A cross-section of experts who have attempted a careful assessment of the key productive sectors of the economy in the first half of 2020 are all agreed on the fact that the performance indices so far leave nothing to cheer about. Ibrahim Apekhade Yusuf and Charles Okonji examine the issues in this report
It the beginning of the year, precisely in mid-January, an elated CEO of a famous brewery company, during a media interaction confidently assured that his company was going to expand into the frontier markets within the West African sub-region within the year.
However, six months into the year, that self-assuredness seems very bleak. That much our correspondent gathered at the weekend when the CEO’s opinion was sought as to whether his company’s planned expansion was still achievable within the given timeframe.
The foregoing anecdote becomes apposite in describing the poor performance of most companies as the economy buckle under the ravaging scourge of COVID-19.
In the view of most analysts, the half year report is nothing to cheer about as the business community continues to reel from the unprecedented crisis precipitated by the pandemic and associated containment measures.
This is just as major activities are yet to resume in certain sectors such as tourism, hospitality, entertainment and education.
Many businesses are presently in dire financial straits as they battle with escalating costs, high receivables, loss of credit lines and other contractual obligations amid revenue shocks.
The impact is more pronounced on micro and small enterprises, with inadequate financial buffers to withstand shocks of this magnitude.
Experts score half year performance low
Firing the first salvo, a renowned professor of Economics and Public Policy, Akpan Ekpo, in his assessment of the half year performance gave a damning verdict: economy underperformed in the first half of this year.
According to him, “The economy is still in the stage of stagflation as characterised by rising unemployment, double digit inflation and sluggish growth before the pandemic crisis set in.”
Specifically, he said, “Households consumption and private consumption declined during the first half of this year, 2020. The GDP growth is less than the population growth and it is not enough to have a dent on poverty reduction.”
The sharp decline in oil revenue as a result of the drastic demand for crude oil as well as the Covid-19 pandemic further worsened the performance of the economy, Prof. Ekpo said.
Going down memory lane, the don observed that beginning from March 2020, the supply chain was shut down, with reduction in demand, loss of jobs, closure of businesses coupled with the health crisis, among others resulted in a near collapse of the economy.
While noting that there is no doubt that the government has responded positively in mitigating the economic crisis with various packages meant to either avert the recession or reduce its adverse effect on the economy, the don said with the negative shocks, the performance of the economy has been grossly below average.
“The manufacturers are right to have said that they are the worst hit. Nevertheless, they should avail themselves of the various intervention packages put forward by the CBN and government,” adding that, “They should complain if they are unable to access the various stimuli.
What is more disturbing is the exit of micro, medium and small enterprises. They need enormous government support to avoid further massive job losses.
It is important to note that crises create opportunities hence manufacturers, big or small enterprises should think of new line of businesses.”
LCCI damning verdict
During a state of the nation press conference address in Lagos, last Thursday, the President of the Lagos Chamber of Commerce & Industry (LCCI), Mrs. Toki Mabogunje acknowledged the fact that Covid-19 pandemic continues to dominate headlines domestically and globally even as domestic and global economies continue to grapple with the profound impact of the pandemic, the prospects of early economic recovery remain dim.
According to the LCCI, the economy grew by 1.87 percent in the first quarter, which marks lowest first quarterly growth level since the post-recession period, and a moderate slowdown from 2.1% recorded in the corresponding period of 2019.
She was however quick to add that the economic fallout of the pandemic, notably disruptions to global supply chains, lockdown, travel restrictions, weakening oil prices, foreign exchange liquidity challenges and weak export would manifest in the second quarter growth numbers, with more pronounced impact on sectors struggling with growth before this crisis.
MAN’s half year economic outlook
The President of the Manufacturers Association of Nigeria (MAN), Engr. Mansur Ahmed, while citing the Manufacturers CEOs Perception Index computed from a survey of over 400 manufacturing companies in Nigeria last year, noted matter-of-factly that manufacturers has marginal confidence in the economy in the period.
Specifically, records for the 4th quarter of 2019 stood at 51.9 points; it scored 51.7 point in 3rd quarter; 50.9 points in 2nd quarter and 51.3 in first quarter of 2019.
Pressed further, the MAN boss said in the second half of 2019, manufacturing production value stood at N7.38 trillion as against N5.22 trillion recorded in the corresponding half of 2018; thus indicating N2.16 trillion or 41.8 percent increase over the period.
A total of 10,735 new manufacturing jobs were created in the second half of 2019, representing an increase of 1852 jobs when compared with 8,883 jobs of the same half of 2018. It however fell by 1,259 jobs compared with 11,994 jobs created in the preceding half respectively.
In the period under review, a total number of 1,308 jobs were lost in the sector, representing a decrease of 1,989 job losses when compared with 3,297 jobs recorded in the preceding half.
In the view of Mr. Afarm Mallinson Ukatu, Chairman of Non Metallic Miners Group of Manufacturers Association of Nigeria, “The first half of 2020 economic situation has been very difficult in the present day Nigeria such that the manufacturing sector is the worst hit.”
Giving reason for the parlous state of the economy, Ukatu who also doubles as the Managing Director of Nispo Group said, “Because of the technical devaluation of naira which was caused by scarcity of foreign exchange, the exchange rates have gone very high, thereby adding to the cost of imported raw materials and servicing parts.”
For Frank Onyebu, Chairman, Manufacturers Association of Nigeria, Apapa Branch, the advent of Covid-19 may have made the situation worst off.
“Covid-19 pandemic affected global oil prices, leading to drastic drop in the demand and consumption of crude oil worldwide as the world economy experienced shutdown.
Though, it hit the Nigerian economy this hard because the economy depends largely on crude oil receipts.”
While commenting on the performance of the economy thus far, Onyebu said, “Obviously, the first half of the year 2020 is seriously affected by the Covid-19 pandemic.
Every sector of the economy is grossly affected and you should bear in mind that every sector had already been performing poorly due to the general downturn of the economy before the pandemic era set in.”
The manufacturing sector of the economy, Onyebu further noted, is not doing well. “It is the most hit sector. This is because, beyond agriculture, the manufacturing sector which is the largest employer of labour has been struggling, so this led to a lot of people being thrown out in the wood, such that the entire economy would collapse, because the purchasing power is not available has also been weakened.
“Let’s hope that the government has started learning its lessons, because if a lot of effort has been put in repositioning the economy before now, this global economic contraction wouldn’t have been this hard on the nation’s economy.”
Economic sustainability plan to the rescue
Thankfully, few months ago after the first virtual meeting of the National Economic Council (NEC), which was chaired by Vice President, Yemi Osinbajo, the Minister for Finance, Budget and National Planning, Zainab Ahmed, assured that the Economic Sustainability Committee is bringing up a stimulus package to reduce the impact of that recession envisaged during this period.
A cursory look at the Economic Sustainability Plan (ESP) shows that it is aimed at ensuring the economy recovers quickly from the effect of the Covid-19 pandemic and continues on a growth path sustainably.
Part of the mandate given to the ESP as submitted by the committee seeks to foster new ways of working, producing, learning, and managing public health and safety in the years to come.
This includes building resilience across critical sectors, including aviation, education, healthcare, internal security, mining, water, and sanitation.
To achieve these lofty heights, the government intends to carry out key projects that include a Mass Agricultural Programme (20,000 to 200,000 hectares per state aimed at creating five million jobs in the agricultural sector while boosting agricultural production and guaranteeing food security.
In the same token, the Extensive Public Works and Road Construction Programme will focus on both major and rural roads just as the Mass Housing Programme aims at delivering up to 300,000 homes annually while the Installation of Solar Home Systems Project will cover up to five million households, serving about 25 million individual Nigerians who are currently not connected to the national grid, ultimately to strengthen the social safety net, support for micro, small and medium enterprises (MSMEs).
To accomplish these, government has opted for the stimulus package of N2.3tn and intends to obtain the resources for the stimulus from special accounts – N500bn; CBN structured lending-N1.11bn; as well as portions of the resources to be obtained from external bilateral/multilateral sources-N334bn and other funding sources-N302.9bn.
“If we apply all that have been proposed and we are able to implement it we might end up with a recession that is -0.4%.
But in any case, we will go into recession but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it come 2021,” she assured.
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