The world is still grappling with the rapid outbreak of COVID-19 which presents an alarming health crisis. The novel Coronavirus (COVID-19) which was declared a pandemic by the World Health Organization (WHO) traced back to Wuhan province of China. The virus started spreading like wildfire to every part of the world. The virus was categorized as infectious and highly contagious by health experts and as a result, WHO and Governments alike have advised its citizens to continuously practice safe hygiene by washing hands with soap & water, as well as using an alcohol-based sanitizer.
The number of new infection and deaths continued to rise rapidly. About 4.23 million people have been infected globally with Nigeria having about 4,787 confirmed cases as at today, 959 recovered cases and 158 deaths respectively (as at when publishing this article) according to NCDC, with Lagos, Kano and Abuja recording the highest cases.
In order to curtail the widespread of this deadly virus, the Nation went on a 5-week compulsory lockdown restricting movements within states and across borders. Businesses were not left out as shopping malls and offices were all shut down and workers asked to work from homes. The lockdown directive led to the shutdown of many businesses including those that cannot be operated from homes. However, the crippling effect on these businesses does not outweigh the gains.
Looking at the most affected business is Micro, Small and Medium Enterprises at the forefront. The MSMEs will be most hit by the pandemic because they rely heavily on daily cash flow transactions to sustain their businesses. They practically have no savings as about 75% of their income is ploughed back into the business.
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The most risk MSMEs are those that deal in perishable goods. Think of a farmer who suddenly couldn’t afford to transport his farm produce to a nearby city or state to sell or a vegetable and fruits seller who depends on daily turnover to survive. What about a food vendor who caters to offices? These people are thrown out of business because of the pandemic.
Also, the COVID-19 pandemic has affected many other businesses with most laying off staff or reducing monthly payments by 50% in order to still retain workers. This led to a great fall in household consumption. Consumers are primarily spending on only commodities perceived as essential. The movement restriction has not only affected a reduction in non-essential commodity consumption but affected the income-generating capacity of people.
Other sectors that are experiencing the crippling effect of COVID-19 pandemic are…
1. Tourism & Aviation: This is one of the hit sectors as the lockdown and movement restriction have caused a downward slope in the demand among travellers. Most airlines have suspended operations as was ordered by the Federal Government. An estimated loss of $252 billion has been reported by the International Air Transport Association as of March, while revenues by cruise companies, hotels & hospitality are facing declining demand and patronage.
2. Oil & Gas Sector: The pandemic did not leave out the oil and gas sector. The sector recorded a huge drop in oil demand and a crash in crude oil prices globally. The loss in oil demand is estimated to surpass the loss of nearly one million barrels per day during the 2007/08 recession. The adverse effect is bad that even OPEC and top oil-producing countries’ intervention yielded no positive results.
3. Cinemas & Entertainment: With movie theatres shut down, art exhibition and musical concerts cancelled or postponed, there’s no doubt that the sector has had its share of loss of revenue to the pandemic.
4. Manufacturing firms: Factories were shut down as well. This led to limited access to raw materials and challenges in the supply chain. Billions of naira worth of trade for both import and export will be lost due to the lockdown.
5. Consultants and other services industries: No company need a consultant when its revenue is declining. The drop in revenue in businesses and even government institutions will lead to budget tightening which negatively affects consultants.
The impact on major sectors will adversely affect the Nigerian economy as a whole. What could be more devastating is the fact that the economic pain accompanied by the virus might not go as soon as envisaged. What the Nigerian government must do is to lead the economic diversification drive. It is the only known way through economic uncertainties and instabilities.
Finally, the effect of the pandemic might teach the Nigerian economic managers and policymakers that the sole reliance on oil is failing. Diversification priorities into Agriculture, Mining Solid Minerals, and Technology should be intensified. Also, improving investment in the Health Care sector in ensuring that the economy is able to recover quickly from difficult conditions in the future.