COVID-19 pandemic threat to mankind, if not quickly arrested, could leave an indelible mark on every one. The world is in a frantic race in search of a cure, not only for the virus, which is paramount, but also for its collapsing businesses. In this report, Simeon Ebulu, Lucas Ajanaku, Emeka Ugwuanyi, Chikodi Okereocha, Okwy Iroegbu-Chikezie, Muyiwa Lucas, Collins Nweze, Kelvin Osa-Okunbor and Daniel Essiet present the impact of the disease globally and on the nation’s economy.
Everyone, institutions and agencies that ordinarily should proffer solution and offer hope on the way out of the deadly coronavirus pandemic, are left with their mouths agape and hands held akimbo, almost totally lost as to what next to do to arrest this ravaging, life-threatening covid-19 pandemic.
The news of covid-19 mayhem dominates every news channel and medium, be it print, electronic or the social media. Almost every world leader in developed and developing countries have shown utmost concern, made varied efforts and as well taken steps to mitigate its impact, but it would appear as though the more steps that are taken to contain it, the more devastating it gets. People have died in their thousands, while no fewer than 500,000 are infested.
If covid-19 cases continue to spread as it is, the several containment measures, notwithstanding, it could result in a global economic recession. It would be Nigeria’s second in about five years and the 48th in the United States.
Experts have spoken and sounded the warning alarm.
The Director-General, World Health Organisation (WHO), Dr. Tedros Adhanom Ghebreyesus, has warned that all nations should prepare, saying; “This virus has pandemic potential. This is not a time for fear. This is a time for taking action to prevent infection and save lives now.”
One unique feature of covid-19 and what makes it even extremely dangerous, is its health and medical characterisation, unlike previously recorded recessions caused mainly by equities price crash, falling commodities’ prices and conflict-related matters. This is why dealing with coronavirus and resolving its fallout, is not just about throwing money at it. It goes far beyond that and that is what makes its resolution very complex and extremely complicated.
Ratings agency, Moody’s, the World Bank Group and International Monetary Fund (IMF), have agreed that the spread of COVID-19 around the world would trigger global and U.S. recessions in the first half of the year.
The World Bank President, David Malpass, and the IMF Managing Director, Kristalina Georgieva, have asked creditors to suspend debt repayments from International Development Association (IDA).
They said, in a statement, that the debt relief for the poorest countries would help IDA countries’ immediate liquidity needs to tackle challenges posed by the coronavirus outbreak.
Georgieva said it was certain that the pandemic “will cause a global recession in 2020 that will be as bad as the 2008 financial crisis.
She said: “We are in an unprecedented situation where a global health pandemic has turned into an economic and financial crisis. With a sudden stop in economic activity, global output will contract in 2020.”
The IMF chief and the Financial Committee Chair, Lesetja Kganyago, said in a statement at the weekend that priority should be afforded to target fiscal support to vulnerable households and businesses to accelerate and strengthen the recovery next year.
Although the greatest health impact has been in advanced economies, emerging market and developing countries, especially low-income countries, will be particularly hard hit by a combination of a health crisis, a sudden reversal of capital flows, as well as a sharp drop in commodity prices.
“Many of these countries need help to strengthen their crisis response and restore jobs and growth, given foreign exchange liquidity shortages in emerging market economies and high debt burdens in many low-income countries,” said Georgieva and Kganyago.
According to S&P Global rating agency, the sudden economic stop caused by coronavirus containment measures will cause a global recession this year and could see U.S. corporate default rates spike above 10 per cent in the next 12 months, adding that cash flow slump and much tighter financing conditions, as well as the simultaneous oil price shock will hurt creditworthiness.
“These factors will likely result in a surge in defaults, with a default rate on nonfinancial corporates in the U.S that may rise above 10 per cent and into the high single digits in Europe over the next 12 months,” S&P Global said.
In Nigeria, as with other emerging market and developing economies of the world, the signs of an impending recession from the COVID-19 backlash are already showing. Dwindling industrial production, reduction in Gross Domestic Product (GDP) and unemployment are already the order of the day. The undulating movement of stock prices in the capital market, idle commercial and residential apartments and falling oil prices are cases in point.
CBN’s intervention
However, the Federal Government and the leadership of the Central Bank of Nigeria (CBN) have adopted some far-reaching measures to tame the economic side of the pandemic.
While the Federal Government has moved to readjust the 2020 Budget to align it with the present reality of its revenue profile induced by the drop in oil price, a more realistic approach was adopted by the CBN in its provision of over N3.5trillion in stimulus to aid drug manufacturing firms, provide succor for Small and Medium Enterprises (SMEs) and households affected by the deadly COVID-19.
Added to this, is the CBN’s push to involve private sector business promoters in the mobilisation of N120billion to mitigate the impact of the COVID-19. What remains to be ironed out are the modalities and the modus operandi through which this huge volume of intervention funds will be apportioned.
Nationally, however, the COVID-19 pandemic will manifest variously, depending on which sector, or segment of the economy one is taking ones bearing.
Banking and financial services
Former President, Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, said the banks should expect rise in bad loans as businesses are shut down and production reduced drastically.
He said many companies that took loans from banks are not in operation, while the tenor of the facilities are running. “The banks have not brought down lending rates and the businesses that took the loans are not in operation. This will lead to increase in bad loans and perhaps will lead to revenue loss for the banks and the companies.
The Managing Director of Afrinvest West Africa Limited, Ike Chioke, said the level of Non-performing Loans (NPLs) in the banking sector is expected to rise between 2021 and 2022 as banks give N2 trillion new credit to borrowers.
He said many banks have loaned over N2 trillion to real sector, following the CBN’s directive that they lend at least 65 per cent of their deposits to customers in a new Loan to Deposit Ratio (LDR) plan.
Also, Macro-EconomistStrategist at Afrinvest, Adedayo Bakare, agreed with Chioke that NPLs would rise.
He said: “We expect that the NPLs will rise between 2021 and 2022, and the CBN is even trying to recapitalise the banks to enable them absorb the likely shock from the NPLs rise. As the banks do more lending, they are also aware that the risks are still very high, as much as possible. Still, some banks are not willing to take any form of risk due to their past experiences.”
Lagos-based financial analyst, Kingsley Abiodun, said banks could only have more money to grow their businesses in a growing economy. According to him, every business has the ambition to grow year-on-year, but that would be difficult to achieve under a shrinking economy.
To him, forward-looking banks should look at what would protect their revenue, by identifying and focusing on the healthy side of their business. “For me, the brewery sector has done exceptionally well in the face of the ongoing downturn in the economy. The agricultural and Information Communication and Technology (ICT) are fast growing sectors that banks can tap into. The Fast- Moving Consumer Goods sector is also a critical sector that lenders can key into because despite the state of the economy, people must eat.
Energy
The first sectorial victim of the COVID-19 is the energy sector. With the outbreak of the disease in China – the world’s largest crude oil consumer – set the global oil market wobbling. Between last December 31 and March 25, this year, global oil price has lost $36 per barrel having fallen from $63.35 per barrel on December 31, 2019 to $27.65 per barrel by March 25, this year.
The supremacy battle between Saudi Arabia and Russia following a disagreement to further lower oil production and supply by OPEC and its allies, OPEC+, to wedge falling oil price caused by coronavirus, worsened the situation.
The disagreement led to excess oil production by Saudi Arabia and Russia despite weaker consumption and drop in demand for oil caused by outbreak of coronavirus pandemic. Coronavirus has undermined energy demand worldwide, especially in China, which before the outbreak was the number one importer of crude oil, with consumption of about 10 million barrels per day. Factories have been closed and thousands of flights cancelled across the world. As a result of this, the International Energy Agency (IEA) said it expects demand would contract this year for the first time since the recession in 2009 that followed the global financial crisis.
Global demand for jet fuel, gasoline, and diesel has slumped amid the pandemic as airlines cancelled flights, cruise lines shutter operations, and consumers are told to practise social distancing. Outlooks for oil demand have cratered, while the global price war has threatened to push supply to never-before-seen levels, according to IHS Markit. If the price war between Russia and Saudi Arabia continues while the world slips into a recession, the oil glut could grow to between 800 million barrels and 1.3 billion barrels in the first six months of this year, IHS said.
While big oil-consuming nations, such as China, India and Germany, would get some relief from the Saudi Arabia/Russia price war and crashing oil price, countries, such as Nigeria, Iraq, Iran, Libya and Venezuela, which depend on oil incomes would pay the price.
It would be recalled that Nigeria fell into recession when the price of oil fell to $27 per barrel in February 2016; therefore, apart from threatening the implementation of budget 2020, there is concern about the economy relapsing into recession should the price of oil below $30 per barrel persists for long. Currently, the oil benchmark for 2020 budget has been reduced to $30 per barrel from $57 per barrel.
Also, two factors working against Nigeria under this situation is that its cost of production per barrel of crude is among the highest in the world at between $20 and $23. Also, the crude Nigeria produces is not refined in-country. It is exported and refined products imported, resulting in export of values that are associated with in-country refining, such as feedstock for petrochemicals and job creation.
Nigeria is also working around its production cost to remain afloat. The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, said the Corporation is putting measures in place to reduce the cost of crude oil production in Nigeria.
Kyari, at the Central Bank of Nigeria Round Table discussion in Abuja, stated that at the moment the cost of crude oil production was between $15and $17 per barrel, but noted that countries, such as Saudi Arabia, produces at between $4 and $5 per barrel. He stated that due to the pandemic, Nigeria’s 50 cargoes of crude oil have not found landing, adding that this implies that there were no off-takers for them due to drop in demand.
The international oil companies (IOCs) have begun to cut their capital expenditures (capex) and have directed most of their workers to work from home. If the low price lasts longer, IOCs and indigenous oil firms would shed their workforce.
The IMF also said it would be working closely with the Nigerian authorities to assess any vulnerability which may be exposed by the sharp decline in crude prices. Nigerian dollar bonds sank to record lows stocks to hit a new four-year low, as fears grow over the devaluation of the naira currency.
International Energy Agency (IEA) and the Organisation of the Petroleum Exporting Countries (OPEC) also expressed worry about the continued fall of oil price in the international market, noting that income from oil and gas could fall between 50 per cent and 85 per cent in the year in emerging markets as a result of coronavirus. Many oil-producing emerging economies are reliant on proceeds from oil and gas to fund key public services and will be hit hard by the drop, they added. The continued fall in oil and gas prices will have a profound impact on the income of economies dependent on natural resources, said the EIA and OPEC chiefs.
Agriculture
There is heightened fear of hundreds of livestock being wiped out with locked down.
The Head of Inspections and Enforcement, Nigerian Institute of Animal Science, Olufemi Atunbi, said the virus is having impact with transport restrictions preventing the much-needed animal feed from getting to farms. As a result, he said the price of various feeds have gone up.
He said farmers were in dire straits because of the coronavirus outbreak. His fear is that many livestock may perish if feeds were not getting to them in time. As the outbreak spreads, there are concerns authorities may announce measures on transportation on all roads and highways, and even long-distance buses.
Atunbi told The Nation, that feeds are in short supply as producers are hoarding it, adding that the extension of business shutdowns will exacerbate the shortage.
He warned that restriction of trucks carrying feeds to farmers would create problems in the livestock sector.
He noted that livestock producers were facing a challenge of delivery due to logistics.
He said in many states,the transport issue was impacting on production as the cost of moving feeds had gone up.
Atunbi said the impact had put the agric sector in a distressed situation.
He urged the government to put in measures in place to ensure that farmers go to the farm or else the situation would lead to food shortage.
Former Dean, Faculty of Agriculture, University of Ilorin (UNILORIN), Prof Abiodun Adeloye, said the effects of the virus could slow global growth and hurt agricultural exports.
He said coronavirus poses a significant risk as demand for agricultural products has declined under restrictions put in place to contain the outbreak.
He expects reduced exports in places hard hit by the virus, and said loss of income in those places will further curtail export demand on a longer term.
The Executive Secretary, Institute of Export Operations and Management Nigeria, Ofon Udofia, said commodity markets have been hard hit.
He noted that while international ports and their customs offices were operating fairly smoothly, the difficulties lie in getting agro exports to and from the docks because of restrictions brought by the virus into the shipping system.
Due to the coronavirus outbreak, he warned that agro exports growth would dip, though its exact level was still difficult to predict.
He underscored the importance of coordinated action to limit the economic effect of the virus.
The Chief Executive Officer, Multimix Group, Dr. Obiora Madu, said the government needed measures to ease the economic blow.
Encouraging more Nigerians on agro exports, he added, that they are one of his strategies.
Madu urged the government to introduce new measures to ensure that food production is not interrupted by coronavirus. These include increasing farm productivity, enabling higher value addition, strengthening logistics infrastructure to improve the sector’s global competitiveness.
As COVID-19 has become a global pandemic, experts expect the impact to be worse, with the economies falling into recession.
Maritime
The rampaging scourge of Covid-19 is taking a huge toll on the blue economy. While the various stakeholders in the sector are taking preventive measures to keep the sector safe and running, huge losses pervade. As at the weekend, activities at the Lagos ports have been hugely scaled down to an all-time low.
The National President of the Association of Nigerian Licenced Customs Agents (ANLCA), Tony Nwabunike, said the sector was losing several billons of naira daily at the ports since the menace of the CoronaVirus.
“It is a huge loss. It has affected our businesses, the nation’s and global economy. I have never seen a situation like this where the entire world is in a crisis because of a single virus. The impact will be so huge and because of the exposure of our country to imports, i foresee a situation, whereby the economy will be hard hit, and if we are not careful, our economy will go into recession,” Nwabunike warned.
The ANLCA boss explained that Nigeria’s import statistics shows that 60 percent of the country’s importation is from China. Sadly, he further revealed, since January to date, very few goods have been coming into the country from China, thus dealing a blow on the data and activities in the sector.
“The losses are huge and the whole system is collapsing. Crude oil is now at $26 per barrel and naira has been systematically devalued. As at now the actual value cannot be fully ascertained, but it runs into several billions at the ports on daily basis,” he said.
Nigeria and the maritime industry, Nwabunike said, should be thankful to God because the virus started immediately after the Chinese in the country left for their country for a one month Christmas holiday, otherwise it would have been more severe. He said many Nigerians cannot import goods, especially from China now because of the virus.
For the freight forwarding and clearing sub-sector, it is not also cheery news. Yesterday, the association ordered the closure of its national secretariat and its 18 branches nationwide, technically halting activities at the ports.
Nwabunike said: “We have to obey instructions from all relevant authority. We have to avoid non- essential travel. We have to keep to Social Distancing; that is, avoid large gatherings and close physical contact with people. These cannot be fully achieved if we do not close our office. The lives of our people are more important to us that work.’’
Reports from Hellenic Shipping News Worldwide further details the impact of Covid-19 on shipments to Nigeria. According to the report, vessels calling into seaports have reduced significantly due to fear of the spread of the virus. Hellenic further reveales that experts in the maritime sector forecast that the country would be losing about N1 billion daily to the outbreak of Convid-19 as the level of imports arriving the country’s ports is gradually dropping while port calls to China are becoming less frequent. It noted that as a result of contracting the disease and a slowdown in the Chinese economy, cruise liners, container ships, oil tankers and bulk carriers have been deterred from stopping at the harbours.
According to Clarksons, a shipping research company, commercial vessels are said to have stopped arriving in the country’s seaports, with port calls falling by an estimated 30 per cent in February, and container throughput estimated to decline by between 20 and 30 per cent.
The firm noted that with more than 50 per cent of Nigeria’s import coming from China, many importers are afraid to take their cargoes, even as millions who usually travel during this period are cancelling their trips.
A United Kingdom-based Nigerian businessman, Kazeem Adigun, said Covid-19 is a big blow to not only the sector but also her economy. Adigun said with a drastic cut in importation of goods, maritime business would suffer and this may lead to loss of jobs in the already troubled sector.
Besides, he warns that the manufacturing sector will be adversely affected given that about 90 percent of raw materials needed by the manufacturing sector are imported.
“Nigeria should be ready for tougher days ahead. Workers’ income may be grossly affected in the long run, just as the purchasing power of the citizens will be affected. I fear that Covid-19 will lead to cut in employment with some workers losing their jobs if this is not urgently brought under control,” Adigun submitted.
But for Nwabunike, there is a silver lining and lesson for the country at the end of the Covid-19 period. “The good news is that the virus will leave a very big lesson for us- like the need to increase and improve our infrastructure and to equip our health sector,” he said.
Aviation
The aviation sector appears the most hit of the impact of COVID-19, whether you take the country, or international assessment of the situation. Efforts to contain the spread of the virus has forced many countries, including Nigeria, to enforce restriction of airlines into its airspace, resulting in flights ban and suspension of operations by scheduled operators.
Experts have estimated the sector’s loss at over N50 billion as revenue that would have accrued from commercial activities from airlines, ground handling companies, airline catering providers, cargo handling agents, car hire operations, aviation fuel suppliers and other ancillary services providers in the movement and logistic value chain.
Besides, these organisation aeronautical agencies, including Federal Airports Authority of Nigeria (FAAN), Nigeria Civil Aviation Authority (NCAA) and Nigerian Airspace Management Agency (NAMA),will also lose revenue, which would have accrued from Passenger Service Charge (PSC), aircraft landing and parking fees, ground rent and other charges.
NCAA, on its part, will lose huge revenue running into millions of naira as five per cent charge, which would have accrued from ticket sales and cargo charges during the period of the lock down.
Significant revenue will also be lost to ground handling firms, airline catering firms and aviation fuel suppliers for flights not carried out during the lock down.
From the weekend, six domestic carriers: Air Peace, Aero, Arik Air, Dana Air, AZMAN and Max Air, suspended flights for two weeks, citing lowering passenger traffic and compliance with measures by the government to contain the spread of COVID-19.
These airlines, including Arik Air and Air Peace, which operate international and regional flights, would be losing millions of dollars which they would have earned from tickets sales and cargo lifting.
According to the International Air Transport Association (IATA), Nigerian and other carriers on the African continent have lost over $4.4 billion to COVID-19 with estimated loss of $113 billion loss in revenue for global airlines.
In an interview, Chairman, Airline Operators of Nigeria (AON), Captain Nogie Meggison said losers accruing from COVID -19 was unquantifiable.
Meggison said: “Nigerian airlines are suffering heavily from the impact of the Corona Virus issue as the passenger numbers have dropped drastically and our overheads remain the same on many fronts and even increasing significantly on other fronts. Like we all know, Nigerian airlines trade in Naira but we do our business in Dollars and the Naira has come under pressure since the Corona Virus pandemic.”
The AON chief called on the Ministry of Aviation to take a cue from the CBN by directing the various Agencies under its supervision to immediately put in place and extend critical palliative measures to Nigerian airline operators in order to reduce the burden of colossal loses they have suffered and continue to suffer from the impact of the virus on air travel.
He said: “On March 16, 2020, the Central Bank of Nigeria announced a moratorium of one year on all principal repayments of intervention loans effective March 1, 2020; reduced interest rates from nine to five percent per annum for one year; and created a N50 billion targeted credit facility to cushion the impact of the virus on businesses.
“We are using this medium to call on the aviation agencies through the Federal Ministry of Aviation to follow the same path by taking action to support domestic airlines that are the drivers of our national economy.
“Our government can do the same, therefore, by granting the above-stated reliefs to Nigerian airlines to assist them during this very difficult time to recover from their losses.”
President, Association of Foreign airlines Representatives in Nigeria (AFARN), Kingsley Nwokoma said the effects of COVID-19 on aviation is negative as fewer cargo airlines fly into the country since the crisis started.
He said: “If you go to the warehouses, it is like a ghost town. In those days, we used to have the China section of the warehouse, almost 70 per cent of what comes in goes to China or the Asia section, but now it is empty. We just hope that things get better.
“Most airlines are cancelling flights; frequency has dropped, of course you need to have passengers and cargoes to fly out. Before covid19, we had over 20 plus aircraft coming in both scheduled and non-scheduled flights. As I am talking to you, more than half of that have stopped and even those that are coming in are also looking at frequencies, which have dropped, a lot of people are not travelling again and cargo is down,” he added.
Nwokoma noted that Asia was the market for most exports and imports. But since the pandemic, production and export of goods had been brought to a halt.
“If we are going to look at the decline in cargo, and rate it, we should be talking about 70 per cent. I am even being magnanimous about it, 70 per cent because most exports go to Asia while import comes from Asia and China.”
IATA has urged governments to remove impediments that could stall cargo and flight operations in the global effort to contain the spread of COVID-19.
The global airlines regulator said removal of such impediments, which include overfly charges, parking fees, and slot restrictions had become necessary in supporting air cargo operations during these unprecedented times.
In an online interview, IATA’s Director-General and Chief Executive Officer, Alexandre de Juniac, said governments need to take steps to remove the impediments because air cargo is instrumental in transporting food and other products purchased online in support of quarantine and social distancing policies implanted by states.
Juniac said: “The government must exclude air cargo operations from any COVID-19-related travel restrictions, to ensure life-saving medical products can be transported without disruption.
“Ensure that standardised measures are in place so that air cargo can continue to move around the world with minimal disruptions.
“Governments must see air cargo as an essential part of the fight against COVID-19.” The IATA boss said since the COVID -19 crisis began, air cargo has been a vital partner in delivering the much-needed medicines, medical equipment (including spare parts/repair components), and in keeping global supply chains functioning for the most time-sensitive materials.
Economy
A bleak prospect stares the economy and Nigerians in the face. The President, Lagos Chamber of Commerce and Industry (LCCI), Mrs. Toki Mabogunje, brought this depressing reality nearer home when she recently expressed fears that the economy might be at the risk of another recession.
She said, for instance, that the country may be at the risk of devaluation as the continued depletion of the external reserves, forced by tumbling oil price, may constrain the ability of the Central Bank of Nigeria (CBN) to support the naira.
Mrs. Mabogunje lamented that crude oil has been trading below the budget benchmark of $57 per barrel in the international market for the past eight weeks, due to drastic cut in global oil consumption, compounded by the on-going price war between Saudi Arabia and Russia.
The LCCI chief said the Covid-19 outbreak has dealt a severe blow to the global economy, including Nigeria, warning that if the pandemic is not brought under control, at least in the near term, the economy might slip into recession.
Mrs Mabogunje, who spoke at a forum on “The implications of Covid-19 outbreak on the Nigerian economy” in Lagos, said the virus has disrupted businesses, economic and financial activities.
She 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. Airlines have cancelled flight to affected areas.”
From LCCI Director-General Dr. Muda Yusuf came a more depressing of the impacts of Covid-19 on the economy particularly on the industrial sector. He said, for instance, that the outbreak of the coronavirus has profound implications for the economy, as it poses a major threat to Nigeria’s macroeconomic fundamentals, the impact of which may be systemic and far reaching.
Yusuf fears that with crude oil price falling below $30 per barrel, against the $57 per barrel oil price budget benchmark for 2020 the sharp drop in revenue could cause significant dislocations in the 2020 budget and in the economy, especially for a country already grappling with challenges of weak revenue performance and a complete erosion of fiscal buffers.
Noting that it is instructive that the Federal Government has taken steps to review the underlying assumptions and the content of the 2020 budget, Yusuf said the revenue effect of the crisis is significant. “Oil revenue accounts for about 50 per cent of government revenue and about 85 per cent of foreign exchange earnings.
“With the scenario of tumbling oil price, a drastic reduction in the revenue of government has become inevitable in the near time.
‘’This has implications for the level of fiscal deficit in the budget; budget implementation will be constrained; infrastructure financing will be affected; borrowing may increase, and the capacity to fund capital project will be severely constricted,” he said.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who announced the proposal on March 25, after a meeting between the executive arm of government and the leadership of the National Assembly in Abuja, said the slash in the oil benchmark became necessary as the nation prepared for a worst-case scenario, adding that it would insulate the economy against any form of unexpected crisis.
Yusuf also said oil revenue is the major driver of accretion to the foreign reserves, and this means that the slump in oil price and the associated adverse expectations will put fresh pressures on the reserves, which stood at all-time low of $36.2 billion as at March 3.
He listed the implications of this outlook to include weakening of investors’confidence, generation of speculative pressures on the currency, likely depreciation of the naira exchange rate, heightened inflationary pressures on the back of currency weakening, likely increase in production and operating costs for businesses, and weakening of purchasing power.
Partner, KPMG, Mr. Ajibola Olomola, said over 70 per cent of manufactured goods in Nigeria are imported, with China representing Nigeria’s biggest trading partner. He said about 19 per cent of Nigeria’s imports are sourced from China, which means that the Covid-19 outbreak has significant impact on retailers and consumers in Nigeria.
However, to circumvent China as Nigeria’s major source of raw materials, equipment and machinery, the President, Manufacturers Association of Nigeria (MAN), Mansur Ahmed, said manufacturers have started turning to alternative sources for raw materials to keep their factories running.
But there is a problem. The rampaging virus has since spread like wildfire across continents from mainland China, its roots, to Asia, Europe, America and Africa, leaving manufacturers and service providers with the short end of the stick with regards to sourcing critical input.
Ordinarily, Nigeria should turn to the tourism sector, as part of the inward-looking strategy to keep the economy afloat. Unfortunately, however, that critical non-oil sector is currently on its knees, unable to attract tourists because of widespread insecurity. The pandemic only added to the sector’s woes as near-nationwide lockdown looms.
Housing
An official of the Nigeria Institution of Estate Surveyors & Valuers (NIESV), Richard Olodu said as previously predicted, COVID-19 will have devastating effect on property market and housing sector in Nigeria and globally.
He said people in western world were finding it difficult to pay their mortgage. He said: “Depending on its tenure, COVID-19 may have unprecedented effects on the property market. In US, over 500,000 Americans lost out in the millionaires rank. In China, more than one million companies claimed they may not declare profit this year due to the debilitating effect of conoravirus. France president has asked tenants not to pay for three months. Businesses are folding up and global turnover is likely going to be quartered or below. The world is still counting”.
Olodu said, fortunately, the United Nations saw this pandemic as world-threatening with the World Bank earmarking some palliatives to support poor countries like Nigeria.
The former NIESV Public Relations Officer (PRO) maintained that COVID-19 would affect the property market, adding that this is not the best time to buy property as nobody might predict when the crash will be at its lowest ebb.
‘’So clients are already hoarding their funds because they are not certain of what will happen and how long the crisis will last. Some tenants are not renewing their rent because of uncertainty about the future. Everyone is monitoring what will happen next,’’ he stated
For Estate Surveyor & Valuer, Sola Enitan, the pandemic has taken real estate to its knees; commercial real estate has taken a hit right now he stated.
He said: “People are clamouring for workstations and the need for smaller offices would ensue in the coming months. More and more people would find it more convenient to work from virtual offices, therefore office rental as Virtual stations would thrive. More people are being forced to work online and that has been taken to a higher level by the government of Lagos State. Retail Projects would continue to thrive. Retail spaces would continue to thrive in the post Covid-19 era. Markets redevelopment and Shopping centre development would offer investors and developers succour in the coming months,” he added.
Enitan further stated that retail spaces would continue to thrive in the post-Covid-19 era as markets redevelopment and Shopping centre development would offer investors and developers succour in the coming months.
He argued that the trend would likely take the industrial sector higher. According to him, discerning manufacturers are likely to capitalise on greater investment requirements in the production of goods. The virus, he said, would drive up industrial index as a cure is found for the disease, its post-pandemic management, too, would require space for specialist clinics.
Healthcare needs would increase. Already, banks are looking for spaces to build centres of medical excellence, even stadia are being converted into hospitals, these are previews of trends to come, he added.
The Head, Kola Akomolede & co, Asiwaju Kola Akomolede, Covid-19 is affecting all real estate agents already. He said tenants, who were due to leave by the end of the month, would not do so while those who were supposed to move into the houses they had probably paid for before could not nor any valuerable to inspect houses or sites.
Construction workers are staying at home. He said: “Building materials dealers and suppliers will not able to open their shops and offices, delaying construction activities this will eventually lead to laying off of workers in the sector.’’
e-Business
Already, the global onset of the virus has started impacting on the way organisations interact with their staff, businesses, suppliers and customers. According to Immersion Group, this a wake-up call for organisations on the importance of digitalisation throughout every touchpoint of their business. It is not just about the way people manage their operations and production, but digital innovation has become critical to how people interact with their customers and as the Covid-19 virus has shown. Already, major telcos in the country are encouraging their workers to work from home (WfH).
The scourge is showing businesses, which meetings and processes should have been digitalised making WfH to be inevitable.
Technology and availability of mobile broadband has made the world a global village, where business can be done anywhere, and interaction needs to be fast, seamless but also user-friendly to the point where it’s easy for anyone to interact and communicate. The complicated must become simple.
Meetings no longer need to be face-to-face, nor does customer interaction – in fact far from it.
The value of digital channels, products and operations is obvious to organisations everywhere. A wakeup call to those who’ve placed too much focus on daily operational needs at the expense of investing in digital for long-term resilience.
Immersion Group said the investment made for digital today would secure the business for the future.
Businesses have begun shutting down and sending employees to work from home in the hopes to stop the spread of the virus and flatten the curve of impact. In the ideal digital world, this should have minimal impact on a business.
The President, Association of Telecoms Companise of Nigeria (ATCON), Olusola Teniola, said the short-term remains positive for telecoms as there is clearly an evident change in consumer behaviour and businesses to go online during the precautions put in place by the Federal Government in places, such as Lagos and Abuja, where broadband is pervasive.
He said: “Medium term is mixed as COVID-19 beyond Q2 2020 may mean a shortage in device imports due to residue impact on supply chain from China in both Jan and Feb 2020 and the ripple effect this has caused.
“Long term is more than likely to be negative as economic impact on consumer spending may take effect, especially if Nigeria is not able to reverse the spread of the virus across the nation and consumers prioritise spending on essential items for survival, otherwise, it is neutral for Q4 2020.”
According to two Immersion Group experience consultants; the technology and solutions are already available. Switching to a digitally-enabled organisation doesn’t have to involve a complete re-engineering of business processes, rather it’s a re-imagining of the business processes.
Businesses that can shift technology capacity and investments to digital now, will be able to mitigate the impact of the outbreak and keep their companies running now, and in the long term.
Not only will businesses need to re-engineer the way they interact with their customers, they will also need to redesign internal communication and collaboration frameworks, leveraging technology and digitally-enabled processes to allow for business to continue as usual and have the resilience to continue despite economic threats and challenges.
Now with the increased demand of remote working, it’s crucially important to simulate or create an imitation of operations similar to the environment employees are used to.
Businesses need to prepare IT systems now in order to safely and reliably handle the vast increase in remote working and the digital fulfilment of market demand.
As the virus continues to take its toll globally, economic symptoms are emerging. Dozens of large-scale organisations have started announcing they won’t be achieving their financial goals.
These announcements, coupled with the impact of supply-chain disruptions and dampened consumer demand will see a drastic drop in economic performance.
Organisations need to take themselves out of their comfort zone and fully embrace appropriate technology and digital solutions in order to make the impossible possible.
Already, major hardware manufacturers have been forced to close shop due to the Covid-19 pandemic, and this has resulted to the interruption of the server supply chain and the severe complication of operation scaling for tech companies, according to Heficed, a company providing full-range services for internet protocol (IP) lease, monetisation, and management services based in London, the United Kingdom (UK).
The production and distribution of hardware needed to sustain the server supply chain has therefore been compromised by forcing a temporary shut down on some of the largest manufacturers based in China, Heficed, a full-scope internet infrastructure provider, added.
Consequently, in a rapidly growing demand which can be hardly sufficed by the current stock supply, this interruption has left companies, which require resources to build and maintain network infrastructure, unable to scale their business, it explained.
When the pandemic escalated, most of the factories shut down in an attempt to prevent further transmission of the disease. China is at the forefront of the industry, as data processing machines and their components are among the top exported goods.
Heficed CEO Vincentas Grinius, said: “The sudden stop of operations in China had a drastic effect on the industry, immensely limiting the available hardware supply.
“We usually stock up for at least a few months in advance, which proved to be a vital decision, which allows us to maintain our operations on a pre-virus capacity. Other hosting providers aren’t so lucky, as most of the storage facilities have been emptied clean, so you can’t simply stock up on required resources.”
Inability to staff the production lines and continue work during lockdown created a significant server supply shortage in the market. Although businesses are restarting their work, they still have a long way ahead to mitigate the damage done to the industry.
Businesses, reacting to the situation in China, started looking at other major markets, such as the United States, in hopes of acquiring the necessary resources. However, this left them facing another problem – delivery.
Grinius said although the government did not restrict global trade, delivery companies either doubled the price or stopped such shipments entirely.
He added that delivery was no longer a rational choice. “Prices for shipping rose from a few hundred to a few thousand dollars: if you would compare it to our previous delivery expenses, costs jumped by at least a 150 per cent,” he added.
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