In the span of a few months, COVID-19 has infected not only health systems, but also the global economy as businesses and industries have been brought to a halt. It has changed our culture–where we once embraced friends, we now see potential disease vectors and stay 6 feet away. It has changed our political systems—countries are erecting borders and turn increasingly inward to find and disseminate rapid solutions to restore a sense of normalcy to panicked citizens.
The economic damage in Africa is just beginning to be felt as cash strapped African governments face imminent debt crises and turn to multilateral organisations for help. At the same time, resource dependent economies are faced with an overnight evaporation of demand for once precious oil and mineral wealth. In a country like Nigeria where pre-crisis, 50% of the population was already living in extreme poverty, one has cause for worry. According to Brookings, Nigeria is on track to add an additional 8 million people to the number of extremely poor by the end of 2020, maintaining its number 1 position globally. Furthermore, a 20% depreciation of the Naira against the dollar (as observed in the parallel market in April) for an import-dependent economy means that for an average civil servant an equivalent of 8 years of wages have been wiped away overnight from a 40-year career. There is cause to believe that this is not the end.
Despite the justifiably prevailing rhetoric of doom, many Nigerians, used to innovating in order to survive will agree with Plato that ‘necessity is the mother of invention’. Faced with very limited options to close a widening fiscal gap as foreign investors flee the capital markets and oil cargo remain at sea without markets, while citizens on land, cry out for costly COVID-19 palliatives, now is the time to reset. Now is the time to let go of the crippling inertia bred from years of easy access petro-dollars that have ballooned to account for circa 60% of government revenues in 2018 according to CBN, a clear diagnosis of the ‘Dutch disease’. This disease has lingered for years in Nigeria and much like COVID-19, there is no easy cure and it can cause far-reaching, multi-systemic damage.
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The COVID-19 opportunity coupled with the global crash in oil prices perhaps gives a window to treat two illnesses at once—COVID-19 and Dutch disease—and save more lives in the long run. With no easy means of creating the much-needed fiscal space to drive development and consequently alleviate poverty, the Nigerian government has already embarked on the right first set of emergency measures aimed at stabilizing, including the well documented IMF loan.
As Nigeria prepares the next set of measures should reinforce shaken systems with the foundations that will allow us to forge ahead with a more resilient and inclusive economy, built to weather inevitable future crises. These should be geared towards tackling critical areas to:
Reform the investment climate so that we can attract not just short term ‘hot money’ investors but also long-term capital inflows
Mobilise domestic capital resources towards investment in areas that will yield the highest development impact
Build public trust in government institutions, for instance, to avoid the situation of COVID-19 patients fleeing government isolation centers
Focus on human capital development in key sectors of education and healthcare so that we can unlock the latent human resource potential of our youthful and dynamic population
Implement policies that promote the optimal level of interconnectedness and self-sufficiency in a global economy, balancing global competitiveness with supply chain stability. For example, policies that stimulate domestic manufacturing in priority sectors coupled with tariff incentives in sectors where localization is not yet practical (eg. manufacturing of specialized healthcare equipment)
Hopefully, the long and exhausting fight with COVID-19 will teach us as a country that you cannot build functional systems overnight and the cost for unpreparedness is great. There’s no better time to innovate than now, by capitalizing on the unifying effect of a joint fight against an inclusive microscopic enemy in COVID-19. In what feels like an increasingly desperate situation, we can start to harness the accelerated creativity and speed to action that this situation has brought, to solve not just this challenge but the greater threat that has lingered for too long. For example, it has been incredible to witness state of the art isolation centers built in Lagos from the ground up in weeks, largely financed by contributions from private citizens. We have seen off-grid energy systems spearheaded by the rural electrification agency rapidly deployed in healthcare centers and vulnerable communities across the country. We have seen private sector organisations innovate in testing and roll out contactless specimen collection booths designed to protect workers against a backdrop of PPE shortages.
Can you imagine if we reframe our minds such that everyone that has come willing to the table to innovate is thinking beyond the current situation and looking at how we can lay foundations that will serve us long after COVID-19? The potential impact will be huge!
Nneka Chime is Associate Principal and Head of the Nigerian Advisory team at CrossBoundary, a frontier market investment firm
