Nige­ria awaits tsunami of job­less as coro­n­avirus hits busi­nesses

Business Day (Nigeria) - - FRONT PAGE - MICHAEL ANI

With eco­nomic activities in the coun­try al­most grind­ing to a halt due to the coro­n­avirus pan­demic, Nige­ria could see a host of its pop­u­la­tion be­com­ing job­less, wors­en­ing it al­ready height­ened un­em­ploy­ment fig­ure.

The odds of Africa’s big­gest econ­omy slip­ping into a re­ces­sion are in­creas­ingly be­com­ing likely as com­pa­nies suf­fer de­clin­ing rev­enue due to the deadly global coro­n­avirus out­break which the Nige­rian Cen­tre for Dis­ease Con­trol (NCDC) said has so far in­fected 46 per­sons in the coun­try with one death recorded.

In or­der to con­trol the in­creas­ing num­ber of cases of the out­break, com­pa­nies op­er­at­ing in the coun­try have en­acted a par­tial clo­sure of some of their op­er­a­tions, forc­ing staff to work from home.

Non-food mar­kets in La­gos and Abuja will come un­der lock and key to­day as both the fed­eral and state gov­ern­ments sweep into ac­tion to keep the virus at bay.

An­a­lysts say the move, though com­mend­able to con­tain the out­break, could put more stress on sales activities of com­pa­nies, al­ready strug­gling with tum­bling rev­enue.

That could also be bad news for Nige­rian work­ers, who may lose their jobs as firms take on all means in cut­ting down cost in or­der not to worsen the hit al­ready felt from the slow­down of eco­nomic activities.

And for those work­ers who do not re­ceive sev­er­ance pay, the fi­nan­cial im­pact could be highly dev­as­tat­ing, ex­cept oth­er­wise a fis­cal stim­u­lus by the govern­ment to cush­ion the ef­fect, ac­cord­ing to an­a­lysts who spoke to Busi­ness­day.

“While we ex­pect fis­cal and mone­tary au­thor­i­ties to pro­vide some stim­u­lus and aid pack­age to af­fected busi­nesses, we still ex­pect the im­pact of the COVID-19 pan­demic to be se­vere,” said Ay­orinde Akin­loye, eq­uity re­search an­a­lyst at CSL Stock­bro­kers.

“Un­em­ploy­ment would def­i­nitely see a sig­nif­i­cant climb par­tic­u­larly in vul­ner­a­ble in­dus­tries like air­lines, leisure and in­dus­tries with dis­cre­tionary prod­ucts be­cause rev­enue will suf­fer sig­nif­i­cantly,” Akin­loye said.

He ex­plained that while sim­i­lar de­vel­op­ments have been seen in ad­vanced economies like Canada re­port­ing job­less claims of over 2 mil­lion peo­ple and the Fed ex­pect­ing un­em­ploy­ment to reach 30 per­cent, Nige­ria might be worse, reach­ing 40-50 per­cent lev­els.

Al­ready as of 2018, some 20.9 mil­lion peo­ple were re­ported to be un­em­ployed. That’s al­most the en­tire pop­u­la­tion of the coun­try’s West African neighbour, Ghana. An­a­lysts tip the rate to have al­most dou­bled to 40 per­cent from its pre­vi­ous 23 per­cent lev­els.

Data re­leased by the In­ter­na­tional Air Trans­port As­so­ci­a­tion, the um­brella body for 290 air­lines glob­ally, show that no fewer than 22,ooo peo­ple would be laid off from the avi­a­tion sec­tor alone, as dis­rup­tions to air travel are fore­cast to shave off N160.58 bil­lion from the in­dus­try as a re­sult of a loss of ap­prox­i­mately a mil­lion pas­sen­gers, a move that would fur­ther pres­sure the coun­try’s al­ready bal­loon­ing job­less fig­ure.

But the eco­nomic ef­fect from the coro­n­avirus pan­demic is not just pe­cu­liar to Nige­ria, as the en­tire globe is reel­ing from the out­break which has in­fected over 170,000 peo­ple world­wide and has so far killed more than 6,500.

Both in­dus­trial activities as well as fi­nan­cial mar­kets have cratered, as schools and cul­tural in­sti­tu­tions have closed, sports leagues have sus­pended, flights have been re­stricted, while sates have banned large gath­er­ings, prompt­ing the In­ter­na­tional Mone­tary Fund ( IMF) to fore­cast a con­trac­tion of global growth.

To cush­ion the ef­fect of a down­turn which might spark mas­sive lay-off of work­ers, ma­jor coun­tries have an­nounced fis­cal stim­u­lus for em­ploy­ees of labour. For in­stance, aside from cut­ting down the tax of com­pa­nies, the United State has passed a third leg­isla­tive pack­age aimed at in­creas­ing the un­em­ploy­ment ben­e­fits for all of work­ers to $600 per­week across the board from $385 per week to en­able its cit­i­zens sort through the pe­riod.

But that might not be the case for Africa’s big­gest na­tion, which is suf­fer­ing from both the health im­pli­ca­tion of the coro­n­avirus pan­demic and the fall in oil prices which has fur­ther cast a spell on its fi­nances, said Oluwape­lumi Joseph, head of in­vestors re­la­tions at La­gos-based ad­vi­sory firm, Afr­icaprac­tice.

“While we might not have been able to as­cer­tain what Nige­ria’s un­em­ploy­ment num­ber would look like due to the virus, given that the last time we saw an of­fi­cial num­ber was Q3 2018, draw­ing from the num­bers from ad­vanced coun­tries like Amer­ica, it is safe to as­sume that we would see the same or even more in Nige­ria. As busi­nesses suf­fer, it would have a di­rect im­pact on the un­em­ploy­ment fig­ure,” Joseph said.

He ex­plained that even the fis­cal bill in­tro­duced by the House of Reps, which calls for various mea­sures in­clud­ing a 50 per­cent tax credit to com­pa­nies that have paid their PAYE, might not be able to cush­ion the huge ef­fect on the work­force.

“In other coun­tries, we have seen a ‘ he­li­copter money ap­proach’ given to cit­i­zens di­rectly; Nige­ria does not have the cen­tral repos­i­tory of iden­tity man­age­ment to make that pos­si­ble and this be­comes a chal­lenge since the mar­ginal util­ity of money is con­stant, hence, those who al­ready have will want to re­ceive more,” Joseph added.

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