Economic Experts Lament Losses After Looting And Arson Of Properties In Lagos

Economic Experts Lament Losses After Looting And Arson Of Properties In Lagos

Economic experts have lamented the losses of looting and arson of properties in Lagos State.

Recall that between Tuesday, October 20, 2020, and Friday, October 23, some stores (both private and public), were looted, while properties were also destroyed by miscreants who hijacked the nationwide peaceful protest against police brutality dubbed #EndSARS, to unleash mayhem in the state.

With many business owners losing their investments and survival means to the civil unrest in Lagos, economic experts, including Muda Yusuf of the Lagos Chamber of Commerce and Industry (LCCI), Teslim Shitta-Bey of Proshare, Seye Adetunmbi of Capital Market Roundtable (CMR), amongst others have in separate interviews expressed confidence that the looting and arson of properties and stores will negatively impact Nigeria’s economy.

According to the experts, many investors are now skeptical as to if Nigeria is a good investment destination.

Yusuf, LCCI Director, said: “Definitely it will negatively impact on the perception of Nigeria as an investment destination. The scale of the looting and destruction is unprecedented in our recent history. I expected better responses from security agencies to prevent these wanton destructions and lootings. The mayhem and destruction of public and private properties in the last few days were most unfortunate. The loss of lives is regrettable and we empathize with families affected. The escalation was avoidable;

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“It was a case of complete breakdown of law and order. The costs of these to the economy, the government and private entities are huge;

“No efforts should be spared to ensure the restoration of normalcy. It is sad that this is happening at a time when the economy is yet to recover from the devastation of COVID 19;

 “Many businesses were still grappling with the consequences of the pandemic and lockdowns. We should have an urgent discussion around a permanent resolution of the crisis.”

Speaking on the development, the managing editor of proshare, Teslim Shitta Bey  pointed out that looting raises risk profile of doing business in nigeria and raises the cost of business funding.

 “The looting raises the risk profile of doing business in Nigeria and raises the cost of business funding;

 “This, in turn, discourages capital importation (which has already been adversely affected by COVID-19) and would likely equally constrain potential job creation. In other words, looters suffer the consequences of their own actions in what economists might call the fulfillment of ‘Murphy’s law’ or a situation in which what can go wrong can really get worse.”

Proshare’s Shitta-Bey stressed that the principal economic growth impact of the mayhem may include lost work place man-hours nationwide; lost business output and workplace disruptions leading to lost income, buildings and movable assets torched during the riots.

“The buildings would be marked-to-market value rather than book value. The movable assets would be adjusted for depreciation; lost lives, the protesters, police and other casualties;

“This would involve the lost cash flow from the future stream of their earnings adjusted for the country’s average life expectancy; intangible costs exist including the cost of the pain and anguish of a nation traumatized by a war on itself; “It would be a surprise if ShopRite goods were not insured; “If the shopping outlet was insured for riots or vandalism then part of the cost of business recovery would be borne by the superstore’s insurers;

“The cost would likely run into hundreds of millions which would worsen the insurance company’s operating loss ratio and cut 2020 profitability.”

Similarly, CMR’s Adetunmbi said the attack, destruction and looting of shopping malls is bad news for the nation and as such, it will be classified as an unstable state, politically, due to bad governance and poor leadership.

Adetunmbi, who is also Chief Responsibility Officer, Value Investing Limited, explained that it is also a red flag for investors that Nigeria is not a safe place for investment destination, especially in the economic sectors and cities prone to vandalism in the event of an uprising.

“The resultant effect is loss of job, which will have a negative multiplier effect on the economy in the short and long run. Coming when we are yet to get over the effect of the pandemic Covid19 and dwindled oil revenue on the economy;

“It is a tripartite economic misfortune for Nigeria – Collapsed oil revenue, Covid19 pandemic and EndSARS fallouts. It is triple jeopardy for the Nigerian economy.

“We are in for a long haul of economic challenges. Most companies are going to report poor performance in the 2020 financial year;

“Dividend yield earned on some investments will reduce in 2021. “Solution includes being prepared for a rough ride until things pick up again and make necessary adjustments appropriately. “Government should seize the opportunity to block leakages in the system and reduce excessive cost of governance; cut drastically recurrent expenditure on the redundant workforce; and review the overheads on the executive and legislative arms of government.

“There has to be a way to help businesses that were adversely affected by the vandalism during the riots.

“The Federal Government needs to make positive pronouncements and take decisive policy directions that will reassure investors (locally and internationally) that Nigeria is a safe investment destination.”

However, US-based economist, risk & data analyst, Waheed Alabede, revealed that the total long term loss to Nigeria’s economy will top N1.5 trillion in direct and indirect losses now and in the next couple of years even if normalcy returns.

Alabede’s words: “Conservative estimate of direct losses of Wednesday alone is currently over N60 billion when replacement cost, loss of use, and other costs are factored in.

“On the economic front, and coupled with downturn caused by COVID-19, it will take over eight years for Nigeria, and especially Lagos, to recover from the loss of confidence among investors occasioned by the attacks on private and public properties;

“One of the effects of destructive protest or riot is that it heightens the level of risk assessment of nations which in turn means local, and international investors and lenders will increase interest rates to compensate for the high-risk business environment brought on by the disruption of business activities, and the destruction of private and public properties.

“The cumulative effect of the shock to the economy is an increase in the unemployment rate, especially among the youth;

 “Additionally, government will have to divert funding from essential services like education to repair or replace the damaged properties;

 “Government must do all it can to bring the youth to the table and the youth must understand that it is time to select a leader within their rank and file;

 “Nigeria survived worse events in the past and we will survive this too but we must work together to turn this to a win for all;

“As it often happens during any economic crisis, there are losers and winners;

 “While the majority of Nigerians including large corporations and SMEs will be losers, the winners, in this case, are the construction and maintenance companies, suppliers of damaged goods, CSOs and NGOs;

 “Due to the recent event, CSOs will be flooded with donations from within and mostly outside of the country. CSOs and NGOs are in one of the few industries that often expect strong financial performance after a major crisis.”

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