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Published On: Fri, Jul 10th, 2020

Economic risks/ structural legacy of COVID-19: Role of leaders

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By Joshua Young

Despite significant medical progress over the last centuries, infectious diseases such as influenza or malaria still represent a considerable threat to society. While some are endemic to specific geographical regions, others can spread, becoming epidemics or pandemics-like the novel covid-19. The dramatic spread of COVID-19 has disrupted lives, livelihoods, communities and businesses worldwide. Currently, about 9000 cases have been confirmed in Nigeria. The continuous increase in the number of infection is generating fear and panic in the society. As a result, economic risks are increasing, health systems are becoming fragile, as insecurity heightens among others. The question worth asking is this: what should our leaders do in relation to economic risk and the structural legacies of covid-19? This write up addresses this central issue in these following areas:
1. Provision of Health care incentives
As we battle this pandemic, leaders should ensure that health care incentives are rolled out and sustained for our frontline workes. According to WHO’s health and population unit, health care incentives boost health workers productivity and raise quality of care which translates to improved health of our population. These incentives will attract, retain and reinforce the morale of our health care workers. WHO’s literature on the incentive schemes in the health care acknowledges that incentives to health care workers are very effective in closing the growing gap between the supply of health care professionals and the demand for their services which is a serious issue facing our leaders seeking to improve national health and development amidst this pandemic. As the greatest asset of a health service is its staff, the implementation of effective incentive packages represent an investment through which that vital asset can be protected, nurtured and developed.
2. Household Support
Empirical evidences from Australia, Italy and other parts of Europe reveal that fiscal stimulus support household sectors from the income perspective. As household income dwindles due to this covid-19 pandemic, it will be accompanied by a fall in household spending. However, an extraordinary support to families by our governments during this period in the areas of cash payout to every citizen above 18 years of age, suspension of payments for electricity in the affected areas and subsidized medical expenses will have a profound impacts on households, thereby offsetting the fall in income. Although none of these actions will would stop a recession, but, they could generate space for households during this present acute portion of this crisis.
3. Firms/Business support
Before the pandemic began ravaging the global economy, a swift fall in the global market price of oil occasioned by the price-war between Russia and OPEC resulted to an increase in Dollar price. This gradually began to cause a strain in most economies, causing the real sector to experience strains in its output and demands. Since the outbreak of the COVID-19 pandemic, there has been a slowdown in economic activities nationally due to critical measures taken by our governments to curb the spread of the disease from quarantine to restrictions in travel, lockdown orders, factory closure and sharp diminution in many service sector activities. These disruptions are the direct channels through which the virus is affecting our businesses and firms. Given the nature of this exogeneous shock, small and medium-sized businesses have been exposed to liquidity issues, while some have closed down. However, the behaviour of this virus is one thing; government reaction is another. The size and persistence of this economic damage will depend on how our leaders handle these disruptions. Hence, our leaders should invoke strong policy response at the firm and business level to contain the level of structural legacies of Covid-19 pandemic by providing business incentives in the form of subsidizing short-term employment schemes, granting of sector-specific financial support for tourism, accommodation and aviation as well as reduction in profit tax with low interest loans for SME’s. These incentives will enable firms and businesses to stay afloat and mitigate the adverse economic impact of this virus. For example, in order to avoid the worst-case scenario of economic contraction of 0.4%, the Indonesian government has rolled out several tax incentives implying that their government will bear income taxes, import taxes, as well as value added tax (VAT) from April 1, 2020, to stimulate the economy. This is a laudable move that our leaders should follow. The time for temporary removal of VAT in Nigeria is now. The implementation of the aforementioned recommended financial packages to our firms cum businesses is one way that our leaders can support these firms and businesses who are affected by this highly contagious novel coronavirus.
4. Support our Financial Institutions
Due to the outbreak of covid-19 pandemic, two challenges are facing financial institutions. While the first challenge is how to address the risk of failure of resources to deliver business services, which is operational, the second entails sustaining the flow of credit amidst dwindling growth. To protect our financial institutions, our leaders should adopt business continuity guidance in order to achieve operational resilience. Those operational guidance could fall into these categories: Ensuring customer and staff safety, assessing telecommunicating capabilities, increase cyber resilience, identify critical financial workers, as well as maintaining clear communication with internal and external parties. Regarding the sustainability of the flow of credit, authorities should maintain the supply of fund to the real economy and support financial intermediation. their should be Rapid and coordinated response to support the real economy, sustainance of liquity , as well as minimization of risk of market fragmentation. Leaders should use monetary and fiscal policy tools to reduce policy rates, expand funding operations and assets purchases. For example, in Europe, authorities have reccommended that financial institutions should not pay dividends and not to buy back shares as a way to provide regulatory flexibility and macroprudential support. This is a move in the right direction. To further address solvency concerns, extraordinary disclosure mechanism should be deployed. Stress tests that aim at revealing financial institution’s true conditions are the most powerful tool. This will boost investors’ confidence.
5. Tackle high Crime rate
The disruptions of normal functions and standard operating procedures occasioned by the various measures taken to contain covid-19 pandemic, couple with crushing poverty, high unemployment, and inequality across Africa have resulted to an increase in crime rate. The Global Initiative Against Transactional Organized crime has mentioned in its policy briefing of March 2020 that covid-19 pandemic has scaled-up crime rate and illicit economies such as street crime, online crime, illegal markets, smuggling, rubbery and burglary, domestic violence as well as terrorism. In the US, individuals were arrested after impersonating doctors and demanding payments for treatment during this pandemic. There is also increase in counterfeit and fraud which is directly linked to this pandemic. Since the beginning of March 2020, over 34,000 counterfeit surgical masks were seized by enforcement authorities worldwide. To contain the spread of the virus, Some criminals have been released from prisons in Nigeria. These people may have perfected the crime that took them to prison and will be ready to unleash mayhem and cause social unrest. This will exacerbate existing tensions, breakdown social cohesion and public trust and lead people to take laws into their hands. However, to curb crime during this pandemic, our leaders should invest in the police. They should recruit the right people, equip them with proper training to meet up with the new challenges and renumerate them well. In this way, social crime could be pro actively checkmated. To tackle fraud and counterfeit shipments of personal protective equipments, their should be an enactment, with the help of our customs, Nigeria Drug Law Enforcement Agency (NDLEA), and other enforcement authorities to investigate, thoroughly monitor to seize shipments of mislabeled, fraudulent, unauthorized or prohibited covid-19 items. In addition, their should be accurate data on all the prisoners released and allowed to mingle with the society in order to effectively monitor and checkmate their violent behavior. Leaders should also assist released prisoners to secure livelihood. This can help them to remain crime free once they go back to their communities, lowering their chances of going back to prison.
Generally, as events unfolds amidst this pandemic, evidences have shown that jobs and businesses will be severely threatened, our financial institutions challenged, households livelihood shattered, crime rate raised, resulting to rising numbers of unemployed, shrunk production capacities, shortfalls in revenue and other important social consequences. To help the people to regain the confidence needed to return to “this new normal”, our leaders should demonstrate some combinations of credible testing, effective quarantine of those stricken and advances in treatments that limit this pathogen’s impact. Remarkable success requires that people view leaders as extraordinarily trustworthy. This means among other things, providing detailed, up-to-date information on the spread of the illness, its severity and the methods available for treatments and control. Leaders have to stick to the facts, and shun politics entirely. Any attempt to colour the facts weakens the credibility of the announcements and delays the point at which confidence returns.
Young is reachable via youngjoshua894 @gmail.com

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