Category: Special Report

As the Coronavirus pandemic takes its toll on all sectors of the economy, the Chinese Restaurants are finding it difficult to brace the storm. With an average cost of N5, 000 food menus, the restaurants are daily counting losses, laying workers off, facing societal rejection and impending closure, writes JANE CHIJIOKE

 

THIS is quite a trying time for owners of Chinese Restaurants in the country. The business which was enjoying some form of visibility and patronage mostly from the elite class due to the uniqueness of its cuisines and cost is threatened following the breakout of the Coronavirus in Wuhan, China in December, last year.

With a minimum of N1, 000 menus, the Chinese food business seemed to be a viable market, serving different nationals visiting or living in the country as well as Nigerians who desire the taste of continental dishes. But with the raging effect of the virus killing over 7,000 across the globe with over 40 confirmed cases recorded in the country, applying caution to stay safe seemed to be the order of the day. This is having ripple effect on the business.

Pint-sized activities

Checks by The Nation showed that Chinese Restaurants are on the verge of closure. Save for the sounds emanating from television set and well-arranged tables anticipating the warmth of customers, the restaurants cut the picture of deserted zones.

At one of the restaurants visited, the environment in which it is situated was a bit glowing with human activities. People drove in and out of the plaza and engaged in one form of activity or the other.  But The New China Restaurant, Ikeja was isolated.  Not even the aromas emanating from the restaurant could lure the different nationals seen around the place.

Management’s seeming disappointment

At the reception of the restaurant was seated the Assistant Manager, Mr. Ademola Odunsanya pinning his gaze into the space, apparently displeased with the low turnout of customers. He couldn’t understand how much of negative impact the Covid-19 has had on his once-booming restaurant.

Anticipating customers soon appeared unrealistic as he was about to retire home as a few minutes past 4:00 p.m. even though the normal closing time of the restaurant was 10:30 p.m.

“You can see I’m preparing to go home.  The Covid-19 outbreak has taken a huge toll on us. The societal stigma we face now is unbearable as if the virus resides in China Restaurants.

“Customers have suddenly disappeared. For instance, since today (Saturday), we are just having our first customers for the day as at 4:00 p.m.  Nobody wants to come in. The Chinese and Asian dishes are somewhat regarded as exclusive dishes for the elite and here, we enjoy such patronage, but not anymore.

“This place used to be a very busy one for us. On a normal day, we can have above 40 customers inclusive of online orders. Even at times when we record poor sales, we make hundreds of thousands of naira, running into millions monthly. But now, even recording N30, 000 is taxing,” he said.

As a result of this, the volume of supplies of the restaurant used to have has reduced.

“We can’t buy more items any longer. We just buy few items that would last for just two days. If we are still unable to finish it within this short period it becomes an additional loss for us. We just have to do away with it and order for fresh ones again,” he added.

Indeed, this threatens the survival of the business. The inability of the restaurant to retain its almost 50 members of staff now has only eight members of staff.  To remain in business, a minimum of 15per cent discount was introduced on every menu.

“This is just to hold back our customers. However, we are still trying to see how long this pandemic can hold. If it exceeds this month, I am afraid we might shut down,” Odunsanya stated.

The sentiment was not different at Hundreds Chinese Restaurant, Ikeja. The Supervisor, Isaiah Ubong explained that since the index case of the virus in the state in February, sales had dwindled.

He said despite measures such as encouraging hand washing, having hand sanitiser and temperature checks for all customers and members of staff, sales has not improved.

He said: “This place can be like this for days without anybody asking ‘what do you have.’ This is so unlike before when we do have good sales. Even the online orders don’t come in again. Also, we no longer see customers coming down here on weekends to have a great treat with their loved ones.

“Though last month’s sales were in bits but this month it is worse.  In fact, at the beginning of March, we laid off workers.  Out of 20, we only have three remaining. Our sales have drastically reduced to 10 per cent and are not good for any business.”

For Samuel Otto, a member of staff of Zenith Water Garden, Surulere, a Chinese food outlet, the uncertainty of receiving his February salary stares him in the face.  He is worried that the daily low sales were fast threatening the sustenance of the business.

Coupled with his pending salary, the restaurant is faced with payment of its   electricity bills and some tax bills from the local government area.

“There are no sales at all. On Sunday, our total sale was N3, 000 for the whole day. Last month (February), we didn’t even make up to N50, 000. I am so worried because it is affecting me. I don’t even know if I would receive my last month’s salary.

“As if that is not enough, we are faced with payment of electricity bill of 111,000 and some tax bills from the local government area totaling N350, 000.

“We have already sacked four members of staff because we couldn’t keep up with the expenses any longer. Customers are scared of Chinese restaurants. Even Nigerians that used to patronise us more have vanished. Nobody wants to eat Chinese food again.  For now, we are still in talks with the owner to temporarily shut down the restaurant,” he said.

Customers speak

Mr. Grey Adesayan, a member of staff of one of the new generation banks told The Nation that he used to patronise Chinese Restaurants for dishes such as prawn rose, fried rice noodles with beef, prawns with chili sauce delight. But with the pandemic virus, he has retreated. He expressed the fear that some Chinese restaurants might still be importing their ingredients from China which make the restaurants unsafe for consumers.

For Mr. Chewg, his regular patronage for Kung Pao Chicken and some seafood has reduced.

“I am just being careful. It is a global issue and can be contracted at any given place. I order online only for now.  But that doesn’t mean it is safer that way but still, I can’t starve myself,” he said.

Kingsley Odion has also minimised his eating out. According to him, before now, he visited Chinese restaurants at least four times in a month but not anymore due to fears of the virus.

“The outbreak also has to do with what they eat, how they prepared them and the low hygiene process they adopt in preparing these foods. As we see in the different viral videos on social media that is not healthy at all and I don’t see myself visiting such places any more even after the virus has been contained,” he said.

Stigma

The hotel owners are angry that they are being messed up on the grounds that the virus emanated from China. The societal rejection of Chinese restaurants, they say, threatens the survival of the business.

Despite efforts to assure their customers that the restaurants are safe through increasing their hygiene level among their members of staff, kitchen, environment and ensuring customers wash and sanitise their hands, the restaurants are still regarded as the virus zones.

“The online videos of that Wuhan market and some other unhealthy videos showing how Asian people eat live animals have affected these Chinese restaurants.

“Now customers are skeptical about the hygiene level employed in the kitchen.  Some even think insects and awful animals are garnished with the foods sold in the restaurant or goods from Wuhan Market are brought down here,” said a member of staff of one of the Chinese restaurants in Victoria Island.

Refuting this, the Manager of Chinese Restaurants, Ikeja Airport Hotel Mr  Femi Peters, who lamented his customer base has reduced from almost 20 per day to one or two, said the restaurant adopts quality hygiene procedures and most of the supplies are sourced locally from some China-based supermarkets.

“Some of the ingredients used are things that we used in our homes such as the ginger, garlic, tumeric and some other healthy herbs. As we all adopt protective measures to stay safe, Nigerians should not be scared to visit Chinese restaurants. They are safe,” he said.

At one of the China-based supermarkets in China Town, Ojota, Huafei Supermarket, the cashier, Maryam Ibrahim explained that since the outbreak of the virus, the company has not brought in any new goods from China. Besides, they have not run out of stocks as there has been low patronage.

On his part, the Secretary of Nigerian Hotel Association, Jijiwin Akpovwovwo feels the way the Covid-19 virus is being reported is over bloated, putting more fears in the public.

“The ones isolated so far have always been negative. The fact that one has running nose or fever or cough doesn’t mean one is suffering from the Coronavirus. Let us be very careful in the way we inform the public. The public is just developing phobia towards these restaurants and it is not reasonable,” he said.

He said though the Chinese restaurants are facing hard times at the moment, the business no longer thrives well as it was in the past decade during the booming Chinese-Nigerian textile trade. The heavy presence of the Chinese in the country, he said, was a boost for the trade and the economy but when the textile business collapsed, this forced the Chinese to travel back to their country.

“It affected the economy in terms of foreign exchange. These are people who buy, eat and make use of our services. Many of them provided supplies and contracts. So, it boosts up the trade. Now, we just have few in the country. The Chinese restaurant market is still trying to pick up again,” he said.

With the raging effect of the virus on the economic activities in the country, a Human Resource person, Nigerian Hotel and Tourism Investment, who prefers anonymity expressed worries that the safety of the country is at risk.

She said while many travelers who are returning, now use hotels as isolation centres, it is putting hotels at high risk and as a result, many who would have wanted to lodge in a hotel for vacation, events or for business occasions are being put off.

“A whole lot of programmes are being shut down. Customers are cancelling their stay in hotels because of those using it as isolation centres. This is greatly affecting hotel management and the economy as a whole because a lot of people are losing their jobs in the process, no patronage, and businesses are shutting down. These are threats to the security of the nation.  When there is no job and the unemployment rate is on the increase, that is quite a disaster,” she said.

Though a global pandemic, the lockdown following the outbreak of Covid-19 has taken a heavy toll on the real sector, particularly manufacturing, believed to be the economy’s growth engine. Experts are, therefore, calling for appropriate policy responses to mitigate its impacts. Assistant Editor CHIKODI OKEREOCHA and CHARLES OKONJI report

 

GIVEN his vantage position as Director-General of Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, no doubt, schooled in the dynamics of the Nigerian economy particularly the real sector. So, when, on the strength of his compelling and deep insight into the economy and the sector, he lamented that many manufacturers and service providers are already experiencing an acute shortage of raw materials and intermediate inputs, following the outbreak of coronavirus (Covid-19), it was obvious that real sector operators are in for serious turbulence.

Yusuf spoke at a forum on the “Implications of Covid-19 Outbreak on the Nigerian Economy” organised by the LCCI in Lagos, on Tuesday, where he said the Covid-19 pandemic has deeply disrupted global supply chain, like China, which is the second-largest economy in the world, is a major supplier of inputs for manufacturing companies around the world, Nigeria inclusive. He said this has implications for the local manufacturing sector’s capacity utilization, employment generation and retention and adequacy of products’ supply to the domestic market.

The disruption is understandable, especially for Nigerian manufacturers and businesses whose supply chains are closely linked to China, the epicentre of the Covid-19 pandemic.

Partner, KPMG, Mr. Ajibola Olomola, put the supply chain linkage in perspective when he said, for instance, that over 70 per cent of manufactured goods in Nigeria are imported, with China representing Nigeria’s biggest trading partner, with about 19 per cent of its imports sourced from the Asian giant. The result, he said, is that the Covid-19 outbreak has a significant impact on retailers and consumers in Nigeria.

Olomola, who shared his perspective on the impacts of the Covid-19 lockdown on the Nigerian economy, using the LCCI forum’s platform, however, said the impact on agricultural products and raw materials may be minimal, as total trade for these materials is less than five per cent. Even at that, the impact has been devastating, which was why following the outbreak of the coronavirus in China early this year, manufacturers under their umbrella association, Manufacturers Association of Nigeria (MAN), have indicated their readiness to look elsewhere, outside China, for raw materials.

Although, MAN President  Mansur Ahmed acknowledged that China is a cheap source for most of these inputs, he maintained that the safety of lives of Nigerians are of greatest importance, as such most manufacturers can always get alternatives to keep their factories running. “Our members have had to deal with the issue in the best way they can. They have started looking elsewhere for the importation of raw materials, equipment and machinery. For many of these items, they do have alternatives. Maybe the Chinese products would be a little cheaper, but they can always get an alternative if they need to,” he said.

That was at a press conference in Lagos that heralded the recently-concluded 5th Nigerian Manufacturing and Equipment Expo (NME 2020) co-located with the 6th Nigerian Raw Materials Expo (NIRAM Expo 2020). But, while manufacturers have started looking elsewhere for the importation of raw materials, equipment and machinery, they are caught between the rock and the hard place. This is because the rampaging virus has since spread like wildfire across continents from mainland China, its roots, to Asia, Europe, America and Africa. Manufacturers are now in a fix over where to turn to for raw materials.

The situation, according to Olomola, clearly underscores the need to “Re-configure supply chain (e.g through backward integration for inputs that can be sourced locally).” Indeed, all the basic raw materials to feed the industries are available locally. The snag, however, is that they are not available in sufficient quantity and quality. Most of the local raw materials are also said to be in an unusable form, requiring value addition before they can be used by industries.

The value addition is done mostly by Small and Medium Enterprises (SMEs) because they are the off-takers, taking the materials from the unusable form to the next intermediate stage. It is the intermediate raw material that industries require. But because of the low capacity of the SMEs to add value to available local raw materials, coupled with lack of access to capital to set up processing facilities, process technology and techniques, and spare parts, among others, they have not been able to fill the gap.

Although, there have been several attempts in the past to try to promote the use of local raw materials, via backward integration, not just in the manufacturing sector, but in all sectors, the challenge, as always, remains government’s failure to match words with action by putting the right infrastructure in place to process the raw materials. The result: Nigeria remains caught in the web of a cycle of an import-dependent raw materials economy, spending as much as N49 trillion on the importation of raw materials and finished products between 2000 and 2015, for instance.

Yet, confusion over where to source raw materials, equipment and machinery is only a fraction of the heartache forced on real sector operators by the Covid-19 lockdown. The truth is that the Covid-19 pandemic has put unbearable pressure on the world economy, as the momentum across key economies is fast grinding to a halt, with Nigeria worse hit. “The outbreak has profound implications for the Nigeria economy,” Yusuf said, adding that “It poses a major threat to Nigeria’s macroeconomic fundamentals, the impact of which may be systemic and far-reaching.”

Why Nigeria is badly hit

It is easy to see why the economy is vulnerable. More than 90 per cent of Nigeria’s foreign exchange earnings are from crude oil and gas. Oil is also the major driver of accretion to the foreign reserves. But the price of oil has been tumbling, hitting an all-time low of $25 per barrel last week. Although the dramatic dip in oil price is not entirely caused by the Covid-19 pandemic, the demand for Nigeria’s oil & gas has reduced significantly. China is the world’s second-largest consumer of oil and its demand for oil alone has reduced by 20 per cent.

Yusuf said, for instance, that oil price budget benchmark for 2020 budget was $57 per barrel, noting that the sharp drop in revenue could cause significant dislocations in the 2020 budget and the economy, especially for a country already grappling with challenges of weak revenue performance and complete erosion of fiscal buffers. He said it was instructive that the Federal Government has taken steps to review the underlying assumptions and the content of the 2020 budget.

Already, as part of measures to stabilise the economy as Covid-19 lockdown bites harder, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, announced last week Wednesday that the Federal Executive Council (FEC) has approved a N1.5 trillion cut from this year’s budget. She said this, among other measures, was arrived at, considering the current economic realities, adding that government would be working on a worst scenario oil benchmark of $30 per barrel at 2.18 million barrels per day.

Other measures, according to Ahmed, include a cut down on the size of the federally funded upstream projects by N457 billion; reduction of projected revenue from excise duty; cut down on capital expenditure by 20 per cent; a reduction of recurrent expenditure by 25 per cent; a ban on recruitment except for essential services and the review of social investment programme among others.

Panic over collapsing fiscal buffers

With oil as the major driver of accretion to the foreign reserves, Yusuf said the current situation has put fresh pressures on the reserves, with the nation’s foreign reserves standing at an all-time low of $36.2 billion as at 3rd March 2020. The Excess Crude Account (ECA) has also been depleted. For instance, in just one month, the ECA, which is a special account for keeping extra oil revenue above budgeted oil benchmark, was depleted from $325 million to $70 million as at February 19, 2020.

Yusuf lamented that the complete erosion of the nation’s fiscal buffers has grave implications including weakening of investors’ confidence, generation of speculative pressures on the currency and likely depreciation of the naira exchange rate. Others include heightened inflationary pressures on the back of currency weakening, likely increase in production and operating costs for businesses, weakening of purchasing power with adverse implications for the welfare of the citizens.

LCCI President Mrs. Toki Mabogunje said: “Businesses are shutting down operations. Factories are closing. Schools are on recess. Conferences, sporting events, football matches, music concerts and business meetings have all been suspended. Countries are imposing wide-range travel restrictions. Trades are on hold. Global airlines have cancelled flight to affected areas. Global equities and commodities markets have been severely affected.”

Recession looms

Mabogunje did not mince words when she said the Covid-19 outbreak has dealt a severe blow to the global economy and if not curtailed at least in the near term, might lead the economy into recession. She said Nigeria may be at the risk of devaluation as the continued depletion of external reserves may constrain the ability of the Central Bank of Nigeria (CBN) to support the naira. He also expressed fears that Nigeria may be at the risk of another recession.

The CEO, Economic Associates, Dr. Ayo Teriba, could not agree less. According to him, Nigeria is at the receiving end of the key economic fallouts of the global pandemic as the collapse of the global oil price threatens to derail the budget and inflict another devaluation of the Naira, both of which would certainly combine to precipitate another recession. He said this is largely because the absence of adequate foreign reserve buffers makes Nigeria’s economy particularly vulnerable to oils price contractions that last up to a month.

The renowned Economist listed some of the temporary harms of the lockdown on the economy to include supply/demand disruptions in the manufacturing and services sectors. He also said tourism and hospitality are already hit by negative consumer/business sentiments, just as there are financial disruptions.

The permanent harms, according to him, include bankruptcies, job losses and wealth losses. He, however, said how long the adverse social and economic fallouts for Nigeria would last depends on how long it takes before the world can bring the pandemic sufficiently under control for the restrictions of movement and public gathering to be lifted.

Why real sector operators are worried

Understandably, the focus of the current worries over the impacts of the coronavirus lockdown is on the economy. However, it does not take an expert to see why such worries are concentrated on the real sector. For one, the sector, which comprises manufacturing and agriculture, is widely acknowledged as the economy’s growth engine, because of their linkages to other sectors. The sectors’ capacity to create jobs and engender economic growth and development has never been in doubt.

This must be why the consensus of experts and operators in diverse sectors is that if the economy must be diversified from oil, manufacturing and agriculture must be prioritised. The thinking is that repositioning the manufacturing and agriculture sectors hold the key to driving the government’s on-going economic diversification. “If you need to diversify, you must do so with the manufacturing sector. Manufacturing must contribute between 30-40 per cent to the Gross Domestic Product (GDP).” Director and CEO, Institute for Development Studies, University of Nigeria (UNN), Enugu State, Prof. Osita Ogbu, said.

He pointed out that the manufacturing sector is the only sector that can lift millions out of poverty, create jobs and fast-track economic growth and development. However, with the current lockdown following the Covid-19 pandemic, industry experts and operators are at a loss over how Nigeria can leverage a vibrant real sector to drive her transition to a non-oil economy. Their worries and fears may have been exacerbated by the fact that the outbreak of the virus added a scary dimension to the catalogue of woes already plaguing the sector.

But, with the 20 per cent cut down on capital expenditure in the 2020 budget, it means that hopes of bridging the nation’s huge infrastructure gap and ultimately, incentivizing manufacturers have dimmed. The building of roads, railways and most especially, improving electricity supply across the country may no longer get the priority attention they deserve. It also means by extension, that high cost of production, which has been one of the manufacturers’ woes, is not likely to abate any time soon.

Recall that before now, hopes of latching on a robust real sector to reboot an economy still recovering from a debilitating recession have been seriously undermined by faulty fiscal and monetary policies and a dearth of infrastructure. For instance, Ahmed has never stopped lamenting over an inadequate energy supply for industrial use. He has continued to tell whoever cares to listen that manufacturers cannot achieve competitiveness with the current state of electricity supply.

The MAN president said it was expedient that government scale-up its plan for the energy sector to reduce cost, improve processes, maximise value addition and generate employment. He insisted that the nation’s current energy projection and currently generated supply are below the expected levels required to drive an industrialised economy.

According to them, the pillar of any economy is monetary policy and the pillar of monetary policy is interest, inflation and exchange rates. Getting these variables right is believed to be key to fixing the economy. This is because the current high-interest rate in the country, for instance, is making it impossible for the real sector to grow. The high inflation rate is also said to be the main driver of poverty.

Way forward

Bad as the current Covid-19 lockdown is on the economy, particularly the real sector, what are the stopgap measures? Yusuf said: “The government needs to look beyond tax credit in its quest for complementary funding sources for infrastructure. We should be looking more in the direction of equity financing. But for this to happen the policy and regulatory environment must be right.”

The LCCI chief also recommended that Public-Private Partnership and Public-Private Dialogue should be deepened to harness quality ideas on how to manage this rather scary situation. He, however, added that it is also important not to respond to the situation in panic mode to avoid a disproportionate response which could do even more harm to the economy.

For Olomola, some of the imperatives for the government and corporates include creating an enabling business environment through favourable government policies, intensifying efforts towards building domestic capacity across critical sectors such as manufacturing, increasing investment in technology that would optimise existing business processes (e.g. digital and online presence).

The KPMG tax expert also advised the government to ensure that tax enforcement practices do not stifle business growth. Besides, there is a need to increase investment in public health infrastructure while experimenting on the possibility of large-scale remote working for employees and its impact on productivity.