Some eggheads at the Lagos Business School recently put heads together to think through the economic challenges of COVID-19.
Here are a few tips you can think about:
1. Economy perilous times.
A. Government current account (export vs import) will be high negative. Implications is that there will be low availability of foreign exchange leading to high demand and resultant devaluation of the Naira
B. Inflation will rise to about 19% given the devaluation and other issues like Government inability to manage it by insisting on defending the Naira to a point where more damage has been done. The implication is decreased purchasing power by citizens.
3. Companies will react by cutting down expenses and the first line is jobs leading to poor spending capacity by the people leading to another wave of poor revenues by companies and resultant bankruptcy. Government does not have bailout capacity and so many companies will go under.
2 Management Government will issue more instruments leading to chase by investors. Implications is that banks will continue to give high interest rates as the chase inflation and this will ruin many SMEs
3. Agro sector The only sector that did not go into recession in 2016 will experience tough time because:
A. Farmers are also on lockdown and might not farm to capacity
B. Their key outlets like hotels, eateries, restaurants etc are experiencing tough times and might not patronise them as much.
C. Their capacity to export us lost as countries close borders and there is no internal capacity to preserve them.
Solution
All stakeholders should sit and agree a negotiated way forward where:
1. Government provides incentives like tax break and holidays
2 banks provide moratorium and lower interest rate on loans
3. Companies will stay execution on retrenchment and take some hit on their profit margin.
4. A renewed push for economic diversification to ensure most of consumptions are provided locally and reduce pressure on the Naira
Finally, I would opine that:
1. This is not the time for those expenses acquisitions and holidays. Curtail unnecessary engagement that cost you money: weddings, birthdays, TGIF, side chicks😜 etc
2. Keep as much cash as you can because cash is king and can be leveraged extensively
3. Look for investment opportunities especially for stock and real estate as many holders will want to dump them leading to a glut and low price.
This is the best time to invest in sales and distribution of anything that appears on the dining table because food will be a fierce competitor for a large chunk of every consumer’s wallet.
4. Most importantly take care of your health. This is because it is cheaper to keep fit thank to pay hospital bills due to illnesses and the impairments could cause you your source of income
