Perspectives on the Socioeconomic Implications of the COVID-19 Pandemic on Nigerians

 In Blog

Calistus Korinjoh

1 Introduction

On the recommendation of WHO, China and western nations, Nigeria has adopted the suppression strategy, as opposed to the containment strategy, towards managing the health challenge posed by the Covid-19 pandemic. The resulting nationwide or partial lock-downs and social distancing as the main thrust, aim to flatten the curve of infection (reducing the rate of infections), prevent the health system from being overwhelmed, buy time for the expansion of health system facilities and extend the expected period for the discovery of a vaccine. This is clearly a time-buying arrangement. However, going forward, how this time bought is expended will lay bare the capacity of the government to reposition its citizens for a future less forgiving of poor governance.

Aside from the initial supply shock triggered by Covid-19 and the expected slump in demand which will most probably snowball into a recession, suppression as a strategy typically accelerates the externalities of its choice for health management: isolation has positive externalities for health, while for the economy, isolation has negative externalities –generally prolonging the time that the economy is not at capacity.

The strategy however appears skewed in favor of mitigating the health risks and fallout (as a dominant strategy, and compared to the alternative strategy of containment, barring the discovery of a vaccine, it essentially back-loads fatalities). Understandably, perhaps a more moral choice –socially and politically. Thus, from a health point of view the strategy is best suited for Nigeria under the circumstances, given its dismal health system which is now embarrassingly obvious to even the government. However it imposes massive socioeconomic costs on the nation, particularly given that the suppression strategy requires a well-structured welfare system and a government fiscal capacity to mitigate economic impact through welfare support programs for individuals, households and businesses. Covid-19 presents a classic policy choice dilemma.

This paper seeks to highlight some of the socioeconomic impact the Covid-19 pandemic and the adopted management strategy choice brings to bare on Nigeria.

The healthcare system has always been very poor and inadequate in Nigeria (poor facilities, inadequate funding, personnel shortage, etc.). However, the Covid-19 pandemic presents an urgent work environment safety problem which could lead to further reduction in personnel. Given an exponentially hazardous work environment, large numbers of health personnel could leave the sector, either switching to other occupations or where the opportunity presents its self, move offshore to climes that offer safer work environments, insurance and better remuneration. Covid-19 has informed a huge demand for medical personnel globally, with nations jostling to attract more and the best. For example the recent offer of ease of migration to medical personnel from developing countries by the US government.
Successive governments in Nigeria need to appreciate that the health of its citizens (and by extension the efficiency of its health system) is its single most important asset and this requires investing in and protection. Thus, in the immediate circumstance, a national health sector emergency needs to be declared. This would allow the government to take extraordinary steps towards the total overhaul of the sector including legislative amendments where necessary. The current structure which leaves the responsibility of primary healthcare service delivery on sub-national governments simply wouldn’t suffice. Aside from improved government funding, a framework that would encourage private sector participation is critical. For instance, the Federal Government working with the Nigerian Stock Exchange, Securities and Exchange Commission could guide a structured intervention by companies into the sector as part of the social corporate responsibility –at least during the period of the state of emergency- against the current haphazard whimsical practice.
The recent initiative in 2011 by the Nigerian government, Primary Health Care Under One Roof’ (PHCUOR) which aims to improve the performance of key PHC system functions and enable increased coverage of essential quality health series clearly holds the promise of addressing some of the challenges in the sub-sector, however, its effective implementation is bogged down by executive lethargy.

3 Suppression strategy has triggered a supply shock of produce from the farms to urban markets
Thus far, the agricultural sector has been impacted more due to the disruption of the haulage of produce from farm to urban markets as a result of lock-down measures placed on the major urban markets of Abuja, Lagos, Kano and Rivers. This supply shock though a challenge to overcome given an unstructured produce haulage system in Nigeria, can be better managed by exempting haulers from movement restriction. This exemption would eliminate (or at least reduce) the movement costs imposed at check points which eventually translate to higher prices.
Furthermore, for shorter time turn over sub-sectors like animal husbandry, aquaculture, this exemption in movement is critical for their survival.

4 Covid-19 triggered recession threatens to wipe out Nigeria’s minuscule struggling middle class

The expected recession and economic difficulties could lead to an erosion in the value of disposable incomes. As a direct effect, in the face of negative income shocks, one of the first and strongest responses of households with high marginal propensity to consume is to postpone purchase of consumer durables like cars, electronics, etc. Increase in uncertainty is also likely to have a similar effect that works via constraining demand.

Thus, the challenge here is how to preserve the value of disposable incomes. One option to consider is, key economic operators and markets need to be mobilized (particularly those that produce goods that constitute the basic demand basket of consumers) with the aim of supporting incomes through price reductions. For example, telecommunication companies (data and call costs), building construction product produces (e.g. cement), commercial banks (reduction of loan payment totals, charges, etc), can consider this kind of subsidy as against direct cash support to government. Price suppression within a basket of tangible consumables (not simply cash transfers) is perhaps a more effective way of keeping the Nigerian consumer sector alive. But, the initiative needs to come from government and not from suppliers who could then be partners in the enterprise. Also, how this interventions are structured is critical –this is why it has become difficult for the government to see through its (copycat) promise of free electricity to citizens, as Ghana has done.

Federal government loan moratorium package which includes loans extended by Federal Mortgage Bank of Nigeria (FMBN) would offer some relief, but most of the loans extended by FMBN are towards low income housing. Avast majority of middle income housing loans are by commercial banks who are yet to be mobilized to come up with an ameliorative packages.

5 Further pressure to Nigeria’s informal extended family and community based social welfare system.
Social distancing, particularly for the elderly more vulnerable possess a very challenging proposition. Fatality rate of persons aged 70 and over is 3-4 times larger than the average. Nationwide, elderly people live and are cared for by their younger relations. Care homes for the elderly is virtually nonexistent and even taboo. Thus, while Covid-19 suggests the need for specialized care facilities for the elderly, the economics and societal frame simply wouldn’t be able to accommodate it. Nigeria’s healthcare sector needs to begin to evolve towards developing an alternative: more formal structure for support of the elderly especially in urban centers. This can begin as part of the nation’s pension offering. The pension funds are large enough to support the development of this kind of structure.

6 Short to medium term occupation in Nigeria is not likely to be significantly impacted.
Given that a vast majority of the population is engaged in small holder farming activity, and the Covid-19 pandemic is coming up at the beginning of the rainy season –with infection rates and suppression measures mostly impacting the urban areas- farming activity is not likely to be significantly impacted. However, if access to urban markets continue to be a challenge, this could intensify the initial supply shock and dampen subsequent farming activities like dry season farming (Fadama) and eventually the following rainy season farming. This needs to be carefully thought through and perhaps modeled.
Seasonal occupation and occasional occupations, those engaged in sectors like construction, hospitality & catering services, whole & retail trade, and manufacturing are more direct recipients of the Covid-19 shock –given the lock-down. Aside from agriculture, which contributed about 22.12 per cent to nominal GDP in 2019, the trade and manufacturing sectors contributed 15.61 and 11.64 per cent respectively together over a quarter of the nation’s GDP .
Furthermore, aside from Agriculture, Forestry, and Fishing activities, females dominate in the top three sectors where a bulk of the population is engaged (these are, wholesale & Retail trade, repair of motor vehicles & motor cycles, manufacturing, Accommodation and food services). Though, these activities are at an informal level, robust support schemes aimed at supporting these activities would be critical in supporting the workforce and sustaining improvements recorded in female economic independence.

7 School closures will reinforce inequality among individuals, societies and nations:
The closures could disproportionately affect children from poor and low-income societies/families, and given the school feeding programme introduced in Nigeria, this could also have nutrition consequences for kids –considering that many kids receive their daily breakfast and lunch in school. The United Nations estimates, that more than 770 million learners are now being affected by school and university closures. One way to kick-start a home based e Learning program given limited resources is to utilize unspent funds of the school feeding program during the lock-down to support households to access devices. The e Learning scheme should ordinarily run simultaneously with traditional learning when normality is restored. They will still lack computers and electricity.

8 Improvements in telecommunication access and improved teledensity, positions Nigeria to reposition her economy for the now accentuated knowledge economy.
Total number of mobile phone service subscribers approximately 173.7m (active subscribes). Teledensity stands at 91% (meaning for every 10 Nigerians there are 9 active lines) . Nonetheless, bandwidth usage owing majorly to limited access to smart devices (computers, tablets, etc) remains very low. Thus, persuasive consumer finance schemes are required to bridge this gap which can potentially launch Nigeria’s domestic economy towards a knowledge driven paradigm.
Additionally, the major telcos MTN, Glo, Airtel, Etisalat, so far benefiting from improved online and communication activities, have all so far remained conspicuously silent. Given that spending on telecom services is a major component of expenditure for many Nigerians, a relief on costs would go a long way to support individuals, households and businesses.
It is encouraging to note the Federal Government’s decision to incorporate science and information technology as part of the economic recovery effort. This indicates recognition of the importance of science and technology for economic competitiveness and growth post covid-19 and a shift in development thinking.

9 Global recession will reduce inflow of ODA towards providing social intervention in critical sectors.
National planning estimates that, between 1999 and 2007, an estimated 70% of ODA intervention went to the north of Nigeria . A region that records the highest poverty incidence and pummeled by insurgency, banditry, herdsmen assaults and general insecurity. With this inflow now uncertain, the implication on human infrastructure development is expected to be massive. Nevertheless, it is also critical that Nigeria’s National Authorizing Officer (the Minister of National Planning) reviews and greatly enhances the coordination of ODA interventions to improve their effectiveness. It is noteworthy that over 50% ODA over the same period (1999-2007) went towards supporting the health sector, though the actual quality of intervention is doubtful.

10 The global economic recession triggered by Covid-19 will have adverse effects on diaspora remittances, with adverse socioeconomic effect on individuals, families and businesses in Nigeria.
Over 83% remittance inflow comes from Europe and America. A chunk of remittance receipts goes towards subsidizing living cost, supporting education, helping meet health needs. Additionally, remittances support small business start-ups. These are all now shrouded in uncertainty.
Prior to the Covid19 pandemic the CBN has pushed a policy that will ensure that all remittances are converted at official exchange rates before transmission to beneficiaries. This policy has met with stiff resistance; with diaspora individuals seeking alternative ways to send money –taking up more cost and losing money in the process. This has inhibited the flow of remittances. Under the current circumstances, the CBN may need to reconsider this policy stance vis-à-vis the cost on the economy of stifling the flow.

11 The Covid-19 triggered recession will also negatively impact Nigeria’s narrow, commodity based non-oil export trade sector.
An estimated 50% of our non-oil export goes to Europe and North America. Italy alone accounts for and estimated 18% of non-oil export –mainly hides & skin . With Italy, much of Europe and America greatly impacted by the pandemic and likely to go into recession, it is only expected that Nigeria’s non-oil export –and indeed the agricultural sector- will be negatively impacted. As an initial response the Federal Government, with strong private sector involvement could reintroduce commodity marketing boards to protect farmers from the negative impact of price and demand decline and also ensure more effective international marketing of produce. Subsequently though, at least semi processing should be the focus to enhance the value of commodities before export.

12 Conclusion
Without doubt Nigeria is headed for a recession and it could very well be relatively deeper than that of 2015. Save for smart policy choices and a more focused management of the economy by governments, the economic challenge posed by covid could snowball into much worse –a depression. Having barely emerged from a recession triggered by a collapse of crude oil prices in 2015, the emergence from a covid triggered recession wouldn’t be anytime soon.
Conceivably, the key challenge being retooling government development operations and initiatives to stimulate economic recovery and growth, without the effortless healthy streams of oil revenues. This will prove especially problematic given decades of over reliance on oil, which has engendered highly inefficient spending in both the public and private sectors. It would be like learning how to walk. Thus, Ngeria is about to be tested in ways like never before; informal social welfare systems, business models/platforms, social organisation, political arrangements. Basically Covid19 heralds a moment of truth for Nigeria.
Summary of core message to policy makers:
• There must be appreciation that the adopted suppression strategy towards managing Covid19, is essentially a time-buying arrangement. How this time is expended is crucial and will determine who Nigeria emerges post the pandemic.

• Human infrastructure health (and education) are key pillars of socioeconomic development and growth. There must be genuine appreciation that, the health of citizens (and by extension the efficiency of the nation’s health system) is its single most important asset and requires investing in and protection –both in terms of physical infrastructure as well as in training, attracting and maintaining personnel. Galvanizing private sector involvement is key.

• There is a critical need for follow-through in organizing (markets/supply chains) and developing other aspects (Agro processing/storage) of the agricultural value chain to help trigger manufacturing as a key means by which significant numbers of people can be lifted out of poverty.

• Its crucial to work with key economic operators and markets to preserve the value of the disposable incomes of segments of society with the highest marginal propensity to consume. This is key to maintaining economic performance, but also, vital towards preserving Nigeria’s informal social welfare system.

• Science and technology (essentially a knowledge driven economy) will be crucial for economic growth and national development. Nigeria can no longer hope to avoid this fact. Nigeria’s favorable teledencity needs to be harnessed and positioned; to infuse knowledge based strategy into socioeconomic interactions – on a national basis and internationally.

• Alternative external inflows (Overseas development assistance, FDI and Diaspora Remmitances) have come under intense pressure and have diminished. Government needs to more strenuously work towards attracting and channeling these funds and other support through more favorable policies and creating a favorable environment.

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