COVID-19: Business Implications and Insight

The coronavirus pandemic – now referred to as a black swan event – has caused unprecedented devastation and disruption to businesses. Across the globe, Governments have shut down borders, issued anti-crowd gathering orders, restricted interstate movements and enforced lockdown to inhibit the spread of the virus. The slowdown of economic activities has led to a sharp decline in trade and investment and raises the risk of an unprecedented economic recession.

Business implications across different industries…

The coronavirus pandemic – now referred to as a black swan event – has caused unprecedented devastation and disruption to businesses. Across the globe, Governments have shut down borders, issued anti-crowd gathering orders, restricted interstate movements and enforced lockdown to inhibit the spread of the virus. The slowdown of economic activities has led to a sharp decline in trade and investment and raises the risk of an unprecedented economic recession.

Nigeria’s 2020 revenue budget is based on an estimated oil production volume of 2.18 million barrel per day at a benchmark price of $57, Exchange rate of N305/$, Projected GDP growth rate of over 2%, and inflation rate of 10.81% – which are now improbable and the change in market conditions has resulted in the downsizing of 2020’s expenditure plan. 

Nigeria’s economy would be directly impacted by the oil price shock, COVID-19 pandemic and lockdown across the country. There are additional complications due to the country’s relationship with China as infrastructure financier and key trading partner. 

With the traditional workplace deserted and businesses forced to work from homes and alternate locations. Business leaders need to be aware of the business implications of the current happenings in order to develop a definite course of action to successfully navigate the uncertainty and disruptions created by the covid-19 pandemic.

This article explores the business implications of the novel coronavirus pandemic to different industries in Nigeria and provides valuable insights needed by leaders to make more informed business decisions.

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The Economy

Business leaders need to understand the direct impact on the Nigerian economy. The COVID-19 pandemic is affecting the economy in two major fronts:

  • Nigeria’s Revenue Projections

Nigeria’s 2020 revenue projection (of N10.6 trillion according to the initial annual budget) had to be reviewed downward by as much as 40 per cent due to the oil price shocks and disruption in economic activities caused by the spread of COVID-19.

The Federal Government of Nigeria also implemented a 20% and 25% cutback in capital and recurrent budget expenditure respectively.. The decline in tax and other sources of National revenue also suggests that State and Local governments would struggle to pay salaries and other related costs. The decrease in Government’s spending power would affect businesses that are closely linked with the Federal Government and State Governments.

  • Changes in Consumer Behavior

Demand will be negatively impacted as consumers and businesses would be compelled to cut spending due to increasing uncertainty and declining purchasing power. Private consumption growth would weaken until individuals are able to evaluate their job and financial security.

The purchasing power of individuals would also be adversely impacted by the significant decrease in remittance from abroad, as a result of the global scale of the pandemic; Financial reports of 2019 show that remittance to Nigeria from diaspora amounted to over $25 billion.

This sharp decrease in purchasing power would cause consumers to cultivate new buying habits. Business owners need to understand the expected changes in order to create scenarios, project demand and cash flows in line with actual market realities.

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Business Implications of COVID-19 Across Different Industries

Business Implications of COVID-19 Across Different Industries


The Nigerian manufacturing sector is import-dependent and the global scale of the pandemic would negatively affect production capabilities. The sector is heavily dependent on the availability of dollars for importation of equipment raw materials. The drop in oil price would lead to further currency devaluations and associated scarcity of dollars, many manufacturers would struggle to get enough forex for importation needs.

The Purchasing Managers index for manufacturing and non-manufacturing sector may also contract due to high cost of inputs and probable inflation; this would negatively affect the already high unemployment rate.

Construction and cement producers would experience an increase in cost of distribution and drop in demand due to moderations in capital expenditures from public, government and private enterprise. The fall in demand may necessitate further reductions in operating margins.

Without decisive and strong Government interventions, the scarcity of forex, delayed shipments, scarcity of intermediate inputs, lack of raw materials and disruption of production schedules would create financial problems for players across the industry. Dispatch of imports and exports would experience significant delays due to the national border closures, travel restrictions and variations in the timeframe that would be required for different countries to emerge from the pandemic.

Also, the construction of the Apapa port roads has been hampered by the pandemic and the port congestion may worsen after the lockdown thereby exacerbating the difficulties manufacturers face in accessing imported products. 

Consumer Goods

The steep drop in demand would adversely affect companies operating on thin working-capital margins. But demand would most likely return as the spread of the virus diminishes.

Brick and mortar retail outlets may be permanently disrupted as business leaders increase investments in digital platforms to market their products and partner with delivery service providers to maximize sales during the lockdown period.

Transportation and Tourism

Tourism, travel, aviation and transportation sector is arguably the worst hit as airlines have experienced a complete shutdown of operations; the decline in demand may continue as fears of the virus would lurk in the hearts of many even after the pandemic.

The aviation industry would need to imbibe additional safety measures into their operations in order to reassure clients and allay their fears.

Tourism and transportation related businesses are experiencing a decline/non-existent demand due to restricted movement of goods and people. These industries may experience long term impact as enterprises may not prioritize travelling even after the pandemic.

Leaders should understand that the losses incurred during the pandemic may not be recovered and develop innovative ideas to generate new streams of income and lead through the crisis


The Telecommunication sector has been one of the few beneficiaries of the economic impact of the pandemic. With over 4 Billion people (50% of the world’s population) in one form of lockdown or another, student homeschooling and companies operating remotely, the demand and reliance on telecommunication has increased significantly. Global trends indicate a 70% increase in internet usage.

Unfortunately, the increased local demand has resulted in a decline in service quality and reliability. Telco business leaders must re-evaluate the technical capability of their critical infrastructure to support growing demand due to the changing consumer behaviour.

Telecomm corporations need to improve customer experience by providing a better quality of service to customers. Quality of service can be improved by leveraging big data to segment customers based on infrastructural requirements and providing customised service bouquets.

There is also the need to shift focus from commercial to consumer segments by expanding existing fibre optic network to provide last-mile delivery to hold holds. Telcos can also create new service offerings specifically tailored to meet the needs of schools and remote workers.

How-to sessions, tutorials, video chat and chatbots can also be used to educate customers on setting up and troubleshooting various products and telecom services.

Oil and Gas

China – the major off-taker of Africa’s petroleum – would continue to experience diminished demand for oil and gas as they continue to combat the effect of the virus. 

Moreover, the declining oil prices have completely eroded the margins of upstream operators, decreasing the impetus to sustain or increase investments in the sector.  

The regulatory uncertainty caused by the impasse of the Petroleum Industry Governance Bill (PIGB) worsens projections for oil investment and the impending deregulation of the downstream sector will compel oil marketers to access forex at the market-determined exchange rate as NNPC would cease to be the sole importer. This intensifies existing operational and infrastructure challenges that currently limit the country’s ability to boost production.

The oil supply chain is further constrained by the declining demand for aviation fuel and PMS as a result of the lockdown. Post COVID-19, increasing emphasis may be placed on gas and renewables as they offer cleaner and more cost-effective energy solutions.

Financial Services

Nigeria is one of Africa’s largest economies, but a large portion of the economy is informal and cash-based. While the Nigerian banking sector would be adversely impacted by the ongoing pandemic, with over 5,000 branches, banks would play a crucial role in stabilizing the economy.

From a liquidity perspective, the pandemic would imply additional drawdowns in commercial and retail credit lines. Banks would experience an increase in restructured loans due to extended tenors and a lower interest rate regime. 

The industry is likely to experience a significant increase in non-performing loans as a significant portion of bank loans go to the oil and gas sector as well as medium and small enterprises, thereby undermining the profitability of institutions across the financial service industry.

At the end of Q3 2019, the oil and gas sector represented about 30% of Nigerian banks’ gross loans and the low oil prices would adversely impact the repayment of credit facilities granted to players in the sector. 

Subdued business activities would negatively affect non-interest revenues and asset quality could deteriorate significantly depending on the duration and severity of the COVID-19 pandemic. However, losses in credit portfolios may be offset by increased lending volume.

Banks would need to cope with the operational constraints of meeting customer expectations without jeopardizing the health and safety of their employees. Banks would also need to improve the effectiveness of their digital service platforms, manage the surge in customer calls, attend to complaints and request for guidance while encouraging the use of their digital channels and capabilities.

Deterioration of IT and other support services because of internal or vendor challenges caused by the pandemic would lead to increased fraud, privacy issues and cyber security risk. Opportunists may exploit confusion, decreased security protocols and vulnerabilities stemming from remote work and government palliatives to perpetrate fraudulent activities.

Banks may also be affected by net-interest-margin compression as rates remain low or fall slightly and decreased fee income due to lower consumer retail spending. 

The banking sector’s access to trade lines from international financial institutions may be adversely affected as depressing global capital flows would put significant pressure on Nigeria’s foreign exchange reserves and exchange rate and negatively impact external trade activities in the local economy.

The pandemic has caused a sharp decline in stock prices, and the Nigerian stock exchange is recording its worst performance since the 2008 financial crisis. This low yield would result in poor returns on investment of pension funds.

The insurance sector may experience a surge from clients with  health, travel and business interruption claims for payouts. 

In general, there would be significant pressure on sales across the entire financial service sector as a result of declining business activities, and industry players would need to significantly improve their digital channels and alternative channels for communication. 


The COVID-19 pandemic has exposed the poor state of health care globally, and Nigeria is no exception. In response, we expect Governments across the globe to significantly increase stimulus and direct investments to the healthcare sector.

The Nigerian Government has mandated the Central bank to develop the infrastructure and capability of the healthcare sector. Pharmaceutical companies will be offered credit lines at heavily subsidised rates to support the procurement of raw materials and equipment needed to boost local drug production in Nigeria. 

There would also be increased need for drugs, test capabilities, health products and services. However, in the short to mid-term, inflation and shortage of drugs are expected due to disruptions in the global supply chain.


Technology companies that support remote work capabilities are experiencing increased demand in collaboration tools such as videoconferencing, instant messaging, team and project management tools as a short term impact of the pandemic.

Technological products such as laptops and smartphones may also experience increased demand as companies acquire infrastructure to support remote work. However, the supply chain disruptions may cause inflation and difficulties in meeting demand.

Large technological companies including Apple and Microsoft have issued warnings of lower-than-expected earnings due to disruption of supply chain and lower consumer demand in China.

Tech consulting firms and system integration services would be negatively affected as most businesses would deprioritize and cut back on new technological projects. However, there would may increased demand for cloud infrastructure services and enterprise software needed to streamline processes.


Every aspect of the startup community value chain is struggling to blunt the impact of the virus, from fundraising to customers to employees and suppliers. There would be increased difficulty in finding the next round of funding as fundraising across various rounds has slowed significantly. However, the level of impact varies based on the segment that the startup operates.

Startups associated with tourism, flight and hotel bookings have been hard-hit; Gig-economy firms and co-working spaces have also experienced a sharp decline.

However, startups in collaborative tools such as videoconferencing firms, gaming, delivery services, streaming and online education content providers are experiencing a significant increase in downloads, engagement and users on their platforms.

Demand for food, grocery, medicine and essential services have also experienced increased demand. However, these startups are also affected by disruptions in the supply chain and may experience difficulties in meeting demand. 

Startups focused on customer acquisition and are yet to start making profit need to ensure liquidity and control cash flow in order to survive. Startups yet to attract venture capital need to capture new markets, increase customer base and market share. Venture-backed startups need to control expenses and seek funds from existing investors.

Across Board…

The number of corporate layoffs would rise considerably, capital expenditure for nonessential services would be cancelled or postponed as organisations continue to monitor the economic landscape. Most businesses would experience reductions in sales, productivity and profits.

In addition to the corporate layoffs, we are likely to witness widespread closure of facilities, stores and branches with some companies opting for mergers and acquisition either to survive or capitalise on the weakened financial state of their competitors.

From a liquidity perspective, businesses may draw credit lines or request for new credit to provide cash and working capital. Key business considerations should be to maintain flexibility by reducing operational cost or revolving credit facilities.

The inability to raise financing would limit the capability of businesses to respond to the pandemic while businesses that are heavily indebted or dependent on external credit may recover much slower after the recession. 

Business Leaders Should Take the Following Steps

Business Leaders Should Take the Following Steps

  • Identify repetitive processes and leverage technology to cut cost and optimize the output
  • Understand and embrace alternative work patterns such as increase in contract staff, outsourcing non-core activities and remote working
  • Identify and mitigate risk in the supply chain, security and business models.
  • Develop multiple scenarios and response plan based on projected impact on business
  • Create a more flexible, adaptable, agile and resilient workforce.

In Conclusion,

For organisations to succeed after the pandemic, business leaders must strike the right balance between short term and long term response strategies. Leaders need to maintain liquidity, streamline processes and cut cost while investing in capabilities and core competencies needed for the future.

Proactive leaders must consider the business implications of the pandemic to their industry, extract unique opportunities that can be harnessed and understand the effect on the entire business ecosystem.

Leaders who see beyond the crisis to understand these implications would shape the future of their industry and emerge stronger rather than adapt to market conditions or return to the status quo.

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