The COVID 19 pandemic is without a doubt a once in a century health crisis that will be with us for some years, even well after a credible vaccine is found and adequately distributed across the world. In addition to the health crisis we also have a global economic crisis which stemmed from the pandemic. It has left every country on the planet socially and economically worse off, with 94 percent of the fortune 1000 companies across the world experiencing COVID 19 disruptions. This has negatively impacted household incomes and employment.
Nigeria in particular is experiencing what many analysts have termed a “Twin Shock”. This refers to the COVID 19 Pandemic and the Oil Price Shock. Due to Nigeria’s oil dependent economy, the reduction in demand for oil and consequent fall in oil prices due to the lockdowns in several countries, affected the country’s net oil revenue as well as its budget and foreign reserves. Furthermore, Nigeria’s dependence on imported goods also made the economy more vulnerable than most. Global supply chains have been affected as a result of the pandemic. This means that Nigeria is unable to access much needed commodities such as spare parts, pharmaceutical supplies and other manufactured goods which mostly are imported from China.
Foreign investment in the country has always been a crucial part of Nigeria’s economic development plan. The global economic crisis has affected this as well. The most recent example of this is the decision of Shoprite to pull out of Nigeria. According to the company, it is considering a sale of the majority or all of its stake in Nigeria because it is re-evaluating its operating model. This may not be too much of a set-back for middle and upper class Nigerians (the main consumers of the Shoprite brand) as they will survive and move on to other supermarket brands. However, it is a different story for many Nigerians who are employed by the company. Shoprite has been investing in Nigeria for 15 years and employs more than 2000 people, most of whom are Nigerians. We must also consider the Shoprite supply chain and the people employed through that process. Shoprite works with Nigerian suppliers, small businesses, delivery outfits and farmers all of whom may lose a steady source of revenue once Shoprite exits Nigeria.
This point brings us to the members of the informal economy (micro and small businesses) who are the bedrock of the Nigerian economy. Globally, the informal economy accounts for 61 percent of global employment. This means that most of the world’s people are employed by the informal sector (International Labour Organization, ILO). In Lagos State alone, the informal economy employs about 5.5 million people out of the 7.5 million people that constitute the states labour force. In 2018, the informal economy was said to have contributed up to 65 percent to the National GDP. This was a rise from 2016 when the sectors contributions were about 41 percent.
The informal sector keeps people fed, productive and out of trouble. Before the pandemic there was evidence that attention was being provided to small and micro businesses by the emergence of micro credit schemes, skills-building programs, mobile money services for the unbanked members of the sector etc. There is no doubt that the Corona Virus pandemic has presented a huge set-back to the advances that were made before 2020. However, with innovative thinking, private sector participation and political will to understand the new and urgent needs of these groups, Nigeria can continue to strengthen its informal sector which will hasten recovery efforts and lead to the needed growth of small and medium businesses.
While the Corona Virus pandemic has presented many challenges, there are opportunities around us. There are new products and services that have become essential items in the COVID era. These include face masks, hand sanitizers, surface cleaning products, and other personal protective equipment, and delivery services, local manufacturing of drugs and opportunities in the digital and education spaces etc. This is the time for government and private sector to work strategically together to empower small businesses to produce and deliver items and services on a large scale that will be sufficient for the nation - especially since borders are closed and supply chains have been disrupted.
Structural changes that will help transition members of the informal economy into the formal economy also need to be established by government. The Companies and Allied Matters Act 2020 (CAMA) is an example of this. The new Act and its provisions are in line with the times and long overdue. CAMA 2020 enables small and medium-sized businesses to register their companies and operate their businesses with ease. Firstly, the new Act has reduced the registration fee for setting up a business. This will encourage registration by those who were deterred by the costs. CAMA 2020 also makes it possible for small business owners to set up a private company with only one shareholder or member rather than a minimum of two persons as previously provided. In line with the digital times and due to the necessity for social distancing, the CAMA Act also makes provision for virtual Annual General Meetings, provision for electronic filing, electronic share transfer and e-meetings for private companies. Furthermore, CAMA provides that certified true copies of electronically filed documents are allowable as evidence and will hold equal validity with the original documents. For many Nigerians this is a step in the right direction for improvement in the business environment.