COVID-19 in West Africa: the impacts for agricultural enterprises
Nigeria’s Government strategies to safeguard the population against COVID-19 and minimise its spread have, so far, been largely effective. But what impact is the country’s strict lockdown having on public food access and fresh produce supply to agribusinesses? Emmanuel Maduka, managing director of a processing company for indigenous crops, outlines the challenges he – and other small enterprises – are facing.
On Friday 28 February, the World Health Organisation declared the COVID-19 outbreak a global pandemic, leading governments all over the world to take precautionary measures to strengthen its containment. Nigeria, like many other countries, implemented a complete lockdown, restricting movement in all states for a period of two weeks to curtail the spread of the virus. As of 18 May, this strict measure seems to have been effective; out of a population of over 206 million people, the country has confirmed 5,959 cases and 182 deaths.
On the other hand, the lockdown has resulted in other, economic costs to the nation, as supply chain and logistical disruptions have taken their toll across sectors, especially the agricultural sector. Many businesses started to struggle before the measure came into force as a result of numerous Chinese factories already being closed to contain the virus, and thus, no longer producing and shipping essential product components for Nigerian companies. The full-blown economic impacts, however, only became evident at the national level in mid-March. It is now clear that the disruption to millions of livelihoods is having disparate impacts on households, with low-income families and individuals the hardest hit, and especially those who receive their wages on a daily basis.
A crisis for food and market access
While the government and national organisations like foodclique have led a food relief effort in the country, many families remain hungry, and food prices have risen significantly. Local food markets are the backbone of the agricultural economy and supply the majority of Nigeria’s population. While supermarkets have become more prominent in some cities, it is these local markets that dominate by providing opportunities to barter prices and buy food products in bulk, whilst still catering for individuals who can only afford to buy small quantities of food. The downside to these markets is their limited potential for enforcing social distancing, and as a result, they have been closed under the new restrictions. This has created challenges – not just for food traders, but for many families whose only option now is to access food from the formal retail outlets where prices are often above what they can afford.
In Nigeria, like other African nations, the pandemic has greatly limited agricultural production, processing, and transportation between farmers, industries and markets. While many companies involved in these processes have been classified as essential businesses – and are therefore still able to operate – labour and supply shortages exist across the value chain as a result of compliance with the lockdown directives, and reduced consumer demand. Companies like mine have had to scale back production as access to raw material has become more challenging.
The business need
Small and medium enterprises (SMEs) in Nigeria make up 84% of the workforce but, due to the pandemic, the activity of these businesses has greatly reduced, with revenues falling by up to 90%. One such company is Nuli, a small and growing restaurant that delivers fresh, ready-to-eat meals and juices in Lagos, which was founded by Ada Osakwe in 2015 and operates 10 outlets. Due to national safety restrictions, Osakwe has had to temporarily close nine outlets, leaving just one to cater for online requests and home deliveries. Osakwe’s situation mirrors that of many SMEs facing reduced revenues and, without adequate government compensation, the inability to address mounting costs, including for staff salaries.
In response to this problem, the federal government has announced a ₦50 billion (over £103 million) fiscal stimulus, which will be provided through the Central Bank of Nigeria as an intervention loan for SMEs. However, many businesses don’t feel this is enough and have signed an online petition requesting that the government go further, calling for amounts as much as 260% higher than the current proposal – part of which is suggested to be provided in the form of grants to provide immediate relief.
What are the lessons?
What we can learn from this situation is that SMEs, and especially agricultural SMEs, are extremely vulnerable to business disruption as they have limited credit reserves and little access to risk finance tools, insurance, recovery lending, extension grants and other tools that could improve their resilience. Development actors therefore need to work with private sector partners to create, execute and enact measures that help SMEs keep afloat during times of crises.
There is also the need for government to install necessary supply chain infrastructure, such as a strategic rural-urban rail network, to reduce widespread disruption within transport, aggregation and retail systems when businesses have to close. Similarly, farmers need to be provided with protective equipment to safely continue production and enable a steady flow of food products to avoid price hikes for consumers, and reduce the possibility of civil unrest due to food inaccessibility and unaffordability.
Finally, local markets need to be restructured in a way that retains their unique benefits but, at the same time, addresses public safety concerns. A financial social safety net for citizens should also be created, especially for farmers who play such a key role in these perilous times.