Embrace for Impact, Analysis of the Nigerian Economy Post COVID-19, By Farida Ali Adamu
It all started many thousand miles away from here. In Wuhan, a city bigger than London bursting with life. Humanity has had somewhat a life where tomorrow was certain.
Everything was well engineered and organized to work on its own, like the train engines. If one person or a hundred people died, it wouldn’t stop the engines of this fast paced train of finance, politics, science, and technology. A planet made of continents all interconnected with nothing but technology. Humans have stretched their brains to making somewhat perfect creations using Artificial Intelligence that has made life flawlessly easy. Everyone depends on somebody, and technology directly or indirectly.
This is how we co-existed in a civil society on our own for many decades. In the middle of our busy hectic lives, with plans for the year 2020 an invisible being was created by one of us.. which is now threatening humanity. Humans can no longer interact with one another, material things mean nothing anymore. Covid19 patients cannot see their family or friends. It is a time for survival. Now this has become a puzzle unsolved. Scientist all over the world are bent onto just one thing.
Finding a Cure or A vaccine. A vaccine will mean every human on earth will be subject to this medication for SURVIVAL. BUT THE QUESTION IS WHAT HAPPENS TO US POST COVID19. ARE YOU READY?
Since the onset of Covid19, i have followed very closely how powerful nations were brought to their knees. How the global economy has shrunk and is still is. It all felt like a far fetched fairy tale until a 14 day Isolation was imposed in Nigeria. I went out to restock some items and Abuja wasn’t the city i knew. Desperately people queued infront of supermarkets trying to equip themselves with the most basic things in life, FOOD. This is when the reality sunk in.
Amidst all of this is the 5G technology recently launched in many parts of the world. The western world have for a long time maneuvered ways in which it can shift away from dependency on crude oil for power generation, this is in response to the rapid depletion of the Ozone Layer.
The fast paced desertification in many parts of the world have resulted in changes in the weather, sea levels rising and farmer herdsmen clashing. The 5G will mean more electric cars around the world. In the UK for example, road tax is highly reliant on the size of ones car engine, meaning the amount of Carbon the car emits into the atmosphere. Looks like many people will opt for electric cars to avoid huge taxes and its likes.
Additionally, in Countries like Switzerland many households use thermal energy from the core of the earth, to heat up and also use electro magnetic waves for cooking. Thereby making themselves completely independent of fossil fuel. 5G means increased use of Artificial Intelligence, Smart Homes, Smart Cities, Smart Medical Care, Robots, and the Use of Drones more easily. The impact of the 5G technology will be felt mostly by countries dependent on crude. And this is how…
The visionary President Muhammadu Buhari has made giant strides in ensuring other sectors such as Agriculture are assisted, and Nigeria’s sole dependency on crude is significantly reduced.
Now the question is How will this directly impact the ordinary Nigerian?
Nigeria’s economy which is highly dependent on revenues of crude oil has come to a stand still due to covid19. In addition to this the small informal sector which makes up 50% of Nigeria’s GDP has come to a hold.
Revenue generating agencies have equally come to a hold. Agencies Such as the FIRS, Customs, and NNPC have come to a standstill amidst covid19. Now lets critically analyze the situation; Nigeria basically has to sell crude in order to raise money for capital and recurrent expenditure but crude oil prices have crashed worldwide. Meaning the value of Naira has declined, as no one demands for Naira.
In addition to this, businesses need to be booming for internal revenue generation by the FIRS. Also, Nigerians need to have enough money to continue trade with the world, and this is how customs and the port Authority generate revenue, through imported goods.
House owners will sell off their properties to survive. Prices of houses will drop. People are bound to save less as they fall back on savings to buy already inflated food. This short term increase in spending will mean that banks can no longer have enough money to lend out at a reduced interest rate. So interest rates will rise, and borrowing will fall. The compound multiplier effect of this is that businesses will grow very slowly or even shrink, as demand falls, revenue generation falls, profit margin falls and perhaps they have to cut down expenses by laying off staff. Resulting to an increase in unemployment. So the informal sector will become frozen.
Usually, the government intercedes by injecting money into the economy via capital and recurrent expenditure. As contractors will get paid and they will in turn procure goods and materials from businesses like yours and mine. But in this instance, that the value of Naira has fallen, the world demands for fossil fuels has fallen, it maybe a bit tricky to intercede without going bankrupt itself.
So how can you cushion the impact of Covid19 economic backlash?
Negotiate reduced prices from your suppliers. If this doesn’t work out, find alternative suppliers. Additionally you can also cut down cost by reducing wastage.
Reduce your prices
This will give you an advantage over existing vendors with inflated prices, as less people will be interested in Luxuries.
Save in foreign currency , Real Estate , Gold or government bonds.
This option will come in handy for those with extra cash laying around, by the time the economy picks up, you will be on the lucky side of things.
Increase your social media presence.
Get into partnerships with vendors in a different industry and support each other. Increase online advertising and marketing.
Have several sources of income, for example if you are in the Fashion Industry, invest in The Food industry.
Look inward and less outward
Find suppliers at home, this is because if the naira has fallen you will need to spend more naira in the forex market. On conversion of this, your retail prices will become inflated. You might loose your
customers to your competition. As they find an alternative vendor selling the same thing at a reduced rate.
The last but not the least, before you make drastic decisions for your business, THINK AHEAD! Develop a strategy and plan accordingly.
The Government on the other hand can do very little monetarily but can intervene in other ways to support existing small businesses that have attained a standard in their production. Enterprises in the Fashion, Entertainment, Beauty, Lifestyle, and Perfumery That have reached heights in branding and customer service delivery, That own intangible assets of intelligence in modern business. In cities like Milan, Paris, Zurich, New York and London, they have Boulevards where brand owners rent stores to display their items and this street is a major tourist point for shoppers.
Nigeria is a country bursting with young talented people. Who have the intellectual capacity to run modern businesses but are constantly meeting a financial constraint especially in terms of rent. I strongly feel that the Government can create a boulevard and build shops where business owners can lease at a very subsidized rate or at allocate space initially free for perhaps two years. Additionally, it can build more farmers markets around the country especially in cities like Lagos and the FCT. This grant will enable businesses grow considering that they will no longer need to pay rent. This will go a long way in boosting Nigeria’s GDP and motivating SMEs.
All of this been said, Nothing is this article is intended to instill fear or discredit the ongoing efforts of this Administration but to be an eye opener for business owners, the ordinary Nigerian and ultimately serve as an advice to the Government. This is an economic prediction for the coming months and the possible Impact of the 5G technology in the years ahead. Additionally to wound up as a business is really a terrible idea in times like this. This is because as a brand you have the first mover advantage. More and more small business might spring up in your sector and you will be ahead of them if you make the right decisions today.
Most Importantly Stay Home and Safe.
Farida Ali Adamu, ACCA, The Princess of Tikau. Email: email@example.com