Economic activities in Nigeria ground virtually to a halt with only businesses in the healthcare and food sectors operating; as the economy stirs back to life Nigerians are counting the costs.
From Small and Medium Enterprises (SMEs) to super oil majors, the novel coronavirus has led to revenue shortfalls and revision of capital expenditures. In the SME space, businesses shut down, some could barely pay workers for March and April salaries hang on a balance. This means many households had it rough during the lockdown.
Ada Osakwe, chief executive officer of Nuli Food Limited said on Channels TV’s Business Morning that although her business offered essential services and hence was allowed to operate during the lockdown, the supply chain was disrupted.
“Our biggest challenge was logistics. Out of our ten stores, we were able to operate only one. We managed to pay March salaries but could afford only 20 percent of April payment to our workers, one salary missed means poverty for many,” Osakwe said. “We also offered foodstuffs to our workers to compensate for the loss of salaries.”
Nigeria’s 41.50 million SMEs account for 84 percent of jobs in the country according to the Ministry of Industry, Trade and Investment. These small to medium businesses account for 48.5 percent of the gross domestic product as well as 7.27 percent of goods and services exported out of the country.
The Central Bank of Nigeria has announced N50 billion credit facility to help SMEs restart their engines post-COVID-19 but some say they have not accessed it and are looking alternatives.
“We are talking to private equity firms and development finance institutions. SMEs need more of grants now not loans and the government has been slow to intervene. The government in Ghana was quick to intervene,” Osakwe said.
Super oil majors are not spared either in the spate of revenue losses. Royal Dutch Shell announced last week a loss in the first quarter of 2020 and cut its dividend for the first time since 1945. The oil major had said it would reduce capital spending to $20bn for 2020 from its previously planned $25bn.
Total said in March that it would cut its capital spending by around 20 per cent to below $15bn, while Eni said it would reduce its 2020 capital expenditures by €2bn, or 25 per cent.
“Oil and gas projects will be delivered later than originally planned due to upstream budget cuts,” Zainab Ahmed, finance minister of Nigeria said.
The Federal Government has reviewed the oil price benchmark for the 2020 budget thrice to provide for the crashing oil prices – from $57 down to $30 and now $20 dollars per barrel. The cost of producing a barrel of oil in Nigeria ranges between $15 – $17 per barrel onshore and $27 to $30 per barrel offshore.
Sunday Thomas, the new Commissioner for Insurance, at the National Insurance Commission (NAICOM) has said the commission is willing to review the recapitalisation programme for operators in the insurance sector.
“It is important that we bear each other’s burdens at this time. Some operators are assisting the states to take care of frontline health workers. Insurance is a key to life and maintaining performance,” Thomas said during Business Morning on Channels TV.
The Commissioner said operators need to protect agriculture and that some are already working with Nigeria Incentive-Based Risk Sharing System for Agricultural Lending. In this light, the Commission is rejigging guidelines for micro-insurance operators
To help businesses cushion the effect of the viral pandemic, the Lagos Chamber of Commerce and Industry has suggested some measures and stimulus packages stem the tide of layoffs and salary cuts. They include one year tax holidays for some industries (healthcare, manufacturing, SMEs and airlines). Six months suspension of the Pay As You Earn (PAYE) tax burden, reduction of cash reserve ratio for banks and support for airlines to cushion operational costs.
