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From pandemic to poverty: Nigeria’s future with COVID-19

Due to the escalating global economic impact of the pandemic, many economies around the globe have witnessed reduced economic activities.

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From pandemic to poverty: Nigeria’s future with COVID-19

The coronavirus disease (COVID-19), which originated in China, has spread to several countries and territories. Many economies around the globe have witnessed reduced economic activities in the first quarter of the year.

Industrial facilities have been shut down in some affected countries, and the global supply chain has been disrupted. Brent crude prices have fallen below $22 per barrel – the lowest since 2003 – due to the escalating global economic impact of the COVID-19 pandemic and the price war between Saudi Arabia and Russia.

Nigeria, the most populous country in Africa, is awakening to a new economic and social reality as a result of the COVID-19 crisis. The country of over 192 million people, recorded its first case on February 28, 2020. Since then, it has recorded about 4,151 cases and 128 COVID-19 related deaths.

While the virus infects people regardless of wealth and social status, the poor will be most affected. In 2019, Nigeria surpassed India in terms of the number of people living in abject poverty. With a recession looming as a result of the pandemic, that number will only grow if proper measures are not enacted.

Living in typically high-density houses, with reduced access to sanitation, and a lack of savings to facilitate self-isolation, Nigeria’s poor are at greater risk of contracting the disease. More so, due to the high cost of health care, greater economic fragility, and higher mortality rates, we are bound to see many more Nigerians fall below the poverty line before this is over.

(READ MORE: Sahara Group donates medical equipment to support fight against COVID-19)

About two months ago, the Lagos State government banned the use of tricycles and bikes. The immediate and most significant impact was the sudden rise in unemployment. The ban affected about 14,000 bike-hailing employees and about 50,000 tricycles and informal motorcycle riders.1 A further strain on incomes resulting from the COVID-19 pandemic will devastate workers.

From pandemic to poverty: Nigeria’s future with COVID-19

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Nigeria’s response to the pandemic

The CBN is providing N50 billion to firms affected by the virus and is increasing credit to the health sector. In addition, the Bankers Committee pledged to provide N3.5 trillion in support to pharmaceutical companies, assist essential health companies in purchasing raw materials, and encouraging local production of drugs. Whilst these stimulants are necessary to spur economic growth, structural policy changes are required to achieve macro-economic stability and long-term sustainable growth.

The average size of the stimulus package as a percentage of GDP in advanced economies is 12%. The US, for instance, is 11%, while in SSA the average stimulus is 0.4% of GDP. Therefore, a stimulus package of 0.34% of GDP in Nigeria is totally insignificant and unlikely to boost the already fragile economy.

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To reduce unemployment and poverty, which are inevitably linked to this pandemic, it is imperative that policymakers provide relief packages tailored particularly to Nigeria’s vulnerable citizens. Nigeria needs to ease the financial burden ensuing from the lockdown, and cushion the aftermath of the pandemic.

(READ MORE: Fidelity Bank debuts ‘SME Forum Online)

Countries’ responses to the pandemic

The US, now the epicenter of the virus, reversed its initial indifference, approved strict external travel prohibitions and some states enacted strict internal restrictions. The President approved a coronavirus relief bill of $2 trillion, which was designed to bolster unemployment benefits for individuals, increase money for states, deliver a huge bailout fund for businesses and send one-off payment of up to $1,200 to every American with an annual income of $75,000 or less.2 This had a direct impact on each citizen including low-income earners and casual workers.

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CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty , From pandemic to poverty: Nigeria’s future with COVID-19

In other countries such as China, the government has instructed that salary payments should be made to workers who are unable to work due to quarantine or illness. Ireland, Singapore, and South Korea have made sick leave available for the self-employed, while in the UK, statutory sick pay will be provided for diagnosed or self-isolating individuals, coupled with a three-month payment holiday for anyone struggling with mortgage or rental payments.3

Taking a look at the relief packages in advanced countries: they are well-tailored to citizens, will have an immediate and positive impact on the standard of living of its citizenry, and they will reduce the knock-on effects on incomes.

The way forward

It is no news that the COVID-19 pandemic will disrupt the global and Nigerian economy in 2020. However, Nigeria can cushion the impact of the virus by introducing measures to protect companies and their workers, most especially the vulnerable citizens, from the impact of the quarantine measures. Such measures could include:

  1. Unemployment benefits
  1. Employment retention
  1. Social assistance benefits
  1. Financial support and tax relief

While these measures will not single-handedly contain the pandemic, it will encourage the citizenry to stay at home, reduce the spread, and also help reduce the level of unemployment, day-light robbery, and poverty ensuing from the pandemic.

 

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Article was written by  Miss Tobiloba Ogunpolu. Ogunpolu is a Senior Economic Analyst with a renowned investment firm

 

 

 

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Columnists

SEC and the proliferation of unregistered investment platforms

The recent move has generated diverse views from stakeholders with some critics classifying this action as irrational.

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Reps raise alarm over N200 billion unclaimed dividends in 2020, the Capital market, Lamido Yuguda assumes duty as new DG of Security and Exchange Commission

According to a circular issued by the Securities and Exchange Commission (SEC), it affirmed its knowledge of the existence of trading platforms that allow investors access to securities listed in other jurisdictions.

The capital market regulator further reiterated the provisions of sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations which state that only foreign securities listed on any exchange registered in Nigeria may be issued, sold or offered for sale or subscription through approved channels to the Nigerian public.

The announcement furthers SEC’s quest to strengthen investor protection, promote transparency in the operations of the Nigerian capital market and ensure all investment transactions are within the regulatory purview of the commission.

READ: Nigeria’s public debt rises to N32.915 trillion as at December 2020

Recently, the capital market regulator introduced a new requirement for the inclusion of the commission’s contact details in all prospectuses or offer documents issued to the general public in a bid to ascertain the genuineness of such securities. Besides, it is often found that the activities of illegal fund managers become prevalent during a financial or economic downturn, making the public susceptible to the juicy yet unsustainable returns promised by these managers.

The recent move has generated diverse views from stakeholders with some critics classifying this action as irrational. They cited the impact of investing in foreign stocks on portfolio diversification and the role of Fintechs in driving financial inclusion among others. On the other hand, supporters of this action argued for the need to reduce the pressure on external reserves especially at a time when the green-back is needed to stimulate economic recovery.

Also, that it helps to safeguard the country’s investing community. We recall that the recent policy by the CBN to close all accounts by Deposit Money Banks (DMBs) and Other Financial Institutions (OFIs) involved in dealing with cryptocurrencies received a lot of backlash from the public.

READ: Why SEC banned investment technology platforms from offering foreign stocks to Nigerians

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On this move, however, we opine that it is still within the legal purview of the SEC to discourage investments in foreign listed securities. Nonetheless, we are aware of the concept of globalization in commerce and thus, there might be a need for a rejig of the Investment and Securities Act 2007, and other related acts to capture current trends and developments in the investment globe.

To avoid backlash going forward, we suggest more public education for clarity with regards to future policy decisions.

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CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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AfCFTA to promote inclusive trades for women and youth in Africa

The SMEs and Startup ecosystem in Nigeria which are dominated by women and youths should equally take advantage of these opportunities.

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Border closure is a threat to forthcoming Lagos Trade Fair - LCCI 

Inclusive economic development remains one of the core elements of both the African Union’s Agenda 2063 and the United Nations Sustainable Development Goals (SDGs). In furtherance of this, article 3(e) of the AfCFTA main Agreement and article 27(2)(d) of the Protocol on Trade in Services specifically mandate State parties to promote gender equality and “improve the export capacity of both formal and informal service suppliers, with particular attention to micro, small and medium-sized; women and youth service suppliers.

With over 60 percent of its population being under the age of 25, Africa is regarded as the youngest continent in the world. This presents both challenges and opportunities for the continent. For instance, in Nigeria, the young population has led to attendant social risks as unemployment nears 40% creating a ticking time bomb. The popular saying is that an idle mind is the devil’s workshop.

On the positive side, however, the young population when properly harnessed will heighten productivity and provide affordable labour which in turn may lead to increase in investment. Nigerian youths just like their counterparts in other African States are known to be very innovative and enterprising. With the right policy and the enabling infrastructures, this energic population can drive the AfCFTA agenda.

Relatedly, women constitute most of the players in the SMEs ecosystem, accounting for nearly 90% of the labour force in the informal sector. A visit to the popular Balogun market in Lagos Nigeria will attest to this fact. No doubt, regional informal trades amongst women and youth within the ECOWAS region have been going on even before AfCFTA. But the new trade deal is meant to open the door to a population of 1.3 Billion people with a combined GDP of USD2.6 Trillion.

This is a huge opportunity and further buttresses the need for gender-sensitive and youth-centric implementation that will ensure sustainable and inclusive growth. As noted by a commentator, women and youth traders are less likely to be equipped with the appropriate skills, technology and resources that would enable them to benefit from trade and trade liberalization as they continue to suffer from invisibility, stigmatization, violence, harassment, poor working conditions and lack of recognition for their economic contribution.

These challenges are made worse by non-tariff barriers such as poor infrastructure, insecurity, lack of access to funds, high unemployment, weak currency, cost of capital, multiple taxations, and other regulatory hurdles.  A clear example of the hurdle being the recent intervention by the agencies of the Federal Government of Nigeria in the areas of FINTECH and Cryptocurrency.

Just last week, the Securities and Exchange Commission issued a circular advising Capital Market Operators to sever ties with platforms that facilitate access to trading in securities listed in foreign markets. While recognizing the role of the regulators to protect the investing Nigerian public and their assets, however, the interventions have been interpreted by many as capable of sending a wrong signal and acting as disincentives to innovation. Again, this brings to the fore the need for Continental Free Trade that fosters inclusiveness with member States initiating policies that create more opportunities for the youth and women.

At the webinar held on 29 March 2021 to mark the signing of the MOU on strategic partnership between the AfCFTA Secretariat and the United Nations Development Programme (UNDP), the AfCFTA Secretary-General Mr Wamkele Mene re-echoed the need for inclusiveness in the AfCFTA implementation with the following words:

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We’ve learnt from other trade agreements in the world. And the lesson to draw is that if a trade agreement neglects the most vulnerable segment of the society, if a trade agreement is perceived to benefit only the multi-national corporations, only the elite, it shall not succeed and it shall not have legitimacy as far as the citizens are concerned. And so that is why I have made it my priority in the implementation of this agreement that there should be shared benefits, there should be shared responsibility with Africans across the length and breadth of the African continent in concrete areas such as affirmative action for women in trade. We are looking at concrete ways in which we can expand the benefit for young people and for women in trade. This is the type of development that we require in order to make this agreement successful. This is the type of development that we require to make sure that the benefits are inclusive.

This Statement coming from the AfCFTA Secretariat is a clear indication of the aspiration towards gender-balanced and youth-sensitive AfCFTA. However, one is not unmindful of the limited role of the AfCFTA Secretariat in the implementation process.  The actual implementation is done at the national and regional level. And this is not to underestimate the very critical albeit complementary role that the Secretariat plays in this regard.

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Therefore, the change must start from each member country and percolate through the regional economic blocs and finally to the entire Africa. Nigeria through its agencies such as the Central Bank of Nigeria (assisted by the private sector) can support inclusiveness by providing AfCFTA-focused low-interest financing, training of the SMEs on cross-border trades as well as other incentives to promote the engagement of women and youth in trades on the continent.

The impact of the COVID-19 pandemic on youth and women-led businesses has widened the economic gap and further impoverished those at the lowest rung on the economic ladder – mostly women and youths. This calls for heightened capacity building in creating new trading and entrepreneurial opportunities for all. With the constant value erosion in the local currency and low-yield environment, entrepreneurs and SMEs in Nigeria can, through cross-border trades, hedge against business risks and equally take advantage of possible arbitrage that exists in different markets within the AfCFTA.

A shift from the business-as-usual approach on the issue of women and youth is needed under AfCFTA to ensure that the objectives are actualized. Although the AfCFTA is not the magic bullet or the cure for all the economic challenges facing the youths and women in Africa, it is hoped that when fully and equitably implemented, it will go a long way to address some of the factors inhibiting the economic growth of these vulnerable groups.

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A recent report commissioned by the UNDP and the AfCFTA Secretariat titled “The Futures Report: Making the AfCFTA Work for Women and Youth” which was published in December 2020 has shown that beyond the projections, numbers and negotiations, the realization of the AfCFTA objectives will depend on decisive actions and collective efforts of the African people. Therefore, concrete measures and investment are needed to ensure that women and youths, who account for the majority of the population, business owners and workforce can be better integrated into the value chains, jobs and opportunities available under the AfCFTA.

As shown by the Report, many entrepreneurs and SMEs across Africa are already taking steps and positioning themselves to benefit from the free trade area and scale their businesses. Some SMEs owners interviewed noted that they are increasing their production lines and sourcing for inter-continental partnership ahead of the progressive implementation of the various phases of the trade regime.

The SMEs and Startup ecosystem in Nigeria which are dominated by women and youths should equally take advantage of these opportunities. Finally, given that trades in goods and services are fast moving into the digital space, the AfCFTA members States need to invest heavily in digital infrastructures and urgently address the high cost of data in Africa which has made it difficult for the majority of women and youths to access opportunities available online.

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