Uninsured businesses may not recover from Lagos lootings without compensation
Still reeling from the impact of the COVID-19 pandemic, many businesses in Lagos, especially those in the retail sector, without insurance packages may have difficulty recovering from the losses associated with the lootings and destruction that took place on Wednesday.
According to private sector operators, it might take a long while for many of the businesses to recover from the losses incurred from activities of hoodlums that took advantage of the curfew and civil unrest in the state.
Though the House of Representatives had earlier assured that it would appropriate funds for the compensation of the victims of the #EndSARS protests in the 2021 budget, there was no mention of businesses whose enterprises have been adversely affected.
Indeed, many of the stores were just recovering from the effect of xenophobic attacks that took place last year in Lagos.
At least 30.8% of Nigerian adults say they cannot obtain insurance services because of economic constraints, according to a study by EFiNA. 15% of them say they can’t afford it, while 14.9% say they have nothing to insure. Many of these adults form the bulk of owners of small enterprises.
Already, many businesses are struggling to repay their loans financial institutions owing to the impact of COVID-19.
For businesses with insurance, underwriters are already overwhelmed with the impact of COVID-19 and would have to increase their premium for 2021 due to insecurity concerns in the country.
The International Monetary Fund (IMF) noted that the risk of sovereign default is growing across Africa because of higher debt levels and currency risk. At the same time, reduced demand and lower commodity prices have pushed some African countries, particularly those reliant on the export of oil and metals, into deep recessions.
This financial pressure, according to IMF, is also increased by lower financial inflows, as investors postpone their spending and official development aid is limited.
Without adequate compensation, they noted that many businesses might not recover while unemployment is expected to rise further.
Several retail businesses in Lagos Island, Marina, Lekki-Ajah axis and Surulere were major casualties of the carnage in Lagos, while attempts on businesses in Ikeja area of Lagos were prevented by security operatives.
According to PwC estimates, Nigeria is ranked 62nd in the world and has a total premium volume of $1.64 billion. Insurance premium penetration rates of 0.7% of GDP, ranked 87th in world terms, and the average premium per capita of $9.4, reflect a market that is in development.
The COVID-19 has also dealt a great blow to the sector with many businesses operating at lean capacity and unable to pay their premiums.
“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”, Analysts at Cordros note.
Director-General of the Nigeria Employers’ Consultative Association (NECA), Dr. Timothy Olawale stated that the social unrest and attacks on businesses witnessed in some states would definitely affect investment in the country, particularly, when the theatre of these attacks and unrest is the Nation’s Commercial Capital, Lagos.
The NECA boss noted that there will be a drastic reduction of foreign direct investment (FDI) as no investor, local or foreign will put money in any country where its youths are in a long-drawn protest with the government, adding that the negative effects could be direr than a deeper recession.
“Nigeria, already shaken and badly battered by the global crisis brought about by the pandemic is slipping further into devastating youth protests to police brutality, insecurity, killings and lootings and breakdown of law and order in the country. The curfews have not deterred the youth in their fight and resolve to speak up and be heard.
“These mounting issues are already shutting the hubs of businesses in the country and portend negative impact to our poor economic situation. Businesses cannot operate in such disharmony and the heightened insecurity with the collateral damages to infrastructure and property definitely amounts to higher cost of doing business”, he added.
The President of the Lagos Chamber of Commerce and Industry (LCCI), Mrs Toki Mabogunje had warned that the country was beginning to witness various unintended outcomes of the protest, adding that there is a great risk that the situation may degenerate into a case of the complete breakdown of law and order which is certainly not in consonance with the objectives of the #EndSars peaceful protests.
“The #EndSARS protest has been impactful and profound. It has demonstrated in unmistakable terms the power of the people and the potency of the energy of our youth to bring about change. The protest has achieved some significant outcomes given the reawakening that it has generated in reforming the shortcomings in our political governance and the fact that some of the demands of the protesters have been met.
“The Lagos Chamber of Commerce and Industry whose mandate is to be the voice of business and protect the livelihoods of all those in the business community wishes to recommend that the protesters progress to the next stage of civic engagement, which is the dialogue phase of this struggle. This is necessary to reduce the massive disruptions, blockades and barricades around our major cities and interstate highways.
“These actions have been at great cost to the economy and the welfare of Nigerian citizens. It should be noted that our economy is still reeling from the shocks of the Covid 19 Pandemic and struggling to recover from its devastating effects”, the chamber added.
The LCCI, however, urged President Muhammadu Buhari to urgently grant audience to the protesters to deliberate on the way forward and to agree on an action plan for the delivery of agreed outcomes and commit to rapid improvement in governance quality and accountability by effecting necessary institutional, policy and regulatory reforms not only for the police but the entire public sector ecosystem.
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