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Nigeria eases lockdown to encourage economic recovery

  • Almost 1,000 new cases in the last week bring total confirmed cases to 2,558 out of 17,566 tests, death toll rises to 87

  • Schools to stay shut, religious gatherings still suspended and inter-state and international travel restrictions remain

  • Reopening of social and economic activity could increase economic activity and/or increase the spread of infections

Nigeria eases lockdown to encourage economic recovery
Nkemdilim Nwadialor
Nkemdilim Nwadialor

Equity Research Analyst, Financials

Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
4 May 2020
Published byTellimer Research

President Buhari has called for a phased easing of the two-month lockdown in Lagos, Ogun and the FCT, which began on 31 March 2020. The restriction on movement within the three states is to be lifted for 14 days from 4 May 2020, within the hours of 6am and 8pm daily. Schools and religious buildings will remain closed within this period and new standards of sanitation are to be imposed on public transport such as compulsory masks and hand-washing facilities.

Nigeria, with a total of 2,558 cases, has the highest number of confirmed infections in West Africa, making it the second most impacted in sub-Saharan Africa and fifth on the continent.

Figure 1: Countries with highest cases of Coronavirus in Africa 

Source: Africa CDC

Figure 2: Coronavirus in Africa (heat map)

The announcement of the easing is arguably ill-timed as Nigeria recorded nearly 2,000 new confirmed cases over the past month, taking total cases from 209 as at 4 April 2020 to 2,558 cases as at 3 May 2020. Food for thought is that Nigeria’s West African neighbour, Ghana, saw its confirmed cases surge to over 2,000 within days of easing its lockdown. 

In terms of distribution, 6 of 36 states account for 80% of all infected cases, with Lagos (44% of total confirmed cases), Kano (13%) and the Federal Capital Territory (11%) as the most affected cities. Currently, only two states (Cross Rivers and Kogi) do not have any confirmed cases of coronavirus.

Figure 3: Covid-19 cases in Nigeria

Source: Nigeria Centre for Disease Control

Figure 4: Distribution of Covid-19 cases by location

Source: Nigeria Centre for Disease Control

The President in his address noted that depressed economic activities during the lockdown necessitated the easing in a bid to reawaken economic activity and prevent further layoffs. He also noted that the stay-at-home order has had a strongly adverse effect on those who rely on daily wages to survive. 

Wage cuts and layoffs during lockdown. A few companies (mostly industrial and services firms) have announced layoffs and /or salary cuts during the lockdown.

Local airlines Air Peace, Arik Air, and Dana Air, whose operations have been completely grounded due to travel restrictions, have all announced varying degrees of staff lay-offs and salary cuts (as high as 80%) in the past month. The tech space is also trying to operate leaner, with Renmoney (local fintech lender) laying off 390 sales agents, following the introduction of new digital channels which rendered some agent functions redundant.

The only bank to announce any downsizing is Access Bank – which has significantly higher operating expenses with a cost-to-income ratio at 70% in Q1 20 vs 59% for our Nigerian bank’s coverage. The bank's CEO announced plans to cut salaries and lay-off some support staff during a team meeting. However, the CBN issued a directive over the weekend preventing any bank from laying off staff within this period.

Nevertheless, we can expect unemployment to increase. Nigeria already has a high rate of unemployment – it stood at 23% as per the most recent unemployment data published in 2018.

High profile deaths reintroduce succession risk. In addition to depressed economic activity, the pandemic also reintroduces succession risk, although this not a new phenomenon and not unique to only Nigeria. The Chief of Staff to President Muhammadu Buhari Abba Kyari died on 17 April 2020 after testing positive for Covid-19. Kyari, who was in his 70s, was an influential figure in the Buhari administration serving on his cabinet since 2015. Similar cases on the continent include West African neighbour Burkina Faso, which lost its first-vice president of the Parliament, Rose Marie Compaore, to the virus. Guinea’s Amadou Salif Kebe (head of the nation’s Electoral body), Sekou Kourouma, (the secretary-general of the government) and Somalia’s Khalif Mum (Minister of State for Justice) are other high-profile political deaths.

Will the easing of lockdown encourage a recovery? The gradual reopening of social and economic activity could increase economic activity or increase the spread of infections, or both. The IMF projects that Nigeria’s economy will contract by almost 3.5% in 2020, a 6ppts drop from the pre-Covid-19 projections. Following exceptionally poor Q1 export earnings (as oil accounts for c70% of exports and contributes c10% to GDP) it is quite unlikely that the easing – which still prohibits interstate travel – would significantly increase economic activity. Evidence shows that the lockdown was not fully observed, as new cases rose by an average of 100 new cases a day over the past two weeks.

Related reading

1) Death by Covid-19 or starvation: Your Hobbesian Hobson’s choice in poorer EM

2) Aged Leaders: Nigeria's Kyari Covid-19 death a reminder of elite succession risk

3) Nigeria deep value or deep trouble

4) IMF approves emergency financing to Nigeria, calls for exchange rate flexibility