At the backdrop of the destructions of public and private properties and businesses in the wake of the #EndSARS protests, businesses have been counting their losses while economy experts have listed the immediate challenges the crises have thrown up against Nigeria’s struggling economy.
Also replacement cost to Lagos State Government, which is the worst hit by the crises, has been put at N1 trillion, while overall cost to the private businesses have been put at several billions of US Dollars.
According to industry executives and economists the result will manifest in fall in real Gross Domestic Product, GDP, to around 6.91 percent year-on-year, deepening the projected economic contraction this year, disruptions in supply chain and faster rise in inflation.
Other fall outs listed include, widening of fiscal deficit as government is bound to incur extra budgetary expenditure to fix damaged infrastructure, further borrowing and worsening of the nation’s debt burden, further rise in the overall level of poverty and unemployment, reduction in foreign investments, more pressure in the foreign exchange market.
Speaker of the House of Representatives, Hon. Femi Gbajabiamila, on a fact finding visit to Lagos yesterday said the Governor of Lagos State, Babajide Sanwo-Olu, had told him the state may spend up to N1.0 trillion to fix the damages done to infrastructure in the state by the protesters.
He also added that the government would be supported by the legislature to compensate private citizens affected by the destructions.
He stated: “The House of Representatives will do all it can to compensate all those who suffered brutality including policemen that lost their lives in the process.
“Also whatever the house can do in rebuilding Lagos and other states it will do. We are now in a state of reconstruction. What must be done will be done.
“I learnt from the governor of Lagos State that it will take N1.0 trillion to rebuild what had been lost and I asked him what is the budget size of the state he said about N1.0 trillion. You can see we are moving backward.
Chairman of the South West Governors, Rotimi Akeredolu, who was part of the visit, stated, “We are indeed surprised at the extent of damage to lives and properties in Lagos. We will be right to say Lagos was turned into a war zone.
“We are deeply concerned with the ease with which public buildings, utilities, police stations and investments of our people have been burnt despite the proximity of security agencies to those areas.
However, while responding to the total number of government’s buildings burnt among others, Lagos State Commissioner for Information and Strategy, Mr Gbenga Omotoso, told newsmen, “We are still counting. The state is still taking inventories of all that happened and not until all that is concluded we can’t not ascertained for now the total number of burnt structures. But I can tell you it’s very huge.”
Speaking to newsmen, Professor Uche Uwaleke, a financial Economist and Professor of Capital Market at the Nasarawa State University said: “While it may be relatively easy to quantify the explicit costs to government, groups and individuals of properties destroyed in the wake of the end SARS crisis which runs into billions of US dollars, the implicit costs from curfews in several states, movement restrictions, reputational risk and impact on investment cannot be quantified. So also is the loss of precious lives many of whom must be family breadwinners.
“Inevitably, the result will manifest in fall in real GDP deepening the projected economic contraction this year, disruptions in supply chain and rising inflation, widening of fiscal deficit as government is bound to incur extra budgetary expenditure to fix damaged infrastructure. This will entail further borrowing and worsening the debt burden.
“Further reduction in foreign investments should be expected which is likely going to affect external reserves and put more pressure in the foreign exchange market and the exchange rate. The stock market is likely to witness dampening of investors sentiments. Also, the overall level of poverty and unemployment will likely rise.
“Government should move fast to restore normalcy and confidence in the economy including speedy implementation of socioeconomic reforms in line with the demands of the end SARS protesters.”
Managing Director, APT Securities & Funds Limited, Mallam Garba Kurfi, said: “It will be difficult to get estimate for now. We need to get the reliable data for all and sundry but it will not be less than N1.0trillion. The cost should not only consider the properties destroyed but also consider the vehicle that were stopped at Berger Junction in Lagos and their items were taken away including cows and goats and many other things.
“You also consider the man hours wasted through the curfew lockdown for at least four days that people were not allowed to do their legitimate works. Remember Lagos controls at least 50 percent of the economy of the country. Airports were closed for five days which is the hope for the other Airports. The cost is enormous especially to Lagos State because on monthly basis they collect millions of naira from Nigeria Ports Authority, NPA Headquarter, HQ as Pay As You Earn, PAYE, but now with no other option than to move to Abuja since there is space for them to operate and that will be a loss to the State’s internal revenue. The same with many private businesses that were destroyed.
“Remember the damage was not only in Lagos but other parts of the country. Indeed it was a great loss that we never expected since after the civil war. As the economy is recovering from COVID-19, this will really take us back. The destruction is beyond the expectation of the people and that will really set us back for many years.”
Analysts at Fidelity Securities Limited, said: “The EndSARs protest and eventual escalation of the protest would cost the Nigerian economy way more than N700 billion initially estimated by the Lagos Chamber of Commerce. With the current level of destructions, it may take a while for business to run at full capacity as the government as well as the private sector will first have to channel funding into the destroyed infrastructure in a bid to restore things back to the way it was, before even thinking of further improving on the infrastructure.
“Given the level of destruction, more businesses have been affected, more jobs would be lost, and more families would further fall below the poverty line as a result of the looting and burning of business. This is expected to further worsen the economic situation of the country which was already suffering from the impact of Covid-19. The government at this point would need to think out of the box, if it aims to revitalise the economy in the shortest time, else our GDP growth rate may remain negative even into the new year.”
According to Ayodeji Ebu, Senior Economist/Head, Research & Strategy, Greenwich Merchant Bank, the unrest and subsequent 24 hours curfew imposed by the Lagos State Government to restore peace and order may have cost the state at least N54 billion each day that the curfew lasted. He opined that the social unrest would impact negatively on direct investment in the remaining part of the year as well as in the first quarter (Q1) 2021.
His words: “While it may be difficult to estimate the exact loss so far, based on the significant contribution of Lagos State (approximately 30%) to Nigeria’s total Gross Domestic Product (GDP) and as over 50 percent of Nigeria’s non-oil industrial capacity is located in Lagos, the impact of the crisis will be enormous.
“This was further compounded with the 24hours curfew that lasted for about four days. Estimating using the Q2’2020 GDP data and assuming there was a total shut down, each day will cost Lagos alone about N54 billon.”
Continuing, he said: “With Lagos the centre of the civil unrest, which account for 70 percent or $1.1 billion of total capital importation in Q2’2020, we expect this to further impact on direct investment in Q4’2020 and Q1’2021.” He stated that insurance claims would also spike due to the damages on lives and properties across the country.
In their reaction, analysts at Cordros Capital, a Lagos based investment banking firm, said that the economic impact would likely be more severe if the unrest and curfew persist beyond the month of October and estimated that Nigeria’s economic output would contract by 6.91percent year-on-year (y/y) in Q4’20 as a result, translating to negative growth of 4.15 percent y/y by the end of the year.
Giving detailed breakdown of the expected impact, they said: “The transportation, trade, and manufacturing sectors are expected to be the hardest hit.
“On transportation, we expect reduced domestic and international flight operations pending when normalcy is restored.
“Similarly, we expect compliance with curfew directives to hinder the free movement of people and goods across the country, further compounding the woes of the transport sector, which is yet to recover from the COVID-19 induced decline.
“While the manufacturing sector is currently being hampered by FX related issues and an unfriendly business environment, the imposition of curfews will further exacerbate the challenges of the sector.
“For the trade sector, the decline in household consumption brought about by higher food prices and shrinking consumers’ income will cascade into weak wholesale and retail trade in conjunction with the pre-existing supply chain constraints.”
The Electricity Distribution Companies of Nigeria, DISCOs, yesterday decried destruction of equipment it uses to service operations and effective power delivery to thugs who hijacked the peaceful protest.
Speaking to newsmen, the DISCOs said the outcome of such action would result to low revenue from electricity collection bills on power supplied them for October.
“I tell you, assets are been destroyed, which is a significant impact on the industry. The DISCOs are expected to give power and how will it be achieved when our facilities including cables, poles, buildings are destroyed.
“That, however, transcends to money because the DISCOs cannot collect money for bills due to the unrest. Who would want to pay when everybody is angry.
“This means the remittance will be low to the Government on power we have collected. The protest has empowered Nigerians to fight back and the threat to lynch officials collecting bill are high. The properties and cables would have to be fixed on whose account?
“Seriously we are at a crossroad but we have signed an agreement to deliver power and that we would do.”