BY ZAKA KHALIQ, ANTHONY AWUNOR and OLUSHOLA BELLO, Lagos
One year after COVID-19-induced lockdown, the nation’s economy is yet to fully bounce back to its pre-COVID state, LEADERSHIP learnt.
To this end, economists say the harsh economic atmosphere will continue with the country currently witnessing trade and budget deficits.
They, hence, advocate creative means through macro-economic instruments that could make life and living easier for Nigerians.
The trade deficit, they said, arose from lack of or low Foreign Direct Investment (FDI) into the country and lessened activities in the export market compared to increased import activities. Trade deficit occurs when a country’s imports exceed its exports during a given time period. It is also referred to as a negative balance of trade (BOT).
Nigeria has over N4 trillion to be borrowed to finance the 2021 national budget. According to analysts, this will further create additional debt burden for the country.
Although, they see more revenue coming through increased oil prices in the international market, they are afraid the gains will go into debt servicing, thereby having minimal positive impact on the current economic situation.
A lecturer at the Lagos Business School (LBS), Dr Bongo Adi, said one year after the COVID-19-induced lockdown, Nigeria’s economy is still far off from where it was before the shutdown of social and economic activities in March 2020.
On quarter-by-quarter analysis, since the economic meltdown of 2016, he said, the Nigerian economy has consistently grown by about 2 per cent, but with 0.1 per cent growth recorded in the last quarter of the year, it only shows that the economy is still drowned in after effects of the economic lockdown.
Stating that the current trade and budget deficits have somehow beclouded the economic outlook of the country going forward, he attributed the trade deficit to the inability of the economy to attract any major Foreign Direct Investment (FDI) in the Q4 of last year as well as lessened activities in the export market ,yet the country still spends more forex to import.
Similarly, he said, the budget deficit, expected to be augmented by foreign and local borrowings, coupled with the trade deficit, are instruments that will further weaken economic growth.
While expressing satisfaction that oil price, a major revenue earner for the country, is going up and may continue on this trajectory till year end, he said the price surplus between the budget and the current trading price will go into servicing debts already incurred.
With inflation on the high compared to pre-COVID time, Nigerians are already suffocating from low disposable income, hike in prices of food and consumables, high cost of living, increased unemployment, a development, he said, will continue to erode any gains that the economy may have made in the last one year.
Except government becomes creative with macroeconomic instruments, he said, the tough economic environment may not ease anytime soon.
On his part, the director-general of Lagos Chamber of Commerce and Industry (LCCI), Mr Muda Yusuf said: “We exited recession by the fourth quarter of 2020 with a positive of GDP growth of 0.11 per cent and we expect things will continue to get better as the economy is on the positive growth with oil prices looking up, which is good for the recovery of the economy, and good for our reserves and foreign exchange. Now with the vaccine, the economy will continue to be better.”
He called on the government to look at issues surrounding favourable business conditions, funding, infrastructure, linkages, and cost environment for the SMEs sector.
If inflation continues to grow, he said, some businesses will suffer as this will compound the unemployment problem.
On inflation, he stated that “mounting inflationary pressures weaken purchasing power of citizens as real incomes are eroded, it accentuates pressure on production costs, it negatively impacts profitability, and undermines investors confidence. Tackling inflation requires urgent government intervention to address the challenges bedeviling the supply side of the economy.”
Similarly, the International Finance Corporation (IFC), a member of the World Bank Group, has said over 90 per cent of MSMEs across sub-Saharan Africa, where Nigeria belongs, are suffering harsh economic impacts due to the COVID-19 pandemic.
The Institute in its report entitled ‘COVID-19 and women-led MSMEs in sub-Saharan Africa’ stated that “women-led MSMEs have been especially hard hit, with many reporting revenue losses of over 50 per cent, largely due to their smaller size, informality, and concentration in heavily affected sectors.”
It noted that “women-led MSMEs entered the pandemic with lower rates of financial inclusion than male-led MSMEs, and the pandemic exacerbated these trends. Among the 13 per cent of MSMEs that accessed financial support during the crisis, fewer were women-led MSMEs.”
Despite challenges posed by the pandemic, the report said “Over 90 per cent of MSMEs still plan to maintain or expand their businesses over the next six to 18 months. In line with this goal, over 80 per cent of MSMEs expressed the need for support, particularly for growth capital and expansion assistance, during the recovery.”
Regional industry director, Middle East and Africa, IFC, Manuel Reyes-Retana, said “as part of the World Bank Group COVID-19
response, IFC has provided $8 billion in fast-track financing to existing clients and has offered a number of advisory service interventions to improve the financial sector’s capacity to serve small enterprises in emerging and developing economies.”
On a sectoral analysis, aviation and tourism sectors seem to be the worst hit sectors in the country. Although, businesses have resumed in both sectors, the patronage and modes of doing business have so far changed.
For instance, as businesses in the aviation resume, one sector that has not picked up is the airline catering services due to the fact that airlines’ inflight services are yet to resume. When LEADERSHIP visited some of the catering services, it was observed that most of the operators such as Pan African Catering Services, KOTS Catering, NewRest ASL, and Sky Care Catering Services located in Lagos were waiting anxiously for inflight catering services to resume so that they can resume full operations.
The aviation minister, Senator Hadi Sirika had few weeks ago rekindled their hope by announcing that catering services, hitherto suspended at the onset of the Covid-19 pandemic, are to resume on domestic flights immediately.
According to the minister, who disclosed this at the weekly media briefing of the Presidential Task Force on COVID-19 recently, the decision was taken in consideration of the businesses involved in the provision of in-flight refreshments who have been adversely affected by the suspension.
He, however, said that modalities and protocols for the resumption of the services would be worked and rolled out by the Nigerian Civil Aviation Authority (NCAA) which will be in line with international practices.
A visit to the FAAN, Nigerian Civil Aviation Authority (NCAA), Nigeria Airspace Management Agency (NAMA), and Accident Investigation Bureau (AIB) in Lagos showed that aviation workers below level 12 were yet to resume work in these aviation agencies, with only officials above level 12 allowed to resume work daily.
But a cargo handler and chief executive officer of Afamdex Nigeria Limited, Mr Afam Augustine told LEADERSHIP that cargo business had resumed fully but with higher charges than during the pre-COVID-19 period.
Mr Afam said the high charges is due to the fact that some international airlines had not resumed operations fully.
“The cost of importing and exporting is now very high because most airlines have not resumed fully after the COVID-19 lock down”, Afam stated.
African countries need strong policies and further support from the international community to avert a debt crisis and protracted low growth, says the United Nations. The UN Department of Global Communications in a statement yesterday said the global body warned of the devastating socio-economic impact of COVID-19.
The report was jointly signed by Devi Palanivelu, UN Department of Global Communications; and Helen Rosengren, UN Department of Economic and Social Affairs.
It said that the impact of the pandemic would be felt for years to come unless smart investments in economic, societal and climate resilience were made to ensure a robust and sustainable recovery of the global economy.
The UN said that despite the relatively few number of cases compared to the number of cases in other continents, the COVID-19 pandemic would continue to strongly impact on living conditions and development progress in Africa.
It said the crisis was already increasing unemployment, poverty and inequality such that most countries were already facing enormous challenges to keep the pandemic under control and mobilize financial resources to support health systems, protect vulnerable groups, and support the recovery.
Nigeria’s GDP is projected to expand by 1.5 per cent in 2021 after a contraction of 3.5 per cent in 2020, according to the report. Yet, the UN noted that tighter foreign exchange liquidity, mounting inflationary pressures and subdued domestic demand cloud its medium-term outlook.
In South Africa, GDP is projected to expand by 3.3 per cent in 2021, after a contraction of 7.7 per cent in 2020. The UN also projected that a strong and sustained recovery remained uncertain, amid power shortages, elevated public debt and policy challenges.
Egypt’s GDP was estimated to have grown by 0.2 per cent in 2020; and in 2021. GDP growth is projected to climb to 5.4 per cent, underpinned by a strong recovery of domestic demand and facilitated by the absence of severe balance-of-payments constraints.
Also, after a contraction of 0.5 per cent in 2020, the Ethiopian economy is projected to expand by only 2.3 per cent in 2021.
The UN noted that while agricultural exports were showing resilience, the tourism sector would remain restrained throughout 2021.
Generally, after a contraction of 3.4 per cent in 2020, Africa is projected to achieve a modest recovery, with regional GDP expanding by 3.4 per cent in 2021.
However, the UN report said this recovery was predicated on the rise of domestic demand and the pick-up of exports and commodity prices because external financing and high debt levels posed major risks.
The UN said explained that public debt was limiting the capacity to boost spending across the continent.
COVID-19: Nigeria gets $15m grant for safe school reopening
The Federal Ministry of Education has said Nigeria received 15 million dollars response grant from the Global Partnership on Education (GPE) for safe school reopening across the country.
Hajia Binta Abdulkadir, the director, basic and secondary education in the ministry, said this yesterday in Bauchi at a Cluster Mobilisation and Sensitisation Meeting on COVID-19 Protocols, Surveillance and Safe School Reopening Readiness.
Abdulkadir was represented on the occasion by Mr Achede Owoicho, deputy director, Basic and Secondary Education and the focal person for the GPE.
The workshop was initiated with the support of the United Nations Children Education Fund (UNICEF).