The Nigerian Bureau of Statistics (NBS), recently released the COVID-19 impact report for the month of August 2020, which revealed that 51.3% of Nigerian households, who obtained loan since the lockdown in mid-March, used it to purchase foodstuffs.
According to the report, due to the effect of the pandemic on the livelihood of Nigerians, characterized by loss of jobs and salary/pay cuts, many households have had to take out loans to meet their pressing financial obligations. Interestingly, just as with loans taken before the pandemic, new loans were primarily used for food items, farm and non-farm business inputs.
- About 1 in 4 households were indebted prior to the pandemic, while nearly a third have taken out new loans, since the onset of the pandemic. Poorer households were more likely than richer household to have to repay loans taken before the pandemic.
- The overall share of respondents who are working is back to pre-pandemic levels, though there continues to be some evidence of people moving in and out of work.
- Only 34% of respondents have been working continuously since April/May; while 60% have experienced periods without work, and 6% have not worked at all since the start of the pandemic. Indicating instability in the labor market.
- Over 67% of households reported that their total income decreased, compared to the same period one year ago in August 2019, and this decrease was evident across the three main sources of income (wages, agriculture, and non-farm enterprise).
- The food security situation in Nigeria remains precarious, even as the lockdown restrictions continue to be loosened. The share of households experiencing moderate or severe food insecurity remained high at 68% in August 2020.
A comparative analysis between pre-COVID and the peri-COVID era, shows that 51.3% of the respondents who obtained loans during the lockdown used it for household sustenance as against 40.9% recorded pre-COVID era. Meanwhile, only 3.3% of the respondents made use of the loans for educational purposes, compared to 8.6% before the pandemic. This makes sense since most academic activities were put on hold during the period.
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Nigerians Loan Repayment Concerns
According to the report, 51.9% of the respondents are very worried about the ability to repay the loans, with only 5.9% expressing no worries at all. In a period where loans obtained are basically used for food consumption with no immediate financial returns, repayment of such loans become a reason for worry.
A substantial share of households with both new and existing loans are concerned about repayment, with more than 70% of households reporting that they are either very worried or somewhat worried about being able to repay their loans.
Meanwhile, the share of people who are working has continued to creep back up to pre-crisis levels. This trend demonstrates that the government’s loosening of the restrictions has enabled Nigerians to return to work. The share of respondents working has steadily recovered since June for both rural and urban areas, though the recovery has been larger in rural than urban areas.
While the share of respondents who are working slightly exceeds pre-pandemic levels in rural areas; it continues to lag in urban areas, where 77% of respondents were working last week, compared to 85% prior to the pandemic. This larger increase in rural levels, can be attributed to the seasonality of agriculture, a sector which has experienced the largest recovery in the share of respondents returning to work.
Persistent decline in income
Across the three main income-generating activities considered in the survey (wages, agriculture, and non-farm enterprises), a significant percentage of households reported a decrease in income, compared to the corresponding period of 2019.
Over 67% of households reported that their total income decreased, compared to the same period one year ago in August 2019; and this decrease was evident across the three main sources of income. However, the share of households experiencing a decline in income was highest for non-farm family business activities at 65% of households, compared to 58% for agriculture (household farming, livestock or fishing), and 43% for wage employment.
In a period of economic downturn, where Nigerians resort to taking loans, which is not for investment purposes but rather for food consumption coupled with a decline in household income, puts the repayment of such loans at risk. With inflation at its highest in 29 months, while food inflation stands at 16% as of August 2020, it is evident that the COVID-19 pandemic has dealt a big blow to the country as a whole and the various households. However, it is expected that with the opening of economic activities in the country, businesses will go back to pre-COVID era and the economy will recover from the downturn recorded in the second quarter of the year.
About the survey
This survey is the fourth series of a planned 12 rounds. It was implemented by the National Bureau of Statistics (NBS), with support from the World Bank. It is a monthly survey of a nationally representative sample of 1,950 households to monitor the socio-economic impact of the pandemic and other shocks. The first round (baseline) of the survey was conducted in April/May 2020, during which a federally mandated lockdown was in full effect. The government began lifting restrictions in June, and by the time the fourth round was conducted between August 9-24, 2020, there were minimal restrictions on movement within the country.