Welcome to our weekly insight on the Nigerian economy. Take a moment to subscribe if this email was forwarded to you, or forward it to a friend!
|
|
|
3 peculiar winners post COVID-19
|
|
|
To download the 45-page Stears Data Macroeconomic Report on: IMPACT OF COVID-19 ON THE NIGERIAN ECONOMY, make a free request to our data advisory team.
|
|
|
“Never allow a good crisis go to waste” - Rahm Emanuel
This was how Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), signed off his newly published paper on Wednesday.
Titled “Turning the COVID-19 tragedy into an opportunity for Nigeria” the document outlined the governor’s policies aimed at ensuring Nigeria becomes a more self-reliant country when the virus is behind us.
However, dissecting the paper is not on our focus for today.
Whether through strategy or luck, the global pandemic has already created short term opportunities for many.
Technology companies are an obvious hotspot. Globally, e-commerce companies like Amazon are hiring 100,000 additional workers to meet demand. Remote working enablers like Microsoft’s workplace collaboration software, has seen its users jump from 20 million in November to 44 million by mid-March. And the story of video-conferencing platform Zoom is already well known. In Nigeria, the likes of Jumia, GIG logistics, and healthcare startups like Lifebank and 54Gene are seizing the day.
But spotting potential beneficiaries requires nuance. It will be a mistake to generalise that all technology companies are on the rise. The likes of Uber and Airbnb that are haemorrhaging customers remind us that there are many exceptions.
Businesses operating in very similar markets have been impacted differently. Compare Spotify (music-streaming) and Netflix (video-streaming). While video streaming has boomed during the lockdown because viewers are home, music streaming has dropped as consumers no longer play their favourite songs on their work commutes or at the gym.
Meanwhile, the Wall Street Journal cited a prediction that there will be major job losses among white-collar professionals such as lawyers & consultants—a sign that the job cuts are now extending beyond the restaurant and retail employees first hit by the lockdowns.
In today’s newsletter, we identify three peculiar groups that could see some benefits in a post-COVID-19 world:
- strict governments;
- the manufacturing sector; and
- Nigeria's poorest
|
|
1. STRICTER GOVERNMENTS GAIN TRACTION
As with every major global crisis, we look inwards and question the status quo or the political systems that govern us.
On this occasion, the world is testing our previous stance on how governments should treat personal freedoms and privacy.
Right now, little else matters more than a government’s ability to deal with tackling the virus. This is the new measuring stick.
Many have argued that governments with a more forceful hand have been more successful in dealing with the crisis. Asian states like Japan, Korea, China, Hong Kong, Taiwan or Singapore with stricter rules have been deemed more successful in “flattening the curve.” Countries like China and South Korea have gone as far as tracking citizens using their mobile phones.
Even with countries that haven’t been cut throat, like Germany, rational and quick decision-making at the highest level of government has been acknowledged as a factor for success.
|
|
Action Man Buhari is playing the field
What has this looked like in Nigeria?
Well, when Buhari decisively announced the lockdown, there was some debate on its legality.
Wole Soyinka argued that it was unconstitutional.
Did Nigerians care about the nuances of separation of powers between federal and state government? Not really.
The collective focus is dealing with the virus as quickly as possible. And if Buhari has to go on TV with the national anthem intro, reminiscence of military era announcements, telling us to stay indoors, then he is being a “good president”.
As a former military man, Buhari has been criticised for falling short of due process. Not long ago, the government ignored court orders and kept Dasuki and Sowore behind bars.
Now in crisis mode, the action style of governing is capable of gaining new fans. A more democratic leader may have done more consultation and law-making with regards to the lockdown orders.
For now, it seems that Baba go-slow is beginning to denounce his nickname.
|
|
2. MANUFACTURING - THE NEW AGRICULTURE
Now, onto a sector. Manufacturing has received a lot of attention since Nigeria started to feel the economic impact of the pandemic.
The CBN has backed the sector with a stimulus package worth ₦1 trillion. The reasoning is that the global shutdown has highlighted the risk involved in relying on foreign imports. And so the sector which accounts for 70% of total imports is receiving protection.
|
|
Apart from the ₦1 trillion package, Emefiele’s recent paper promised extra support to ensure that the sector is further strengthened when we are out of the COVID-19 woods. The CBN will consider an initial intervention of ₦500 billion for “state-of-the-art” machinery and equipment.
The apex bank also plans to “reinvigorate financial support” to the sector by expanding other interventions; as well as a project to get banks and private equity firms to finance homegrown healthcare services.
|
|
Let the shackles loose
The objective is to boost local production.
If achieved, it will allow the sector function without hunting for forex to pay for imports - a much-welcomed relief after its experience during the 2016 recession.
The dollar scarcity dragged the sector from 15% growth in 2014 to -4% in 2016. The industry still hasn’t recovered - growing by only 0.8% last year.
So less reliance on dollars would give manufacturing room to grow.
Within manufacturing, there is also a particular emphasis on pharmaceuticals.
These new policies should improve competition in the sector. Currently, only a few companies are licensed to import and sell to smaller distributors or retail pharmacies. This situation gives companies the power to charge retail companies high prices.
According to Mckinsey, a drug’s manufacturing price can double or triple by the time it reaches patients. By providing support, allowing more companies to produce locally, new competition should drive down prices.
Time will tell if this happens in reality. But given Emeifele’s stance over the last month, and the large sums being discussed, he is certainly taking things seriously.
It’s safe to say that he has swapped his farming hat for a helmet instead.
|
|
3. NIGERIA'S POOR: COUNTED AT LAST
Another group that could see future benefits are paradoxically the worst hit by the economic crisis: Nigeria’s poor citizens.
The lockdown has worsened already harsh conditions for many of Nigeria’s poor. Thankfully the Nigerian government has started to act with several social intervention policies ranging from cash transfers to food provision.
But how exactly does the government get support to those that need it? By finding them.
There is no disputing that COVID-19 is an overall negative for Nigeria’s most vulnerable, but the truth is that, just like our healthcare sector, they have been neglected.
Now they are being counted. And after the lockdowns are done with, the government will have a better idea of who the most vulnerable citizens are and how to reach them.
Before the pandemic hit, Nigeria had a Social Intervention Program (SIP) to protect the poorest in the population. But how much attention did we pay to it?
Conditional Cash Transfers (CCT) are part of the program and pre-COVID-19 there have been conflicting reports on how many people were identified or have received the promised monthly ₦5,000.
|
|
More data, better process
Today, depending on your level of trust, there seems to be some support for identifying and disbursing money to the most vulnerable.
When the government was asked why they aren’t distributing the upgraded ₦20,000 stipend via bank transfers, they replied saying that beneficiaries didn’t have bank accounts.
Given that the poorest are financially excluded, the reply is, in a strange way, reassuring.
The government said it is also ensuring that beneficiaries then open bank accounts.
In terms of qualifying for the transfer, the government has also revealed its formula. It first uses the National Social Register and Bank Verification Numbers (BVN) to check for individuals with an account balance of less than ₦5,000.
This is then complemented with data from mobile phones to find those who historically top up their phone with less than ₦300. The process is still messy, and we are not yet at a point of one version of the truth. Still, we haven’t seen this level of precision in the past.
The programs also are facing more scrutiny than before. The Federal Government terminated two CCT contracts for disbursement in four states (Bayelsa, Akwa Ibom, Abia and Zamfara). The project was called off after a breach of an agreement by the affected contractors.
We didn’t get the full details, but it seems like there was a delay or non-payment by the contractors. Again, in a strange way, it’s reassuring that the government is keeping an eye on contractors.
We know there’s corruption and so not hearing news stories about it is worse than the silence.
The government says it is currently targeting 3.6 million Nigerians. The systems to send money to millions of Nigerians automatically means the government knows more about its vulnerable population.
Using this information to further better their lives even after the coronavirus impacts have subdued will be a significant step forward for the country.
|
|
Same old Nigeria
It’s possible that, as with all things Nigeria, we forget the past. And come the next global pandemic, our healthcare sector is still neglected, and we’ve lost the BVN numbers of the poor in a “fire accident.”
But there’s space to believe that something in the wind has changed.
First, we devalued the naira in record time as soon as oil prices fell and began to put a strain on our reserves. This is in stark contrast to when oil prices dropped in 2014 and the CBN stubbornly ignored calls to devalue until it had no choice.
Second, we’re taking a loan from the IMF. Again, this is something that Nigeria has always been against. Back in 1985 Maj. Gen. Ibrahim Babangida said even though his country needed financial help, he would not accept a $2.4 billion loan from the International Monetary Fund if the Nigerian people opposed it.
Lastly, we have seen Buhari on TV twice in the last month. Wow.
|
|
|
Welcome to our weekly insight on the Nigerian economy. Take a moment to subscribe if this email was forwarded to you or forward it to a friend!
|
|
|
|
|
|
