Coronavirus has been a catalyst for unprecedented and unexpected challenges across the globe. In Africa, it has disrupted millions of livelihoods, with a disproportionate impact on poor households as well as small and informal businesses. The pace of this disruption is likely to accelerate in the weeks ahead. More so for oil-exporting countries, like Nigeria, who have seen their misfortunes compounded by a fall in oil prices.
Compared to the rest of the world, the mortality rate in Nigeria remains relatively low. However, even though the rate of spread in Africa appears to be slower than Europe, the threat of a heavy toll hangs overhead if effective containment strategies are not put in place. In addition to setting a priority to save human lives, African nations will also have to contend with the economic impact of battling a pandemic.
According to a recent publication by Mckinsey; Tackling COVID-19 in Africa, three economic developments are highlighted as the major challenges to look out for in the coming months:
The impact of the global pandemic on African economies: This includes disruption in global supply chains exposed to inputs from Asia, Europe, and the Middle East, as well as lower demand in global markets for a wide range of African exports. Moreover, Africa is likely to experience delayed or reduced foreign direct investment (FDI) as partners from other continents redirect capital locally.
The economic impact of the spread of the virus within Africa, and the measures that governments are taking to stem the pandemic: Travel bans and lockdowns are not only limiting the movement of people across borders and within countries, but also disrupting ways of working for many individuals, businesses, and government agencies.
The collapse of the oil price, driven by geopolitics as well as reduced demand in light of the pandemic: In March 2020, oil prices fell by approximately 50 percent. For net oil-exporting countries, this will result in increased liquidity issues, lost tax revenues, and currency pressure.
Economically, the brunt of these challenges will be felt mostly by small and medium-sized businesses (SMEs) who account for about 50 percent of industrial jobs and nearly 90 percent of the manufacturing sector, putting them under significant cost pressure with potential closure and bankruptcy. Recent developments will likely lead to widespread job losses. At the same time, the pandemic will impact productivity across many sectors and reduce household expenditure and consumption significantly. This could result in reduced tax revenues and limitations on access to hard currency for the African public sector as well as rising deficits and increased pressure on reserves. In the absence of significant fiscal stimulus packages, the combined impact of these economic, fiscal, and monetary challenges could greatly affect economic activity and GDP growth in 2020.
This is backed by the further analysis presented by Mckinsey which concludes that Nigeria is facing a likely economic contraction. It is expected that a best-case scenario will see Nigeria’s GDP decline by nearly six percentage points – approximately $20 billion given Nigeria’s status as a major oil exporter.
The shock from this is likely to be felt mostly by small businesses who typically cannot access large scale extensive capital solutions. In Nigeria, few businesses have the savings to cover things like rent and pay wages as the lockdown continues to result in reduced demand for goods and services. Femi Egbesola, President of the Association of Small Business Owners of Nigeria, has said that the number one fear of most small business owners is finance related.
In response to this, Nigeria’s central bank has retroactively lowered interest rates from 9 percent to 5 percent for one year as of March 1st 2020. It also has announced credit relief of $136.6 million to businesses affected by the coronavirus pandemic, including petty traders and small enterprises (various experts have criticised that the amount may not be able to make a difference). Tax relief is also available and the government is to introduce a scheme to encourage people to retain staff.
National efforts won’t be enough though to soften the effects of COVID-19 on the continent where it is estimated that governments will need billions of dollars in additional funding.
Various other capital-focused interventions as a result of the pandemic are outlined below:
African Development Bank has launched the world’s biggest social bond to date (called Fight COVID-19) by selling $3 billion of notes.
The World Bank and the International Monetary Fund (IMF) has called on all official bilateral creditors to suspend debt payments from borrowing countries that request it.
The IMF is making around $50 billion available in emergency financing for low income and emerging market countries to help the fight against the coronavirus.
The World Bank Group has approved an increased $14 billion package of fast-track financing to assist companies and countries to respond to the rapid spread of COVID-19.
In more locally focused interventions,
Various commercial banks have placed a hold on its loan repayment plan for all Small and Medium Enterprises (SMEs) that have obtained credit facilities from the banks. Some have further explained that businesses that obtained Food and Fashion Industry loans would be issued a 90-day moratorium for repayment of the loan.
The Central Bank of Nigeria has released guidelines for a N50 billion targeted credit facility. Based on the guidelines, those that can benefit from the fund are households with verifiable evidence of livelihood adversely impacted by COVID-19 and existing enterprises with verifiable evidence of business activities adversely affected as a result of the pandemic, as well as enterprises with bankable plans to take advantage of opportunities arising from the pandemic.
More interventions and solutions are expected to be announced in the coming weeks as the adverse effect of the pandemic becomes more apparent.
As regards the impact on policymakers, recent unprecedented developments have acted as a wake-up call. Unlike in previous internally generated crises, international support and bail our options have been hard because of the competing demand for resources across the globe. Structural changes that make the country and the businesses that operate inside of it, more resilient to shocks should be pursued. In the longer term, tougher decisions regarding the exports of advanced products in the value chain, and the restructuring of businesses to take advantage of this, will be key in ensuring that small businesses can better withstand future shocks.
At EZ37 Solutions, despite the present realities, we have leveraged on technology and the creativity of our unique workforce to provide solutions that allow businesses, organisations and government agencies navigate and succeed in the current market conditions, including providing access to financing, HR solutions, training, coaching, and other advisory services. We utilise a wide scope database and other digital tools to successfully help our clients hire the best and the right talents.
We have rolled out virtually-monitored psychometric assessments for candidates in our recruitment process – delivering objectivity in the recruitment process whilst maintaining integrity. We have also continued to deliver assessment centres by employing an innovative approach that allows the process to be rendered remotely and yet seamlessly.
Aware of the importance of learning and development at this time, we continue to deliver virtual training that is carefully curated to ensure that all-round inclusivity and assimilation takes place. For our coaching support services which are greatly in demand at this time, we have sought out the best technology that brings personalised coaching experiences to the fingertips of top executives.
Finally, at such a critical time, we have made virtual training available to government agents on the front line of fighting the pandemic as well as pro bono and other services to help them remain effective.
Source: Businessdayng
