I do not intend to scare you but by the time President Muhammadu Buhari speaks to us again to either end the lockdown or extend it, many of us will receive sad news: salaries will not be paid. It will not be because our employers are wicked; it is just that companies are closed and money is not made. Companies that have been operating have not done so at full blast and whatever revenue has been earned is bound to be infinitesimal and incapable of footing bills.
You may wonder why companies will not go into their reserves to cushion the effect of the financial dire strait caused by the pandemic and my response is – many companies in Nigeria are like the Federal Government, with severely depleted reserves, or no reserves at all! They are run based on what I see as ‘run-as-you-go’. If they do not earn money in a particular month, surviving the next month will be like a blind man trying to fix thread into a needle.
Our foreign exchange reserves fell to $34.58 billion on April 7. The reserves had $38.53 billion on January 2. No less than $3.95 billion has been taken away from it in the last three months. Oil price has tumbled to an all-time low and, being a mono-economy, we have no choice than to keep dipping our hands into the reserves. Soon, there may be nothing there again as it is the situation for many businesses in the country. Every government since we returned to democracy in 1999 has been mouthing diversifying the economy, but this has always ended up as mere campaign sloganeering. No concrete effort is discernible along this line.
The terrible shape of our Almighty black gold is captured in the words of Dr Sun Xiansheng, the Secretary-General of International Energy Forum: “The global spread of the Coronavirus is creating a demand shock that is impacting the already fragile world energy market balances. Markets are continuing to assess the yet unknown risks of COVID-19 to the global economy as the disease continues to suppress economic activity.
“Low oil prices combined with the inelastic nature of refined product supply and demand is usually a boon to refining margins. However, COVID-19 also impacts downstream profitability caused by erosion in demand. The combination of sustained shocks to supply and demand will cause product inventories to rise to new highs.”
The country this week joined other Organisation of Petroleum Exporting Countries (OPEC) counterparts to cut 9.7 million barrels of supply to raise price and save countries like Nigeria, which depends on oil cash, from starving.
Minister of State for Petroleum Resources Timipre Sylva said the cut in production would enable the rebalancing of the oil markets and the expected rebound of prices by $15 per barrel in the short term. Good as the expected effect of this decision sounds, its fruit will not be immediate and, even if it is, I do not see it translating into helping stop our tears.
There are fears that the country will soon slip into recession. The last time we went into recession, shortly after Buhari took over the reins of power in 2015, we saw hell. Many companies could not pay salaries for months, and when they eventually started meeting their obligations to their members of staff, it was because investors recapitalised. Recession at a time like this is like jumping from frying pan to fire. But it does not look like we can avert it.
From what I can see, it is not only transporters and others who earn daily money that are crying or will cry, salary earners will soon cry when at the end of the month, it is either they get half-pay or they are not paid at all. An employer told me during the week that his employees would be paid half salaries. Only the manager, he said, would get fully paid because she had carved a fresh niche for the business without being prompted.
Amid the Coronavirus madness, street gangs – whose sources of income have been cut off – terrorised residents of various parts of Lagos mainland during the week. They wanted money. They wanted food. The people had to take their destinies into their own hands by keeping vigil against them. I fear what will happen when, at the end of the month, workers do not receive bank alerts notifying them of payment of salaries. Bitterness will spread like wild fire and I pray blood do not flow.
In the First World, many employers have informed their employees that they will receive half of their pay for working from home. But there is a difference: governments have come in to make up the losses. In the United States, for example, every tax payer is getting paid some stimulus package. This covers non-citizens; once you are a legal resident and you pay tax, you get paid some dollars to ease the pain of the loss. If you have children, your kids also get about half of what you are paid. Landlords have also been mandated not to harass their tenants over no-payment or late payment of rents. These may not cover all your losses, but you are not left to bear the losses alone.
Nigeria seems handicapped to offer us real reliefs, except the tokenism that is embarrassingly being shared to those described as the vulnerable. But, in the end, it appears we are all vulnerable, especially salary earners who will in the next two weeks begin to receive the shock of their lives when the bank alerts refuse to come or they come with half or quarter of their pay.
In the next few days, we will further appreciate the fact that our world has changed and continues to change; we will realise that we do not know this world again; and with our cash flow dwindling, we will get to look at things from sombre perspectives.
My final take: We have always needed one another; we will need one another more in the days to come. Whatever many have stored will dry up and there will be little or no cash to restock. With our kind of banking system – with a ‘sick’ credit system – there will be no money to get basic needs. A credit card would have made a difference like it is doing for folks in the developed world.