Coronavirus: So Far So Bad!
TIMI OLUBIYI, Ph.D.
The novel coronavirus (COVID-19) pandemic which originated in China, has infected more than 600,000 people as at today. Its spread has left businesses and individuals around the world counting losses already. Nigeria as well has forced thousands of businesses to close in the meantime due to movement and commercial activity restrictions. Many State governments have issued directives to contain the spread, though without thorough consideration of the economic impact on businesses and citizenry.
At the moment international flights have been suspended around the world with skeletal services and flight operations within and outside Nigeria have also been suspended. Likewise, interstate transportation and movements have been banned with immediate effect by State governments with State borders shut, all to check the spread of the pandemic. Nevertheless, the big question is for how long will these restrictions last in Nigeria? Because the numbers of incidence continue to escalate through community transmission, the uncertainty of the situation keeps increasing within the populace.
The coronavirus (COVID-19) outbreak has already dampened the economic outlook of the country and there is a near economic recession looming. This is largely due to declined crude oil price which has dropped below $25 and the depressed state of the economy. Further to this,one of the leading global rating agencies, Standard & Poor’s (S&P) downgraded Nigeria’s credit rating further into junk territory, with a B- rating, down from ‘B/B. This rating will affect future foreign direct investments into the country and expected foreign portfolio investments. This recent development and COVID-19 pandemic have now raised the fear of recession and higher unemployment rate in the country. The government revenue is already dwindling, occasioned by the pandemic and sharp fall in oil price across the globe. Therefore, in addition to the life-threatening and health risks of the pandemic, the socio-economic impact is real most importantly with many workers likely to face looming job loss, job cuts, salary cuts, and redundancy. This socio-economic impact could be another huge shock if the COVID-19 outbreak persists beyond 30 days from now when another round of salary payment is due. If it happens that the pandemic outbreak is not contained,it will be inevitable, the circular flow of income within the economy would be impeded or blocked and the disposal income will equally shrink drastically. The consequence would be a domino effect of lack of fund on the large informal sector and SMEs who depend on the spending of the salary earners.
With this in mind, it would be hard for private organizations and businesses especially SMEs to sustain salary payments beyond April 2020if the restrictions lingered in the country. A situation where factories and workplaces continue to experience a lengthy closure due to the restrictions, nearly 80% of the workforce nationwide in the private and informal sector will face the looming job loss, salary cuts, low-incomeor no-income and redundancy in response to coronavirus outbreak impact. Additionally,by the time this is over, the number of people that will be able to retain or go back to their jobs might likely experience a sharp decline. Currently, the disruption to air travel has adversely impacted the aviation industry with airlines already recording huge losses. With this development, some Nigerians are probably to lose their jobs even before the coronavirus outbreak is over. Airlines are already fighting and struggling for survival due to many travels ban globally, likewise other key sectors.
Currently, globalization will be extremely difficult to achieve with the level of travel restrictions announced by over 100 countries to contain the widespread of the COVID-19 outbreak. In economic terms, the spread of products, technology, flights, bilateral relations, foreign exchange earnings, access to goods, services and jobs across national borders and cultures have been greatly hindered and negatively impacted by this pandemic.
Lagos State which is the economic center of the country and the SME hub of the nation issued restrictions as well, but with a partial closure of markets and businesses because of the recognition of the strength of SMEs to the economy of the State. Even at that, the SMEs and entrepreneurs are already experiencing far-reaching consequences because the COVID-19 outbreak has forced a slow or halt in physical operations of their businesses. This development, in the long run, will impact adversely on their business continuity. Currently, the restrictions have resulted in SMEs having to contend with weak client’s patronage, low affordability from consumers, weak supply-side manufacturing, supply shortages, disruption to factories, restocking and logistics due to the restrictions, therefore sustainability of these businesses are at great risk especially the micro businesses.
The concept of working from home and organizations requesting staff to work remotely is likely not to be effective because of epileptic power supply and other poor infrastructure. As things unfold, if the restriction is prolonged it could lead to high figures in the unemployment rate amongst the middle class and the youths. The job loss is expected to increase exponentially amid the pandemic if not curtailed within a short time. The consequence of this is that, there will be an extreme financial hardship for millions of Nigerians and food insecurity threat might spike among the poor citizens who live on daily income from their micro-businesses.
In fact, before now unemployment has been a rising phenomenon as many Nigerians are jobless to the extent that the government itself may not actually know the rate of unemployment precisely. In May 2019, Senator Chris Ngige, Minister of Labour and Employment, disclosed that Nigeria’s unemployment rate would reach 33.5 percent by 2020. Senator Ngige, said this while declaring open a two-day workshop on “Breaking the Resilience of High Unemployment Rate in the country’’ in Abuja the Federal capital territory last year.
Therefore, with the global risk COVID-19 outbreak as portends now in the year 2020, it is certain that the projection of the unemployment rate made by the Honourable Minister and poverty will go further upand might be on a steady path of growth. However, the eventual rate of growth or outcome will depend on how fast the government contain the widespread of the virus in the country. As we speak many, sectors have been impacted depressingly already such as hospitality, tourism, real estate, manufacturing, retail businesses, transportation and travel industry.
With this development socio-economic problem especially, unemployment is inevitable with this pandemic, many citizens are most likely to become unemployed and go further below poverty line. In the context of this article, the unemployed is defined as economically active population, who are without work but available for and seeking for work, including people who have lost their jobs and those who have voluntarily left work. Recall unemployment is generally regarded as a symptom of basic microeconomic disequilibrium. If no stimulus package is considered to reduce the impact of the inevitable job losses, the poverty level in the country is expected to increase. Poverty implies inadequate resources to satisfy basic needs or the inability to buy or otherwise secure essential foods, housing, clothing, transportation, education, and health care.
Currently, the available data indicate that over 60 percent of the total population of the country are youths with many of them vulnerable and out of gainful employment. Opportunities for jobs for these youths are hardly available and with the COVID-19 outbreak, the unemployment rate is expected to increase exponentially and this is likely to escalate the already staggering unemployment data. This is a huge concern and a precarious situation for the country and government because the pandemic is already triggering an economic crisis and it would compound the already high unemployment rate in the country.
In Nigeria we currently have deficits in housing, water, sanitation, food, health care, and education, among others, COVID-19 outbreak will more than likely spike up the level of these shortfalls. Consequently, harsh economic condition and the impacts of unemployment which include a surge in the prevalence rate of crimes and criminality are unavoidable. More so, lowered tax revenue is likely for government with the following upsurge attendant consequences from the pandemic: increased demand for substandard goods and services, a weak currency regime, high inflation, loss of highly skilled individuals through brain drain, insurgency, militancy, kidnappings, drug abuse, and of course prostitution among others. The main consequence of the all the aforementioned is that it affects each and every one of us as a citizen and residents.
Therefore, Government and stakeholder palliatives, policy reforms, initiatives and social intervention programmes targeted at reducing the effect of COVID-19 pandemic, unemployment and eradicating poverty are important at this time. In addition, the pandemic requires priority attention and a collaborative mechanism to flatten the curve of the progression of the COVID-19 incidences and also yield measurable results. Government is therefore enjoined to be more aggressive in providing measures aimed at containing the widespread of the virus. Time is running out!
Dr. Timi Olubiyi holds a Ph.D. in Entrepreneurship and Small Business Management. He is a prolific investment coach, Chartered Member of the Chartered Institute for Securities & Investment (CISI) and a financial literacy specialist. He can be reached on the twitter handle @drtimiolubiyi and via email: firstname.lastname@example.org.