With goods worth several billions of dollars trapped in China owing to the outbreak of the COVID-19 virus popularly known as coronavirus, businesses in Nigeria have their backs against the rope as the effect of the virus outbreak bites harder, Babajide Okeowo reports.
From Computer Village in Ikeja, Lagos to Alaba International Market also in Lagos; Ogbete Market in Enugu to the Sabon Gari Market in Kano; the Wuse Market in Abuja to the Tudun Wada Market in Kaduna, stalls are getting empty and there is imminent scarcity of goods all over the country. No thanks to the closure of many factories in China as a result of the outbreak of the Coronavirus in that country.
Chinedu Obiorah is the importer of the popular Valem brand of smartphones and tablets. Since the outbreak of the Corona Virus in Wuhan, a province in China late last year, he has not been a happy man. The reason for his unhappiness is not far-fetched, the goods that he took a loan from the bank to import is still trapped in China.
In an interview with The Nigerian Xpress on the phone, Obiorah lamented that the consignments he has been expecting from China are yet to arrive due to the outbreak of the virus.
“‘My brother, it is not a funny situation at all. I took some loans from the bank to import some of my products and shortly after I placed the orders, the news of the outbreak of the virus filtered in, at first, I thought it was a joke. The goods I took the loan to import has not arrived and I have to repay the banks, where will I get the money to repay the banks now that my goods are trapped in China’ he lamented.
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He is not alone. Mrs. Chika Anyim has also been battling with the effect of the outbreak of the virus on her business. She revealed to The Nigerian Xpress that since the outbreak of the virus, the factory she does business with has been shut down, thereby cutting down productivity, as a result, she has not received new products while her old stock is fast running out. Anyim who deals with the importation of Human hair is unsure of when production will even begin.
“Since the outbreak of the virus, we have not received new products, everything is in a state of limbo, they told me that they can only resume production and shipping goods to us when there is an improvement in the outbreak,” she said.
She further revealed that the effect of this has been serious.
She said: “When you are selling the products that you have and there is no replacement, it is not good. The money is there somehow but you cannot purchase any goods with the money, while the goods that you paid for have not arrived, it does not bode well for businesses,” she added.
Users of electrical and communications products have been told to brace up for increased prices in the product as over $100 million worth of hardware goods belonging to some of Nigeria’s phone and computer vendors are currently stuck in China.
The President, Phones and Allied Dealers Products Association (PAPDAN), Ifeanyi Akubue, said huge stocks, especially phones and computers were stuck in China.
Akubuen in an earlier interview said the coronavirus’ impact was huge on the Nigerian market, as major Original Equipment Manufacturers (OEMs) supplying this market are based in China, and have not supplied products since the outbreak of the virus.
“I can confirm to you that over $100 million worth of goods are currently stuck in China. Most of the OEMs have stopped production. Our stocks are currently depleting. It is a sad situation. The world is confused. We can only pray and take caution,” he stated.
On his part, Alhaji Muhammad Dan Auta, spokesman for a Traders’ Association in the northern Nigerian city of Kaduna said his business has suffered huge losses in the last few months.
“Chinese products are usually found in all parts of Nigeria and in most homes, but now, many business people in the region have canceled their trips to China since the outbreak of the virus, the import of Chinese products has declined noticeably. There are even sporadic shortages” he said.
Speaking more on the impact on the local market, the President, Computer and Allied Products Dealers Association of Nigeria (CAPDAN), Adeniyi Ojikutu, said if the situation persisted, prices of products would definitely rise.
According to him, “the situation has become worrisome because both goods and people are stuck in China. The COVID-19 must be tackled as fast as possible before it crumbles both businesses and humans.”
From the East to the West, South to the North, the effects are biting harder.
Why does it affect us this much?
According to SBM Intelligence, Nigeria depends on China for practically everything. For instance, import from China last year according to data from the Nigerian Bureau of Statistics, NBS hit ₦1.9 trillion in the first half of 2019. The country almost doubled total imports from China, rising by 88% in half-year (H1) 2019.
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Similarly, China’s non-financial investment in Nigeria stood at $3 billion as of April 2019, while China-Nigeria’s bilateral trade volume currently stands at over$15.3 billion.
There is a state of panic in the economy- Expert
Speaking on the effect of the virus outbreak on the Nigerian economy, the Managing Director of Cowry Asset Management revealed that there is a heightened state of panic in the economic space.
“We are going to have a slowdown in business interaction amongst people in the country, we are going to have supply disruptions because most of our raw materials, goods come from China. China is the largest import market for Nigeria, we not only import raw material, we also import semi-finished products and even finished products from China. So, if China is unable to produce, we are going to see a huge and ripple effect on the economy.
Lately, in the equities market, we saw a decline of over two percent which is by far the highest in 2020, you cannot rule out the connection of Corona Virus to this. There is a heightened state of panic in the economic sphere’ he said.
Exchange rates spike, inflation possible if the crisis persists- Stakeholder
Chukwu painted a grim and worrisome scenario of what would likely happen if the outbreak persists.
“We have seen Brent Crude trading at about $50 per barrel down from about $60, we have seen our stock of crude been unable to get a buyer because China is the largest importer of crude oil globally, so with a slowdown in China as a result of factory shutting down, with cities on lockdown, there will be a drop in the demand of crude oil drastically. What this means is that we will have a drop in foreign exchange earnings and if this crisis persists, what you might see is a situation whereby the Central Bank of Nigeria, CBN might not be able to maintain the current exchange rate, if this happens, we could see a depreciation in the value of the naira. If this happens, it will also have an effect on the inflation rate, it will increase the inflation rate beyond what is currently obtainable. The implication can be very pervasive” he added.
How 2020 budget may be affected
The devastating impact of the coronavirus outbreak may even make the Federal Government review its 2020 national budget of N10.95 trillion if statements by the Minister of Finance, Budget and National Planning, Zainab Ahmed is anything to go by.
Ahmed at the end of the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari at the Presidential Villa, Abuja recently, expressed concerns over the sustainability of the budget in the face of the virus outbreak.
“We are concerned because it does have an impact on our revenue and the current crude oil price of 53 percent is below the budget benchmark. What we are doing is that we are studying the situation and when the budget was passed we committed to do a midterm review. We will do the midterm review and if the revenues are so significantly affected, we will have to do some revisions in the budget by way of budget adjustment.
I will want to inform that crude production is now at two million barrels per day and in some days, it has moved up to 2.1 million barrels per day so that in itself will be a cushion. All the same, we are not taking any measures now until we have a reasonable period when we make a review and then we may need to adjust budget though, working together with the National Assembly” she stated.
What we need to do as a country- Chukwu
Johnson, however, believes some positives can be taken from the crisis if the right things are done.
“What we should look at now is to start the journey of the diversification of our foreign exchange earning sources, it is not going to happen overnight, economic development does not happen overnight, it takes conscious efforts. It is time to look inward and move from being a country with huge prospects into a country that has realized her potentials,” he said.
