opening the economy sector by sector. You should give a sector-specific guideline. We are for opening up. The government should be able to give guidelines for each sector to operate,” he said.
Ugboaja argued that some people could not work from home. “We need people at the construction site, we need people in the farm to operate the agricultural sector and we need the transport sector to be on the move effortlessly.”
Findings from a survey carried out by the LCCI to determine the impact of the lockdown on businesses in Lagos State showed that the unemployment rate would rise to 45 percent as businesses execute cost cutting measures to survive the impact of the lockdown. The survey, which was titled “Lockdown and Its Impact on Businesses: LCCI Survey Report,” noted that cost-cutting strategies particularly downsizing has implications for the economy from unemployment and productivity perspectives.
“First, it will exacerbate the already-high level of unemployment as more and more workers risk impending job losses. This may see the unemployment rate surge to 40 percent and 45 percent by the end of 2020 from 23.1 percent as at Q3-2018. Additionally, the potential risk of huge job losses will aggravate the magnitude of stagflation in the economy. This has a ripple effect on the Gross Domestic Product, GDP, given that private consumption by households accounts for about 60 percent of national output.”
The survey, which was released by Yusuf, said 63 percent of business operators was weighing plans to downsize operations to minimise losses, adding that this development is not surprising as businesses have not generated income for over a five-week period and have lost trillions of naira in profit due to the lockdown.
“This suggests that the unemployment rate is expected to increase drastically post-lockdown except government takes urgent steps to support business owners towards surviving and ensuring business continuity. Most of the respondents (46 percent) intend to slash salary and reduce the workforce as a joint measure, while 24 percent has the plan to cut personnel cost only, 13 percent intends to trim staff strength only, while 17 percent are proposing no salary payment,” the report said.
The survey stated that 81 percent of the respondents were ‘severely’ affected by the lockdown, while 17 percent experienced a moderate impact on their business, adding that 50 percent of businesses in the service sector experienced a severe impact by the lockdown.
It stated that 64 percent of the respondents suffered a loss of N500,000 and below daily during the lockdown, while 16 percent indicated a daily loss of between N1 million – and N2 million. Only about 20 percent of the businesses suffered more than N2 million daily losses and above during the lockdown.
“A conservative assumption that sampled business operators lost an average N500, 000 each day during the lockdown suggests that each operator lost N17.5 million within the five-week lockdown from March 31 to May 3, 2020. This modest estimation indicates that about N2.7 billion was lost in revenue by sampled businesses to the lockdown. This translates to trillions of naira losses for thousands of businesses operating in Lagos.”
Apart from these, statistics from the National Bureau of Statistics, NBS, shows that the government needs to reopen the economy fully. For instance, the Consumer Price Index, CPI, which measures inflation rate, rose by 12.34 percent year-on-year in April from the 12.26 percent recorded in March. The latest rate is the highest in 23 months.
The CPI released on Thursday, May 21, showed that the latest inflation rate is 0.08 percent points higher than the rate recorded in March 2020. The report indicated that increases were recorded in all divisions that yielded the Headline index.
On month-on-month basis, the headline index increased by 1.02 percent in April 2020, representing 0.18 percent rate higher than the 0.84 percent rate recorded in the preceding month The percentage change in the average composite CPI for the twelve months period ending April 2020 over the average of the CPI for the previous twelve months period was 11.71 percent, showing 0.09 percent point rise from 11.62 percent recorded in March 2020.
Urban inflation rate increased by 13.01 percent in the month under review from 12.93 percent recorded in March. Similarly, the rural inflation rate increased by 11.73 percent in April, up from 11.64 percent in March. The NBS further reported that the composite food index rose by 15.03 percent in April 2020 compared to 14.98 percent in March 2020. “This rise in the food index was caused by increases in prices of Potatoes, Yam and other tubers, Bread and cereals, Fish, Oils and fats, Meat, Fruits and Vegetables.”
– Jun. 5, 2020 @ 17:29 GMT |
Tags: COVID-19: Clamour for reopening of Nigerian economy grows louder
