Rough steps in year 2020

The year 2020 was rough for Nigeria and other economies. Daniel Obi looks at those rough factors including poor performing economy exacerbated by Covid-19 pandemic that laid prostrate a number of businesses, to Analysts say re-assessing our economy development strategies to be able to more productive economy than consumption is the way out as the future also lies in innovation and technology.

Nigerians entered the year 2020 with great optimism. This was informed by 2.55% growth in GDP in fourth quarter (Q4) of 2019 after sluggish performance of 2.10%, 1.94% and 2.28% growth in the first, second and third quarters of 2019 respectively.

National Bureau of Statistics (NBS) said the growth in Q4 2019 was highest quarterly growth performance since the 2016 recession. The growth was projected to be on upward trend after Nigeria exited economic recession in the second quarter of 2017.

While government and businesses were adjusting, ready to reap from the expected boom in the economy, as 2020 budget was based on ambitious $57 bp, then came in March 2020 oil price war between Russia and Saudi Arabia over the production, exportation and price of crude oil.

Experts explained that price war is a competitive tactic of purposefully lowering prices with a view to undercutting rival businesses. When this happens, other producers will be forced to lower prices to remain competitive “and the cycle typically continues until the price across the board drops so low as to be unsustainable, thus causing logistical unease to one or more parties”, says KVB Prime.

The price war exacerbated by Covid-19 pandemic saw Nigeria’s oil selling below $30 bp against the projected $57 bp. This development began to have its negative impact on revenue and the operation of the economy.

The International Monetary Fund (IMF), predicted that the plunge in crude prices could cause GDP to contract by 3.4% in 2020, a rate that is by far the highest in at least four decades.

As noted by KPMG in its 2020 budget review “the oil sector, which is only 8% of GDP, contributed 70% to government revenue and 90% to foreign exchange earnings over the years. Contribution of the non-oil sector to GDP remains significant at over 90% in the last two quarters of 2019. Notwithstanding, the economy is still exposed to the risk of oil price shocks”.

The impact of poor oil sales including inability of some states to pay N30,000 minimum wage and lack of improvement in the infrastructure was a result of non-diversification of Nigeria’s economy believed to be viable option for obviating international oil price shocks.

In addition to the shocks experienced from the oil price war between Saudi Arabia and Russia, the Covid-19 pandemic which started in China in December 2019 worsened the global economic situation including Nigeria. In an attempt to slow the spread of the deadly disease, many businesses closed for several months while restriction of movements affected economic activities.

The CEO of SO&U, Udeme Ufot said the year started with no one expecting Covid-19 but when it finally came, “we thought it would be about a month or two months lockdown, but it took several months which affected businesses”

The Nigerian economy encountered Covid-19 in a condition that has serious underline economic issues. Businesses were already struggling; especially those in the marketing communication sector, as revenues were disappearing. Amidst all this, clients were shutting down or cutting costs. It has been challenging for agencies to retain their staff and keep them motivated, Udeme said.

As the effect of the pandemic bites, many businesses took some drastic actions such as laying off staff and cancelling contracts. The pandemic literally laid prostrate a number of businesses including airlines, hotels, land transportation industry, education, shopping malls, the media and event centers as many of them could not operate for months.

“We placed a number of our staff on compulsory leave without pay as clients’ jobs diminished”, following the pandemic which ravaged economies, managing director of a media agency based in Lagos told BusinessDay recently.

Many airlines, both local and international grounded their fleet while commercial vehicles both inter and intra city busses stopped operation, losing millions of Naira on account of rules and lockdown targeted at checking the spread of Covid-19.

The Nigerian hospitality sector, which was recovering from the traditional lull in business between January and early February of every year, faced even more difficult challenge occasioned by the coronavirus (Covid-19) pandemic.

From occupancy rate of between 50-60 percent in late January, hotels recorded below 25 percent, the worst in the history of the sector due to lockdown over coronavirus.

As the Nigerian businesses were seeing some bright spots after relaxation of Covid- 19 restrictions, Nigerian youth staged a protest tagged ‘ENDSARS’ against police brutality. The one month protest brought back businesses back to their knees.

The Lagos Chamber of Commerce and Industry (LCCI), according to a report by Frank Fagbo writes in Enterpreneur.ng disclosed that Nigeria lost more than N700 billion in economic value since the #ENDSARS peaceful protests started. “The effect of the ENDSARS protest on businesses is huge, with some ripple effect on the economy. Especially, an economy picking up its ruins from the blackswan (covid-19) that hit the market”, The report said while the protest went on, the hot- term economic consequences for the people began to mount. “A drop in consumer spending on non-essential goods was one of the most visible signs of its impact of the protest that shut down most of the major activities of Nigeria’s busiest airport. Also, the major roads were blocked and activities brought to a halt”.

As the protest ended, with Nigerians ready to re-embark on their businesses, Nigeria slipped into recession. “The recession was not unexpected as the signs were open following activities which slowed down in the Q1 and Q2 due to Covid-19”, says an expert.

Owing to the Covid-19 pandemic, reduced demand in the oil market, and restricted international trade activities, the outlook of the nation’s Gross Domestic Product (GDP) had been expectedly negative.

Assessing the recession, Ademola Asunloye in his writeup in BusinessDay said “hit hard by the spread of the coronavirus, the decline in oil prices, and other consequential factors, Nigeria slipped into its predicted recession in Q3 2020.

“According to the data released by the National Bureau of Statistics (NBS), Nigeria’s gross domestic product (GDP) recorded its second consecutive negative growth in real terms, from -6.10 per cent year-onyear (YOY) in Q2 2020 to -3.62 per cent YOY in Q3 2020. Although this represents an improvement of 2.48 percentage points in comparison to the growth rate recorded in the preceding quarter (Q2 2020); but negative growth rates in two consecutive quarters translate to a recession in Q3 2020.

“The underperformance of the economy in Q3 2020 reflected the adverse effect of the restrictions on movements and economic activities implemented across the country in early Q2 in response to the COVID-19 pandemic. In comparison to Q2 2020 where 13 economic activities recorded growth, 18 recorded growth in Q3 2020”

All these negative indices were amidst high unemployment rate and insecurity which did not make things better.

Assessing the outgoing 2020, The President of Association of Advertising Agencies of Nigeria, AAAN, Steve Babaeko said it has been a challenging year for the economy. He said the learning point in all this is to adopt the Boys Scout motto: Be prepared.

On his view for 2021, Babaeko who said that naturally he is an optimistic manager declined to be optimistic going into 2021 on the excuse that oil price may not go up and he also expects after-shocks of 2020 to reflect in 2021 and this is where businesses need to be careful, spend less and be innovative.

Former Registrar of Advertising Practitioners Council of Nigeria, APCON, Bello Kankaroffi described the year as a disaster for Nigeria and globally. He said the advertising sector was hard hit.

Looking deeply, he said the multinationals now move from the local media to international media for advertising and wondered whether it is a trend or value generation. “What is worrisome is that Association of Advertising Agencies of Nigeria, AAAN and other sectoral groups that supposed to rise and speak against it are keeping silent perhaps for fear of clients’ backlash”. However he said there are a lot of potentials in advertising that can be unleashed for the growth of the economy, if harnessed.

He advocated for reform to unleash the potentials. When reminded about the reform of 2012, he said implementation could be a key issue.

Udeme Ufot described the year as exceedingly difficult year for business across all sectors but especially the service sector. He said costs for goods have gone up and revenues for enterprises are dwindling.

According to Udeme, the year has taught business operators to be more adaptive, to approach businesses in different ways. He said the challenges businesses have gone through remain as the foundation for a more effective, more productive style for businesses. “We never thought that some of the things we do in the offices could be don’t off-site as Nigerian businesses particularly had to operate in an economy that was heavily challenged.

Udeme further said learning points from year 2020 is that in life you must expect the unexpected, and flexibility and adaptability have become key. He said the businesses that will survive are those that have been able to adapt to the challenges and adjust themselves.

Tunji Olugbodi, CEO of Verdant Zeal said presently, Nigeria has its back to the wall and when somebody is pinned to the wall, it is either you remain there or fight back. “I expect that 2021 will be much better than 2020 and I expect that there will be a new strategy on which the economy will function better, I expect that as a people based on visionary leadership, we will re-direct our energy towards better policies and principles different from those ones that have kept us vulnerable in one position”.

He hoped since Nigeria is tied to the global economy and as there is vaccine against Covid 19, the global economy will be better which will rub off on Nigeria. But more importantly, he said there is consciousness now within the private and public sector on re-assessing our strategies to be able to be a productive economy than consumption. Our future now lies in innovation and technology and this should be the agenda of the government.