A perfect example of the phrase “when it rains, it falls on everybody” is the chaos of the unprecedented Covid-19 pandemic. Businesses have suffered, economies have shrunk, and the objective of the world has largely shifted from attaining more economic streaks, to survival.
Amongst the worst hit, the top contenders are small businesses that do not have the right structures in place to withstand the storm that is the pandemic and, of course, households.
According to data from the National Bureau of Statistics (NBS) in its COVID-19 impact survey on a nationally diverse sample of 1,950 households between April and May, 91% of households across all socio-economic classes are more worried about their finances than getting the virus. 38% of the interviewees lost their jobs due to COVID-19, and 78% of households across all socio-economic classes saw a decrease in income levels. Also, there has been an increase in food inflation.
During the lockdown, the NBS noted that overall food prices rose sharply in April (+1.2% M-o-M) and May (+1.4% M-o-M) from (+0.9% M-o-M) in March. With specific food produce, the data is even more alarming. At the end of May, frozen chicken and local and imported rice prices were up 14% Y-o-Y, 24% Y-o-Y, and 28% Y-o-Y, respectively.
The United Nations World Food Program (UNWFP) had warned that the number of people facing food insecurity might double by the end of the pandemic, and the reasons are not farfetched. Agricultural companies have been burdened with restricted access to inputs, limited mobility, etc., and it was on the back of these challenges that we had predicted that cost of production could double by the end of the year – thereby increasing the cost of food.
On Easing The Lockdown
The reduction in household income as well as the sporadic increase in the cost of food can be visualized as an elastic band that stretches from both ends; it is only a matter of time before it snaps. Nigeria is presently in the extended second phase of an eased lockdown and appears to be heading into phase three (the ‘new normal’) when the current phase ends on the 27th of July. While this has eased the impact on businesses, particularly in the informal sector reopening, the trajectory of macroeconomic indices like expected crash in GDP and overall inflation rate reveal that things will continue to plunge until the end of the year, and will only marginally increase by 2021. For this reason, even amidst the ease of the lockdown in many developed parts of the world, new tranches of stimulus measures are being put in place by governments to augment the impact on businesses and households alike.
Stimulus Measures for Households
Countries across the world had put palliative measures in place to cater to the needs of households. At the start of the full lockdown, the Nigerian government had commenced a social investment programme, which involved food distribution, cash transfers, and loan repayment waivers to 3.6 million households.
More recently, the Central Bank of Nigeria introduced a N50 billion Targeted Credit Facility as a stimulus package to support households and micro, small and medium enterprises that have been affected by the pandemic. Barely a month ago, it noted that it had disbursed over N49 billion of the targeted facility to over 80,000 families and households.
According to the Consumption Expenditure Pattern report by the National Bureau of Statistics, Nigerians incurred N40.20 trillion as household consumption expenditure in 2019 alone. What this means is that if the government is to bear the cost of only 20% of household expenditure in a year, it would require at least N8 trillion.
Whether the stimulus measures have reached the targeted households in need of them is another issue. Needless to say, negligence will only lead to increased crime rate, amongst other negative repercussions.
With the rising cost of food and the lower than par household income, the government will have to periodically come up with new stimulus packages to help households. However, with our resources even more limited than what is available in developed nations, palliative measures are unsustainable. Not only because they will not be able to cater to all the needs of the growing Nigerian population, but because such investments will not lead to any sustainable infrastructural development.
A better approach will be to direct its limited funds into the development of key sectors that ensure survival, even as households leverage the eased lockdown to earn more. In other words, if the government deploys the funds into curbing the rising cost of food at least in the interim, households will be able to buy more with less funds. In addition, the sector will be stimulated, with more jobs created leading to another level of development.