But for the COVID-19 pandemic, the long-awaited African Continental Free Trade Area Agreement (AfCFTA) would eventually have become a reality, last year, with trading under the scheme originally scheduled to commence on 1st July 2020. Thus the implementation date was postponed to 1st January 2021. The agreement is expected to create a Continental Free Trade Area (CFTA) for goods and services in Africa, liberalise and facilitate the free movement of people, investments and businesses across the continent. The objective of the Continental Free Trade Area (CFTA) is to integrate, diversify and industrialize African economies of about 1.3 billion people with a combined gross domestic product (GDP) of $3.4 trillion.
However, the novel Coronavirus disease (COVID-19) seems to undermine these possibilities through the crippling effects that are causing a global economic crisis. On 11 March 2020, the World Health Organisation (WHO) declared COVID-19 as a pandemic, formally signaling its threat to every country in the world. This threat is not specific and isolated to international health systems, but also developed and developing economies as weak economies in Africa face the severity of the pandemic amidst the measures taken by governments such as border closure, travel bans and lockdowns that directly hinder activities necessary for economic growth and development. At a time when the AfCFTA was in its critical phase of implementation, the total or partial lockdowns enforced by most African countries in the light of global health pandemic (COVID-19) generated socio-economic crisis within the region, that dampened the enthusiasm that followed the continental trade treaty. Chris Paul had a chat with the Director General of the Lagos City Chamber of Commerce and Industry (LCCI), Muda Yusuf, on the impact of the COVID-19 pandemic on businesses and the level of preparedness of Nigeria for the AfCFTA
How are you managing with the pandemic?
Well, it has been challenging, at the level of the households, businesses. This is because the current conditions that we are going through in the economy has a lot to do with the pandemic; both its impact at the global and domestic levels. It has affected quite a lot of variables: economic, macro-economic and social variables. So many disruptions have happened on the back of the pandemic. So, it has made the year, really, a very challenging year. We had thought that by now, we would be exiting the pandemic; unfortunately, we are seeing a resurgence of the pandemic… but we will get over it.
To what extent have you been able to adapt the core objective of the Chamber to this pandemic period we have found ourselves, especially in the area of policy paradigm?
We have been engaging the government. It is not only the Lagos Chamber; other business associations have also been doing same, on the appropriate interventions to cushion the effect of the pandemic. Few months ago, the government came out with the economic sustainability plan. The total value of the content of intervention in that plan was about N2.3 trillion. And the whole idea is to intervene to cushion the impact or the effect of the COVID-19 on the economy and as you know, the economy is already in recession; partly as a result of the Covid 19 pandemic and lately as a contributory factor, result of the EndSARS protest (which happened last quarter of 2020), which also further compounded the problem we were grappling with, with the COVID.
That led the government to intervene, particularly at the sectoral level. For instance, the Central Bank came up with a lot of interventions to support the health sector; the SMEs… the ministry of Finance also came up with some interventions in the area of Tax concessions. Even some States came up with some waivers in the area of Tax among others; in order to cushion the effect. Some of these measures were outcomes of the engagement the private sector have had with the government. At the State level, we also had series of engagement with the State government; with the State Governor in particular. This pandemic impacted different sector, differently.
Some sectors were more impacted than others. For instance, for those who are in Aviation, it was almost a total shutdown of that sector. Hotel, Hospitality and Tourism were severely impacted. Even the private investors in Education were also severely impacted. So, there were specific intervention programs for some of these sectors. The Lagos State government, for instance, set aside about a billion naira to support the Hospitality industry, just to help them get back on their feet. So, these were outcomes of the engagement the private sector have had with the governments at the Federal and State levels.
In order to proactively curb the spread of the second wave, both the Federal and State governments are contemplating returning to the measures applied against the first wave last year. The Lagos State government, as you know, has banned further gatherings at social centers among others. This will affect these same businesses that are barely recovering from last year’s stringent measures against the virus. Do you not think these measures are extreme?
I won’t say the measures are extreme. If any measures were extreme, you would be talking about the measures we had the first time, when we had restriction of interstate movements. Quite a lot of sectors were shut down. Remember the kind of tension it created; especially social tension, because, first of all, we are in an economy that is largely informal and secondly, a lot of people depend on daily income for survival. So, when you shut an economy, completely, for even one week, there is a way it creates a lot of tension in the economy because people have challenges in terms of basic survival. So, I believe the government, this time around; have been a bit cautious not to put in place extreme restrictions. The emphasis, for now, is more about compliance to the COVID protocols, restricting large gatherings and assessing the Covid risks generally, while targeting high risk areas vulnerable to Coronavirus. That is the strategy the government is applying; and so, they are looking at large gatherings, religious gatherings, large conferences, the transportation sector, events and so forth. Largely, the government is looking at compliance: use of facemask and non-pharmaceutical interventions among others.
Talking about compliance, what is your assessment of the level of compliance so far and for businesses, what are the risks?
The level of compliance within the corporate community is still relatively high. By corporate, I mean very structured businesses; formal sector businesses. But in the informal sector bones, compliance is very weak; there are people who still believe this COVID we are talking about is just ‘an academic exercise. It is not really here in Nigeria’ and so forth. This is because to some people, it is still not visible to them. For them, they still can’t believe until it hits them or someone close to them, they still will not believe. So, the level of compliance, in general, has been very weak and that is why I believe government is looking for better framework for enforcement.
There are some legislations or policies that require enforcement for you to get result. It is not enough to depend on moral suasion, persuading people and things like that. In this environment, you need to complement it with enforcement. If you don’t enforce, you may not get result. The government is now scaling up enforcement. The Lagos State government, for instance, is threatening to invoke fines or imprisonment on violators of the Covid protocol. Those measures need to be brought on board to ensure better compliance; because it is in the interest of everybody to ensure we don’t push the government to take extreme position of shutting down the economy entirely; which I do not believe the government is keen to do. As much as is possible, government still want the economy to run, while it manages this Covid challenges.
Looking at the LCCI as an institution, how are you responding to the challenges of the pandemic?
The way we respond is to engage our over 2,000 members, many of which are small and medium scale enterprises. We engage them to manage the challenges of the moment; on the need to use Information Technology (IT) and a whole lot of that is happening. Lots if businesses are now holding their meetings online using zoom, webex and all sorts of platforms through which meetings are being held. We are encouraging businesses to minimize face to face interactions, to minimize holding meetings physically. We are also talking to businesses about strategies on how to survive the moment because these are very difficult times and we have a lot of macro-economic challenges such as foreign exchange, foreign Reserves, problems at the Port etc.
Again, businesses need to go on; because if the businesses don’t go on, a lot of Lives will be at risk. This is due to the fact that this economy is still largely driven by the Private sector. Close to 85per cent survival of people are dependent on Private sector activities. So, we cannot allow the private sector to go down. We encourage businesses to review their business model; to look at how they can forge ahead in the midst of all the challenges Covid has imposed. That is also yielding results plus the fact that people are also looking for opportunities, even, in the pandemic; because they are thriving in this pandemic, better than they used to do before the pandemic. An example is the ICT sector because a lot of businesses are now migrating to the ICT space and a lot is happening in the e- commerce area and so forth. So, there are opportunities, even, in this pandemic and we tell our members not to focus on the challenges but on the opportunities thrown by the pandemic.
That is the kind of engagement we have been having with the private sector, with our members. So, we teach them how to manage the Covid risk and second, how to survive, as a business, within the challenges we currently face at this trying time.
In the last quarter of last year, the federal government opened the Landed borders after over 18 months of closure; which some industry analyst would say it’s preparatory to Nigeria’s participation in the Africa Continental Free Trade Agreement (AfCTA). Do you believe Nigeria is ready for the AfCTA?
The state of preparedness, vary from sector to sector. Those who are in production…first because of the cost of production and the challenges they face especially with infrastructure, their competitiveness level is very low. Therefore, they face high vulnerability risk within the context of the AfCFTA; because at the end of the day, the AfCFTA is more about competitiveness. Trade is all about competitiveness and if you are not competitive, there is no way you can survive in a trading environment because you now have a lot more players. So, it is the fittest that will survive. And when we say the fittest, we are talking about the most competitive in terms of cost and in terms of quality. But if you look at the service sector, our service sector is a lot more competitive.
They are more dynamic, they are more creative and they are more innovative. Look at our financial services sector, for instance, they can stand shoulder to should with any financial institution anywhere in the world; not just in Africa; on account of their use of IT, electronic use of cards…Talk of any technology services you can use in financial services, our banks have them. Look at their configuration, their packaging and everything… if you go to the West African sub region, they have practically dominated the banking environment in those areas and when you see their structures they stand out. It’s like we are teaching them banking, in many of these areas.
So, imagine they have bigger opportunity around the continent, of course, that would be a huge opportunity for them. The same applies to our entertainment industry: our music industry, the movie industry… the Nollywood. Already, you have strong presence in Africa. What about broadcasting… look at what private investors are doing in broadcasting. When I was growing up, it was just NTA and Radio Nigeria we had at the time. But now, look at how many broadcast stations we have. If you go to many of these African countries, if you see the quality of their broadcast, you will realize that Nigeria is far ahead of them. Imagine that our main stations have this opportunity to have presence across Africa, we will easily dominate. It is the same thing with the Print media.
It is the same thing, in many other sectors, including trading. We are fantastic Traders. Anywhere you talk of retail business, you cannot beat Nigerians. And that is why we have strong presence across the entire Africa. Even in Asia, there are environments that are Nigerian environments where they are engaged in the business serious of exporting and importing. That is why our people are having some problems in Ghana; because they have completely taken over the retail sector there. You just can’t compete with Nigerian Traders. So, in the service area we are not doing badly. Of course, we have our challenges in the service sector. But because the constraint of infrastructure does not impact the services as it impacts the Real sector. It is easier for those in services to do a lot. It is amazing what our young people are doing with E-commerce, Instagram, a lot of small, small businesses; and they are doing great things.
So, in terms of preparedness, on the whole, I will not say we are not prepared. But some sectors are more prepared than others. What that tells us now is that for those sectors that are vulnerable, the government needs to do something quickly about them; to support them to be more competitive, to remove the constraints they are facing, to create better policy environment for them and better infrastructure environment for them so that they can also compete; because if they are not able to compete, goods from other parts of Africa will overwhelm them; because they will not be able to survive. A large part, of our Nigerian industrial sector, today, is surviving because of protection. When I say protection, I am talking about high tariffs, high import tariffs or complete import ban. That is what is keeping them alive. If you relax all those protections, many of them may not be able to survive. Not because they are not good investors but because the environment for them is much more difficult.