Silver linings in a global crisis
Warren Buffet has this saying, “only when the tide goes out, do you discover who’s been swimming naked.” It’s a bad thing for those swimming nude, but great for the diligent, clothed swimmer because it’s easy to figure out who to avoid.
A novel pandemic is strange and, in many ways, has been a terrible experience. For most, great macro-challenges like a global lockdown or persistently low oil prices have led to real economic trouble.
However, for young, literate, and middle-class Nigerians, who are about 20% of the total population, it could also be an opportunity. A large and thriving middle-class is essential for building a stable country. By capitalising on the current global crisis, this set of people are positioned to reduce inequality and are necessary for fuelling economic growth. But how?
We can build
Experiencing a recession as deep as the World Bank or International Monetary Fund predictions means unemployment numbers would rise. A survey by the National Bureau of Statistics indicates that 42% of Nigerians who were working before the outbreak left their jobs due to the pandemic.
But unemployment also implies lower labour costs, because large institutions would lay off staff, pause recruitment, and focus on survival.
Such an environment is enough reason to shelve dreams as a young entrepreneur. However, history shows it could be the right opportunity to recruit the talents that big companies have let go.
Nassim Taleb, New York University professor, argues that small organisations have an advantage in periods of crisis. He explains how existing businesses suffer in periods of uncertainty, but small start-ups improve when exposed to stressors. Silicon valley ideas like “fail fast” and “be foolish” are born from embracing uncertainty to improve.
In Nigeria, the last two periods of economic downturns (the Great Recession and 2014 – 2016 Oil Glut) have stellar alumni that include Andela, Aella Credit, Printivo, PiggyVest, Truppr, IrokoTV, and Jobberman. The global list of companies founded during a crisis is even more illustrious – it includes Microsoft, Disney, IBM, and HP.
On the one hand, the benefits of a booming economy include easily obtainable capital from investors; you can expand quicker and afford to carry out more experiments. On the other, building businesses when resources are limited, like in a crisis, forces leaders to prioritise resources, streamline processes, and be more innovative about their profit model.
Starting a company at this moment may seem especially risky, but being lean from the get-go can help shape a company’s culture and set it up for long-term success.
We can own real estate
While rising inflation and exchange rate depreciations threaten to wipe away the value of earnings and savings of many Nigerians, a downturn may also be a good time to buy assets that can provide significant returns in the long term.
It is expected that the recession would reduce individual purchasing power, but create a need for more liquid cash. This presents an opportunity to invest in low and middle-priced homes in anticipation of an increase in demand.
According to house prices on Nigeria Property Center, real estate prices in Lagos Island have dropped 56% in 12 months. Between April and May this year, the average sales price for homes in the area was down by ₦45 million. The value of real estate is currently around ₦77 million, a sharp contrast, when compared with ₦187 million as of July 2019. Abuja’s Asokoro district also records a similar trend.
While no two recessions are the same, in 2016, Nigeria witnessed a considerable drop in property prices. Commercial rents dropped by 20% in Lagos, and a similar drop in the current crisis would be a unique opportunity for individuals to buy real estate in the places they live and work.
Admittedly, this is a relatively expensive space to invest. However, there a range of options like part-ownership schemes that allow individuals to buy real estate at reasonable entry prices.
We have always been online
This pandemic and global recession have highlighted how connected the global supply chain is, and the internet’s usefulness to us.
A decade ago, social media was a plaything, now numerous business transactions occur via these platforms, and people share live events across the globe in a few minutes.
With the pandemic necessitating a global lockdown, hospitality businesses like Eko Hotel had to change their modus operandi. Negotiations are now carried out online, and tactics have shifted from providing room service to food and laundry deliveries across Lagos city.
Kantar’s COVID-19 Barometer, a global study tracking people’s attitudes, behaviours and expectations across more than 50 markets, predicts that e-commerce will outperform retail marketing in the coming year.
The study found almost one in three households had increased their spending on e-commerce during the pandemic period and believed they would increase their future online purchases.
In Nigeria, social media use between 2018 and 2023, is projected to grow by 26% from 29 to 37 million people. In the same period, the number of internet users could double from 92 million to 188 million and cover 85% of Nigerians.
The experience of being online is providing both traditional and entrepreneurial employment opportunities, as seen with the rise of social media influencers and young digital marketers.
As we accelerate to transacting and living more online, being data and internet-savvy post-crisis will add more value to the economy. The ICT sector already contributed 14% of National GDP in the first quarter of 2020, more than the Oil sector (9.50%).
To most economies around the world, including Nigeria, it is already clear that this crisis is heading to a hard crash. Regardless, these potential opportunities can be leveraged with the benefits of being educated, online, and with access to disposable income.