The services sector is the economy’s largest. It also holds the key to tackling the nation’s rising unemployment, because of its capacity to deliver high productivity jobs. But, the sector is on its knees, badly hit by containment measures to halt the spread of the COVID-19 pandemic. Assistant Editor CHIKODI OKEREOCHA reports.
It was a deft move borne out of survival instinct. To ride the storm tossed on its path by movement restrictions and other containment measures to stem the spread of the COVID-19 pandemic, car-hailing firm Bolt has rejigged its services.
Bolt, which has been confronted by plunging revenue caused by huge drop in demand for existing services, as customers cut down on non-essential trips due to the COVID-19 pandemic, may have set the template for operators in the nation’s services industry to weather the COVID-19 storm by throwing its hat in the delivery services ring.
The company launched its “Bolt Business Delivery” service in Lagos and Abuja, the epicenters of the COVID-19 lockdown measures. The service, The Nation learnt, boasts a simple, easy-to-use web interface that links businesses with couriers and allows vendors to place orders online to deliver products to their customers.
On the strength of the service, orders can be set to be picked up immediately or scheduled to be collected within 48 hours. When adding orders, vendors will receive a price estimate. Once they confirm request delivery, Bolt will dispatch a courier to collect the order at the specified time.
Bolt Country Manager for Nigeria, Femi Akin-Laguda, explained that in launching Bolt Business Delivery, the company had two key goals in mind.
The first was to make sure that drivers on the Bolt platform continue to earn a living safely. The other goal was to help businesses selling the essential products defined by the lockdown regulations to get orders to their customers quickly and safely.
Also driven by corporate survival, as the knock-on effects of the COVID-19 pandemic force not a few operators in the services industry to either scale down their operations or shut down, Uber, another ride-hailing company, has temporarily suspended its operations in Nigeria following the movement restriction order to stop the spread of the virus.
Uber, however, hopes to continue services when movement restriction is fully lifted. The company is also said to have pushed into grocery deliveries with its food ordering platform – Uber Eats, besides announcing a series of partnerships with supermarkets, convenience stores, and other businesses to offer home deliveries of essential items.
However, Bolt and Uber are just two out of several key players in the nation’s services industry hardest hit by containment measures put in place by the Federal and state governments to stop the spread of the COVID-19 pandemic.
Other major players in the services industry affected by the movement restriction and other containment measures include operators in tourism/hospitality, courier/logistics, transportation, and medical services.
Others are those in education, banking, insurance, waste disposal, telecommunications services, aviation, consultancy services, trade (wholesale and retail), and advertising, which is part of media and entertainment, among others.
The severity of the impacts of the containment measures has been evidently more pronounced on the services sector, because of its wide nature. The sector is widely acknowledged as the largest sector in the economy, accounting for 53.97 per cent share of the country’s Gross Domestic Product (GDP) in 2018, according to the National Bureau of Statistics (NBS).
The sector also has the highest employment elasticity, according to analysts at professional services firm PricewaterhouseCoopers (PwC Nigeria).
According to them, the sector is capable of delivering high productivity jobs with great potential for income generation and poverty reduction.
For instance, Partner and Chief Economist at PwC Nigeria, Dr. Andrew S Nevin, said estimates of employment elasticities suggest that Nigeria’s services sector has the highest employment potentialat 0.5, relative to agriculture’s -0.1 and manufacturing’s 0.3.
Given the huge number of Nigerians engaged in the sector, where they offer diverse services to businesses and individuals, it is hardly surprising that operators in the sector are among the hardest hit by the dislocation caused by containment measures to stop the spread of the COVID-19 pandemic.
The rampaging COVID-19 was first identified in Wuhan, Central China, last December. But it has since spread across continents from mainland China, its roots, to Asia, Europe, America and Africa, leaving in its wake tales of deaths and unprecedented disruption in business, economic and financial activities.
The pandemic eventually found its way into Nigeria on February 27, this year. The following month, precisely March 11, the World Health Organisation (WHO) declared it a global pandemic.
Rattled by the deadly bug, the Federal and State Governments swiftly responded by ordering several containment measures including partial and total lockdown in some parts of the country to control the its spread.
Expectedly, such measures, combined with the crash in oil price, which is being driven by geopolitics as well as reduced demand in light of the pandemic, forced operators in all sectors of the Nigerian economy to shut down their operations. Those still operating are forced to downside their workforce or compel them to work from home.
However, the first phase of the gradual and controlled easing of the lockdown and travel restrictions began last week Monday, May 4. But almost two weeks after the relaxation of the lockdown began, affected operators, particularly those in the services sector, are still gasping for breath. And they are, therefore, rethinking their strategies to remain in business post COVID-19.
Operators in tourism/hospitality hopeful
Even before the easing of the movement restriction, operators in the tourism/hospitality sector have put forward a number of options to ensure the sector’s recovery post COVOD-19, including the need for operators to embrace innovation, while the government removes Value Added Tax (VAT).
These were key highlights of a video-conference with the theme: “Impact of COVID-19 on the Hospitality and Tourism Sectors in Nigeria,” held on April 16, 2020 via Zoom.
A common thread that ran through the submissions and presentation by industry operators and experts at the conference was the need for operators to constantly innovate, as this will enable them stand the chance to ride the storm of the COVID-19 pandemic and also enjoy a rise in earnings in the last quarter of this year.
At the conference organised by Hotel Expo Nigeria (HEN) and supported by Women In hospitality Nigeria (WIHN), WIGN Founder Amaka Amatokwu, Eko Hotels Rooms Division Manager Jihane Khoury, and MP Hotels Managing Director Bruce Prins were unanimous in their submissions that the industry needed innovative ideas and concepts to continue to attract patronage from local and international guests.
The Managing Director of Dana Airlines, Obi Mbanuzuo, stated that while the Central Bank of Nigeria’s (CBN’s) plan to provide a stimulus package for the commercial airline sector was laudable, it would be more beneficial for the domestic carriers if the Value Added Tax (VAT) was removed.
However, the removal of VAT may be a hard sale to the Federal Government, as the Secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF), Boss Mustapha, had recently foreclosed the removal or reduction of VAT) from 7.5 per cent.
The SGF said in spite of the coronavirus pandemic that has ravaged the nation’s economy, the Federal Government cannot remove or reduce VAT from 7.5 per cent, insisting that the country’s purse was already bleeding. According to him,, the Federal Government takes only 15 per cent of the VAT while the balance is shared for states and local governments.
The operators’ campaign to salvage the sector came following the barrage of travel restrictions, social distancing, isolations, curfews and total lockdown to contain the spread of the scourge. These forced a total freeze on all hospitality and tourism-related activities.
A Tourism Consultant and Vice President (South East), Federation of Tourism Association of Nigeria, Ngozi Ngoka, said the tourism/hospitality industry was the first and has been the worst hit so far.
She said this was because the industry is primarily involved in the provision of accommodation, transportation, entertainment, food and other services to individuals who move from place to place for business and pleasure.
According to her, restrictions of movement, gathering of people and closure of borders between states are all tourism activities that have been put to a halt. She said airlines, accommodation facilities, ground transportation, event centres, restaurants, beaches, nightclubs, museums, game parks/reserves and all tourism facilities are currently in limbo.
Even with the lifting of the restrictions, the tourism consultant believes that it will be a long and gradual process for tourists to have the confidence to move around or congregate freely.
Ngoka is right. At present, foreigners and expatriates who form the bulk of customers of hospitality and tourism-related outfits in Nigeria are yet to return to the country after they were evacuated by their home countries.
Countries, such as United Kingdom (UK), France and the U.S, have been evacuating their nationals in Nigeria, even though the death toll from COVID-19 outbreak is more in their countries than Nigeria.
Their action, The Nation learnt, was informed by the belief that Nigeria’s public healthcare system is unreliable and not robust enough to handle the treatment of COVID-19 patients especially as the number of confirmed cases in Nigeria has continued to rise astronomically.
For instance, from the first index case of an Italian who flew into Nigeria on February 27, last year, Nigeria now has 4, 399 cases of COVID-19 with 143 deaths and 778 discharged as at Sunday, May 10, 2020, according to figures on the Nigeria Centre for Disease Control (NCDC) verified twitter handle.
Fears over job, revenue loses
The implications of the evacuation of the foreign nationals from Nigeria on jobs and revenue are dire. For instance, the United Nations World Tourism Organisation (UNWTO) predicted that because of the unparalleled introduction of travel restrictions across the world, including Nigeria, international tourist arrivals will be down by 20-30 per cent this year.
The UN specialised agency for tourism in its assessment of the likely impact of the COVID-19 on international tourism stated that an expected fall of between 20-30 per cent in international tourist arrivals could translate into a decline in international tourism receipts (exports) of between $300-450 billion, almost one third of the $ 1.5 trillion generated in 2019.
“Tourism has been the hardest hit of all the major sectors as countries lockdown and people stay at home…Tourism is a lifeline to millions, especially in the developing world.
Opening the world up to tourism again will save jobs, protect livelihoods and enable our sector to resume its vital role in driving sustainable development,” UNWTO Secretary-General Zurab Pololikashvili said, last week.
Earlier, the World Travel and Tourism Council (WTTC) had also warned that the COVID-19 pandemic could cut 50 million jobs worldwide in the travel and tourism industry.
WTTC’s Managing Director Virginia Messina projected that of the 50 million jobs that could be lost, around 30 million would be in Asia, seven million in Europe, five million in the Americas and the rest in other continents, including Africa.
Messina said equivalent to a loss of three months of global travel in 2020 could lead to a corresponding reduction in jobs of between 12-14 per cent. She also estimated that once the outbreak is under control, it would take up to 10 months for the tourism sector to recover.
Although, the WTTC boss did not specifically say how many of this projected job cut will come from Nigeria, most hotels in Africa’s largest and most populous economy are operating with less than 30 per cent guest occupancy rate.
The President, Federation of Tourism Associations of Nigeria (FTAN), Alhaji Saleh Rabo, said because of the toll COVID-19 is having on his members’ business bottom-line, many of them have been forced to downsize in order to reduce cost and save their businesses from shutting down completely.
Rabo said, for instance, that FTAN members are the largest investors in Nigeria’s tourism industry, including investments in hotels, resorts, transport services, tour operations, travel agencies etc. And they have been providing thousands of direct and indirect jobs to Nigerians.
Transporters, travel agencies count losses
Operators in the transport/travel agency sub-sector are also agonising after reportedly losing over N160 billion to the COVID-19 outbreak. Rabo attributed the heavy financial hemorrhage by travel agencies to mass flight cancellations by domestic and international airlines.
The National President, National Association of Tour Operators (NATOP), Bilkisu Abdul, also said the pandemic has taken its toll on efforts to boost tourism in Nigeria. “We are all scared because of this COVID-19. A lot of our planned trips have been put on hold,” he said.
Abdul, who is also the Chief Executive Officer (CEO) of BBOOG Travels and Tours, said, for instance, that her planned trip to Turkey with about 60 people was billed for April, but she had to put that on hold as a result of the scare. “You can imagine the losses,” she complained.
Courier, logistics operators also
Even before the impacts of the lockdown started manifesting on operators in the courier/logistics industry, courier operators had kicked against their inclusion in the lockdown order announced by President Muhammadu Buhari.
As part of the containment measure to break the transmission of COVID-19, the president had on Sunday, March 29, 2020, announced a 14-day total lockdown in Lagos and Ogun states, as well as the Federal Capital Territory (FCT), Abuja.
The directive, however, allowed companies that render essential services in the affected states to continue operations. Companies in that basket include food and drug companies, medical/health institutions, oil installations, utilities, certain transport companies and members of the press.
But the non-inclusion of courier operators in the essential services basket did not go down well with courier operators.
The operators under the aegis of Association of Nigeria Courier Operators (ANCO) argued that the courier services industry is among the few critical ones that should be exempted from the lockdown.
The aggrieved operators, who spoke through their National President, Okey Ubah, said the exemption government gave to the communications industry ought to have been extended to courier operators since their services are also communication, though ground communication.
As a result of the restriction on movement, vendors of courier services are also allegedly being harassed by some enforcement agents, a development that has forced many of them to either scale down or suspend their operations.
Retailers in limbo
Wholesale and retail sale (trade) is the second largest sectoral contributor to the nation’s GDP, accounting for 16.4 per cent of GDP in 2018, with an estimated market size of $109 billion.
Nigeria also ranks as the eighth most attractive investment market for retailers in Sub-Saharan Africa and 28th globally, largely based on its volume of consumers and its growing middle class.
The burgeoning sector has attracted a wide range of foreign investors, including South Africa’s Shoprite, the continent’s largest supermarket chain, SPAR, the Dutch retailer, and Pick n Pay, another South African retail giant who is in partnership with a local chain-store operator, AG Leventis & Co.
However, operators in this segment are ruing the impacts of the COVID-19 lockdown on wholesale and retail trade, both online and traditional. They lamented that the shutdown of factories, reduced access to raw materials and commodities due to supply chain challenges affected the supply of products to them
To salvage the situation, Partner, KPMG in Nigeria, Mr. Ajibola Olomola, said there is need to intensify efforts towards building domestic capacity across critical sectors and also increase investment in technology that would optimise existing business processes (e.g. digital and online presence).
Olomola, who spoke at a recent forum organised by the Lagos Chamber of Commerce and Industry (LCCI) in Lagos, also said there was the need to experiment on the possibility of large-scale remote working for employees and its impact on productivity, as well as reconfigure supply chain (e.g through backward integration for input that can be sourced locally).
The KPMG tax expert stated that the COVID-19 crisis has given rise to both challenges and opportunities, with unforeseen events playing a big role in the transformation and reshaping of the retail industry.
He said, for instance, that emerging community shops and online shops are increasing their trading volume and attracting a mass of new customers.
Jumia Nigeria appears to have ceased the opportunities presented by the COVID-19 crisis. The e-commerce operator has been promoting its ‘cashless’ payments and ‘contactless’ delivery of prepaid packages to curb COVID-19.
The innovation entails taking measures that keep its customers, delivery agents and partners safe by leveraging on JumiaPay payment platform, which allows consumers to make prepaid payments for products online and get them delivered without a direct body contact or cash exchange with the delivery agents.
“The health and safety of our customers and delivery agents are our absolute priority. We are uniquely positioned to step up and be part of Africa’s response strategy in this challenging time.
“We have implemented a “contactless” delivery option, which eliminates any possibility of physical contact. Convenience, social distancing and cashless measures are woven into one solution to combat the situation,” CEO of Jumia Nigeria, Massimiliano Spalazzi, said.
Operators in other segments of the services industry including advertising, banking, insurance, telecommunications and aviation, among others, are also mapping out strategies to stay afloat post COVID-19. But the coming weeks, perhaps months, will determine whether or not such measures will guarantee their survival.
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