Job cuts loom as COVID-19 takes toll on private sector

There are emerging signals that private sector employers may opt for job cuts to survive the effect of the coronavirus pandemic (COVID-19).

Experts in various sectors of the Nigerian economy have given indications that the COVID-19 pandemic has hit the private sector negatively as many firms are struggling to survive.

The pandemic is already affecting businesses in advanced economies such as the United States and United Kingdom.

For instance, the US Department of Labor recently announced that employers cut over 700,000 jobs in March.

While there is yet no current statistics on job losses in Nigeria, the National Bureau of Statistics (NBS) reported that in 2019, Nigeria’s unemployment rate rose to 23.1% and underemployment to 16.6%.

This might be further worsened by the effects of the pandemic, experts say. NBS data indicate that over 20 million Nigerians are unemployed as at 2019 and looming job cuts as a result of COVID-19 will likely worsen the situation.

An economist, Tope Fasua, said the recent partial shutdown of Nigeria’s commercial nerve centre, Lagos, and the administrative headquarters, Abuja, by President Muhammadu Buhari and other movement restrictions across the country as a measure to check spread of COVID-19 is likely to affect the prospects of many businesses.

“Goods are acquiring demurrage at the ports and if the lockdown persists, many importers will simply abandon the goods – and many will go bankrupt,” he said.

On looming job losses in Nigeria, Fasua noted;  “The bankruptcy that is already rolling abroad will soon make a landfall here (Nigeria).”

Meanwhile, the International Monetary Fund (IMF) has predicted that the global economy will fall by 12% due to the impact of COVID-19.

Already, businesses are already feeling the brunt of the pandemic even as the Nigerian economy is bleeding.

The international price of oil has fallen far below the country’s bench mark upon which the 2019 budget was predicated.

“Rating agencies have downgraded Nigeria to B Negative, almost the default zone, and the prognosis is not looking good at all. Foreign investors are listless right now,” Fasua said.

Workers in the aviation sector, hotels, oil and gas as well as the financial services sectors are likely to be affected the most.

Key employers in the aviation sector have asked some of their staff to proceed on compulsory leave without pay pending when the situation improves.

An employee of a top hotel in Abuja said that they were asked to go home without details of what to come next. He said they were categorically told that they would only receive half of their salaries in April, and what comes after that would be determined by the prevailing situation in the country.

The employee noted that operations at the hotel have virtually been grounded with no over 95 percent of the rooms now vacant, adding that the future of many of the company’s staff remains uncertain.

Meanwhile, analysts have unanimously argued that banks and other financial institutions will almost certainly need to manage the earnings impact from the sudden COVID-19 pandemic which has forced a near shutdown of economic activities.

Most financial sector players have activated their business continuity plans and strategies for survival.

Analysts at PwC said post COVID-19, banks would need to rethink their balance sheet challenges while managing loan stresses.

They noted that the banks would need to find ways to trim their costs quickly by resetting their revenue outlook and recalibrate for the future.

An analyst said, “The COVID-19 pandemic could be the most serious challenge to financial institutions in nearly a century. As the economic fallout spreads, retail banks will find themselves juggling some big priorities that require concrete steps to reposition now while also recalibrating for the future.

“They’re working to keep their channels open, despite the social distancing advice and supervisory and compliance functions that were never designed for remote work. They’re trying to manage revenue and customer expectations and growing pressure on consumers. And, they need to keep an eye on strategy and brand issues that will define their future, as market forces and customer behaviors potentially change coming out of this crisis,” he said.

These approaches could have implications for jobs within the financial sector, many have feared.

But the National President, Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), Oyinkan Olasanoye, has faulted the assumption that some banks may retrench workers over the coronavirus pandemic crisis.

Olasanoye said, “Presently, I am not anticipating banks laying-off workers because of this virus, because the moment we have a clearer condition of health, I know there will be a run on the banks.

“Any bank that is going to lay-off people now, they are going to face the repercussion very soon. I am not expecting any bank in Nigeria to lay-off staff. However, there will be effects on the profitability of the banks and there are going to be effects on people that took loans because they cannot go into production,” he said.

Our correspondents observed that there is disquiet in the aviation sector over impending job losses occasioned by the COVID-19 pandemic which has triggered global decline in passenger flights with Nigeria inclusive.

As at March 27, all domestic flight operations were halted in response to the stay-at-home directive by the federal and state governments.

All the domestic carriers operating in the county are now reeling over the huge losses they are likely to incur in the period of the shutdown more so when their facilities (aircraft) would still go for the compulsory checks whether they fly or not.

The fear of aviation workers became real last week when one of the domestic carriers,  Max Air, said it would not be able to continue with the payment of salaries to workers, citing the suspension of flights.

A message sent to Max Air employees read: “It is regrettable to inform all staff that Max Air Ltd will not be able to further provide remuneration for the duration stated by the federal government and if the situation persists, the same applies as well.

“We hope that things will go back to normal after the fourteen days as directed by the federal government, and that operations will resume immediately.

“Accordingly, Max Air Ltd will then review this subject matter and ensure that all staff are compensated as appropriate in line with services rendered.”

The House of Representatives has however intervened, asking the federal government to prevail on the airline and other private employers of labour in the aviation sector to be compassionate with their employees in this difficult time.

It has been projected that the aviation sector in Nigeria would lose 3.5 million passengers resulting in a US$ 0.76 billion revenue loss for airlines and US$0.65 billion contribution to the Nigerian economy.

The International Air Transport Association (IATA) which made the projection said 91,380 jobs are at risk in Nigeria.

The Airline Operators of Nigeria (AON) has however cried out over the development, calling on the government to come to their aid as the COVID-19 pandemic pushes them into near insolvency.

Capt. Nogie Meggison, the Executive Chairman of AON, said this is the time government should bailout the industry to sustain the sector after the COVID-19.

Speaking with our correspondent, the President of Aviation Roundtable, Elder Nogie Megisson, said, “Government should look into all sorts of modalities to support the sector. Since this is a global phenomenon, we should take example from other jurisdictions on how they are mitigating against all industry obligations that face threat of breach, example; lease, rentals, bank loans, insurance, exchange rate fluctuations, scheduled trainings, etc.

The International Air Transport Association (IATA) which recently announced the postponement of its 76th Annual General Meeting (AGM) and World Air Transport Summit earlier scheduled to take place from 22 to 23 June in Amsterdam, Netherlands, said its members were facing hard times.

IATA’s Director General and CEO, Alexandre de Juniac, said: “Our members are in the deepest crisis the air transport industry has ever faced. With much of the passenger business grounded as part of the global fight to contain the virus, many airlines are in a struggle to remain viable.

“On the cargo side, airlines are doing whatever they can to keep global supply chains moving with vital shipments, including those for critical medical supplies. We will come together as an industry when the freedom to travel has been restored and we can focus on air transport’s critical role in driving the economic and social recovery from this unprecedented crisis.”

“The 76th IATA AGM and World Air Transport Summit will be held when it is both safe and practicable to do so,” the association representing some 290 airlines carrying 82 percent of global traffic said in a statement on Friday.

Observers say government guarantees and indemnities would be useful for identified credible operators. They note that airlines are the hardest hit by the impact of COVID-19 pandemic.

“Most workers may lose their jobs at this difficult period but continued training and human capital investment remain the key to job protection, skilled manpower reserve will not waste on the long run, technology skills in particular,” an analyst said.

While workers in the public sector may be less apprehensive on job cuts and payment of remunerations, workers in the private sector are pensive.

Fasua advised the federal government to reopen the economy and adopt alternative approaches to stem the spread of COVID-19.

He said the lockdown must not exceed the initial two weeks announced by the government.

“So NPA is closed, FIRS is closed, no one is collecting any tax and no one can pay. Though the service recorded a 30% increase in collection in the first quarter ended March 2020, the expectations for the rest of the year isn’t looking great… so where will the cash flow come from to pay for anything after a while? Where will Nigerian governments find the salaries of their staff after a while?”

He recommended that Nigeria should set up a war room with smart people to strategize deeply on the next steps to take.

“The expectation that millions of us will fall dead will only be realized when they further impoverish us (or we end up impoverishing ourselves) more than we already are today,” he said.  (Daily Trust)