COVID-19 and the perils of being poor in Nigeria’s Informal Sector

While COVID-19 is predominantly a public health crisis, it has severe social, political and economic implications. In fact, it is already threatening the livelihoods of millions of people in Africa, with a disproportionate impact on poor households and informal businesses. It is also redefining the way people interact and engage in the modern world. 

The World Health Organization (WHO) and national governments have put forward several measures aimed at “flattening the curve” and minimising the spread of the virus; from simple hygiene practices like washing your hands to behavioural ones like social distancing and more draconian measures like lockdowns of entire cities. While many have found it easy to comply with some of these new measures, nationwide calls to stay-home and maintain social distancing have amplified the stark inequality that exists in most countries across the world. This is even more evident in developing regions in East Asia and Sub-Saharan Africa where the population is booming, poverty is rife and the economies are largely informal. This article is interested in that intersection of the poor in the informal sector which make up the majority of Nigeria’s population.

The informal economy in Nigeria

Nigeria’s economy and population depend on the informal sector for their survival as it accounts for 65% of GDP according to IMF estimates. The sector contributes to production, income generation and 80% of total employment in Sub-Saharan Africa, according to the International Labour Organization. Informal workers are not just your roadside sellers, vulcanisers, hairdressers, garbage collectors, low-skilled workers but also all other small and medium sized enterprises that are not registered, do not declare their income or pay taxes.

The sector is the engine of most African economies and a crucial source of livelihood for many thereby reducing unemployment rates and poverty in some parts. Even though not all informal workers are poor and not all working poor are engaged in the informal economy, the sector is undoubtedly pervaded by low economic productivity and low wages. Lack of labour legislation, lack of social protection to cushion workers and the fact that informal workers earn significantly less than workers in the formal sector means that more informal workers in Nigeria are poor than not. Because of scale of operations and limited access to a small group of customers, the nature of income in the informal sector is mainly subsistence. This means that workers are unable to save and during periods of uncertainty their earnings become extremely volatile, increasing their vulnerability to economic hardship.

Between a rock and a hard place

Historically, the poor have been hardest-hit by pandemics. Without access to social security, employment benefits or insurance, informal workers are the most affected groups during economic crisis.

The nationwide lockdowns and quarantine measures implemented by many countries on the continent have had a significant impact on economic activity, from local production to consumption. For instance, in the city of Lagos, which is best known for its dense population, chaotic traffic, frenetic commercial activities, bustling streets and nightlife, life is unusually quiet for its 21 million residents. On the supply front, lockdown measures have also led to the shutdown of businesses – shops, malls and restaurants – and disrupted supply chains, preventing some informal workers from earning wages and further keeping some other informal workers who work from home out of work. On the demand front, people are spending less as they are stuck at home and millions of informal sector workers have lost customers, with pronounced ramifications on their income.

Imagine a contract office cleaner who depends on rendering her services to a small firm in Victoria Island for her daily income. Any day she is out of work, there is less money for her to feed her family, pay rent and save some extra cash for other expenses. She has just one choice, to stay home and starve with her family, especially in the absence of social safety nets. The promise of governments to provide relief packages can only go so far, as a marginal proportion of the population will benefit from the palliative.

Stockpiling food is one of the behavioural responses to the lockdowns. Supermarkets and stores are crowded with customers who fill their trolleys with enough food items and household essentials to last them for weeks. However, poor households cannot afford to stockpile even if they wanted because of their limited disposable income, low savings and restricted access to online commerce. This means that they still have to make frequent trips to their local market to feed their households, making them susceptible to being infected. 

To make things worse, the surge in demand due to panic buying has also led to higher prices for basic food items. For instance, the price of a 50kg bag of tomatoes rose from ₦6,000 in February to ₦9,000 in March. So, even if they want to stockpile, the fear of being exposed to the virus and the higher costs of food items would discourage them from doing so. Ironically, even for the few who are able to buy food items in bulk, there is the challenge of storage in the face of the persistent power outage in most African countries.

Social distancing, a luxury few can afford

Many poor informal workers live in dire conditions that make social distancing and self-isolation almost impossible. How exactly do you maintain social distancing in a ‘face-me-I-face you’ housing arrangement? In this kind of environment, residents literally share everything from kitchens to toilets to even clothing hangers. Aside from the lack of space, the dearth of basic amenities such as clean water and functional health facilities available to this demographic amplify their struggles. Also, in many African cities where electricity is an infrequent visitor, the heat will drive people outside their homes and render social distancing efforts useless.

Health Ministries across the continent have also advised that hand-washing with soap and water as frequently as possible for a minimum of 20 seconds is essential in curbing the spread of the virus. But, many households may not have access to these facilities. In communities where water supply is limited, if residents had to decide whether to use a bucket of water to cook a meal for their family or wash their hands, cooking will be a priority.

Furthermore, a greater percentage of informal sector workers, especially the poor among them, have jobs that require face-to-face interactions with their customers and cash-based transactions. And, even for those who work from home, they most likely lack the space and  regular power supply and will now struggle with being able to pay for facilities such as internet access to make working from home conducive.

Another important problem is that most African cities are characterised by poor urban planning. This is further compounded by the existence of overcrowded slums which easily become hotspots during pandemics. During the 2014 Ebola crisis, a study found that Ebola patients living in run-down areas infected 3.5 times as many people as those living in richer areas. The rapid rate of infection of the disease combined with Nigeria’s dense population could lead to catastrophic outcomes for everyone in the coming weeks. 

Let us not forget about the security implications. Without the support of the government, people are less likely to stay home, posing a health and security risk for themselves and society as whole. Unsurprisingly, the extension of the lockdown has already started inciting violence, vandalism and armed robberies in places like Lagos, threatening the safety of residents. 

Flattening the curve

The struggle to contain the spread of COVID-19 pandemic in Nigeria has so far revealed a huge flaw in the labour market – the lack of social protection and benefits for informal workers – that needs to be rectified. To ensure that people stay home, the government has to intervene and take on the role of a ‘welfare state’. The adoption of social protection policies such as cash transfers and unemployment benefits to low-income earners and small businesses is a crucial first step. This will help augment incomes, support poor households and strengthen resilience. It will also enable informal workers to adhere to social distancing practices with reduced anxiety on where their next meal would come from. 

Globally, the most common policy response is the introduction of “stimulus packages” for the most vulnerable. For instance, the US has enforced a $2 trillion package, Germany has put in $800 billion and Canada has announced over $70 billion. Africa needs an economic stimulus of around $100 billion to buffer the economy and its burgeoning population from the impact of COVID-19.

Another feasible option is opening markets on specific days to allow traders to go about their business, but with strict restrictions to prevent overcrowding. India has adopted this approach and it has proven to be effective. Mauritius has also allocated market days to its citizens depending on the first letter of their surname.

In the longer term, African governments should consider ways of improving working conditions and ensuring the legal and social protection of informal sector workers.

We are all being affected by the COVID-19 outbreak. But, the millions of families who were already living in precarious conditions before this will be in a more difficult position. Now more than ever, governments have a responsibility to enact policies that protect those most in need.

A version of this article first appeared on The Economics Blog

Stephannie Adinde

Stephanie Adinde is a strategy consultant. She holds a first-class degree in Economics and Politics, and a masters in Emerging Economies & International Development from Kings College London.

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