COVID-19 and the Lagos Informal Sector – Realities, Implications and Responses

Authors: Babajide Oluwase, Wole Ademola Ademola

With excitement and fireworks, the world ushered in 2020 with so much dreams and expectations but never thought everything would be brought to a halt and on the brink of global recession in a flash by a virus outbreak. The Coronavirus (COVID-19) pandemic which started at the tail-end of 2019 in Wuhan, China has now become the biggest invincible enemy of the world. The world as we know took a challenging turn on 30 January 2020, when the WHO declared the COVID-19 outbreak a public health emergency that should be of international concern. The  pandemic is primarily a health crisis and a human tragedy, but it also has across-the-board economic implications. In Africa, it is already disrupting millions of people’s livelihoods, with disparate impact on poor households and businesses in the informal sector—and the pace of this disruption is likely to speed-up in the weeks and months ahead.

As the world now grapples with the containment measures of COVID-19, countries around the world including Nigeria have put in place measures such as restrictions of movement in Abuja, Ogun and Lagos, currently the epicenter of the outbreak in the country. Nigeria currently has more than 1,000 confirmed cases of COVID-19 with the numbers increasing daily and this means there are choices to be made: to either return to normal or extend the restrictions even when they come with unintended consequences in various spheres.

Lagos, the Epicentre of Nigeria

Lagos exemplifies the challenges that plague most African cities, but on a scale that seems daunting and amplifies the stresses and strains of urbanisation. Even if there is no general consensus on how many people live in Lagos, one thing holds true: the economic nerve of Nigeria is growing at an alarming rate. Though arguable, the State Government records the population of Lagos as over 21 million with a high influx of people from other parts of the country on a daily basis. When Lagos confirmed the first case of the novel virus in Nigeria, it quickly sparked memories of the fears of the Ebola epidemic that hit the megacity six years ago. Though it is believed that there is not enough testing going on, the State governor, has however shown leadership in the implementation of the response strategy so far.

The Informal Sector: What Does it Mean?

The informal sector represents a significant part of economies around the world, especially in developing countries. As described by many economists, the informal sector is a part of the economy not formally recognised or registered under any national legislation. From a non-economist perspective, it is invoked to refer to the street vendor in Ghana, the hawker in India, the shoe-shine worker in New York, the “danfo driver and conductor” in Lagos to mention a few. What these activities have in common is their ability to satisfy basic needs by harnessing informal opportunities and its impact on economies is becoming more significant. For example, in Uganda, about 13.67 million persons of working age (14 – 64 years) are engaged in the informal sector, which represents about 98 percent of the total working age population. In Nigeria, the Bank of Industry (BoI) acknowledges the informal sector as a major economic driver which contributed about 65% to the country’s GDP in 2017. 

COVID-19 and the Lagos Informal Sector 

As Lagos grinds to a halt amid increasing coronavirus cases and movement restrictions, Adebola Rebecca, a 46-year old trader, still visits her shop thrice a week. “How can I stop,” she said, with an edge of desperation in her voice. “For me to eat, I have to make daily income, it’s as simple as that.” Without regular patronage, Adebola spends much of her day sitting back in the hope of making sales to support her family. The struggle with Adebola’s business amid the COVID-19 pandemic captures the realities of millions of informal economy workers in Lagos. Social distancing has necessitated dramatic deviations in the world of work – a shift into remote working. However, such an easy transition only works in the formal sector. Informal sector activities thrive on physical interactions.

In addition, slums and unplanned settlements dotted across the city of Lagos serve as home to most informal sector populations, many of whom lack basic services like potable water, sanitation and decent housing. This reality aggravates their vulnerability during a health crisis, and makes stopping the spread of COVID-19 a complicated task to manage. That the informal workforce was not taken into proper account while declaring a total lockdown is reflective of their invisibility in the State’s consciousness and policymaking.

Amidst the closure of workplaces and avenues of employment, the lack of clear and positive assurances from the political leadership only exacerbated these workers’ anxieties. The economy as we know it was fragile even before the advent of COVID-19, but now the outlook is far worse as government efforts to confront the pandemic paralyze economic activity. No sector, worryingly, may be as vulnerable during the lockdown as the workers who toil in the State’s vast informal economy, employed in precarious work environments, and lacking any form of social security or welfare safety net.

Imagine a city like Lagos with a population of over 21 million and the informal sector is estimated to account for over 70 percent of the working population and approximately 42 percent of the economic activities within the State. This includes hawkers, roadside traders, vulcanisers, battery chargers, hairdressers, carpenters, bricklayers, etc. What this implies is that as the pandemic worsens daily, the majority of informal sector workers may have no option but to prioritise their economic needs over the health implications of the virus. This is not because they are not aware of the impending risks, but as a survival instinct and because the available welfare system is not far-reaching.

Responding to the Impact

As uncertainty envelopes the world and  with one-third of the world’s population (about 2.6 billion people) living in some form of lockdown, the implications are far-reaching. Analysts have described the impact of COVID-19 as being worse than the great depression of 1929 or the financial crisis of 2008. Hence, COVID-19 requires a novel and urgent response that can mitigate the increasing scale of disruption it is causing, especially in the most impacted sector such as the informal sector and communities where the vulnerable and poor reside. 

During the outbreak

• All Hands on Deck Approach: The most powerful weapon in the fight against the spread and after effect of COVID-19 is public trust. The Government must have an open system in their strategies, policies and economic restructuring. Reinforcing this means getting ahead of the downward curve of contagious fear and social-economic breakdown with responsive communications tailored to local contexts and diverse population groups. Social cohesion and community participation must be an integral framework of strategies being developed by the Government leveraging on communal structures like community-based and faith-based organisations for delivering social welfare packages, water and sanitation facility, and poverty-fix palliatives.

• Safety Net for All: During this crisis, the government needs to extend support to the poorest decile, most of whom depend on informal activities and who can’t access the CBN N50 Billion COVID-19 Credit Facility. If the stimulus package is implemented in its current form, large proportions of informal workers particularly in Lagos, who depend mostly on irregular daily wages with almost no safety nets to depend on will be left to fend for themselves. The negative impact of this is already being felt in some parts of Lagos where increasing crime rates have been recorded in the past few weeks. What if the Government initiates  a “special grant” to simultaneously address the needs of businesses in the informal sector? This grant can be disbursed through their various registered groups/associations within the State. Adopting this model will not only soften the impact of COVID-19 on the businesses in the informal sector, but it would also act as a trickle-up economic stimulus for the mainstream economy.

Beyond the Outbreak 

• From Regulators to Enablers: Highly imbalanced societies like Nigeria will continue to give room for more actors in the informal economy. Post COVID-19, it will be in the State’s best interest to integrate the informal sector into their economic development plan in a way that reflects their spatial reality. Beyond taxation, the government should support the sector such  that it fits rightly into their context. For example, the pure water industry was conceived in a bid to exploit the gap created by an inadequate public water system. Policymakers were able to enable, to a large extent, the growth of the pure water industry by designating NAFDAC to guide and regulate drinking water production standards. This is an approach that can be transferred, though with modifications that fit other areas of the informal sector.  

• Closing the Urban Services Divide: As lockdown stretches across the world, we are only beginning to understand how COVID-19 will affect the urban fabric. The current crisis offers an opportunity to reflect on how Lagos is being planned, managed, and brings concepts such as resilience to the front burner. For a rapidly growing megacity like Lagos, millions of people today lack access to essential services such as housing, water and healthcare, which intensified the challenges of responding effectively to COVID-19. Closing the urban services divide must be a priority going forward especially in informal communities, and this highlights the need for government and urban planners to take advantage of this crisis to plan and build a Lagos that truly works for all.

Moving Forward: An Integrated Approach for Africa 

From whatever standpoint you look at it, there is no doubt that the informal sector, particularly in developing countries is going to be the most impacted in the post COVID-19 economic crisis, and the active population subset in informal communities might fall short of being able to provide the basic standard of living. Studies have indicated that there is a strong correlation between informal employment and poverty. Hence, if critical measures are not put in place, we might begin to experience further increase in the poverty rates across parts of Lagos and by extension, Nigeria. Mirroring the realities in Lagos to other African cities, the experiences will be somewhat similar, necessitating the need for an integrated approach across Africa.

Policy makers in Africa need to recognise the important role the informal sector plays in their economies and begin to take deliberate actions to support and revive this sector during and post COVID-19, learning from experiences in cities like Lagos. Development partners e.g. WHO, United Nations are also critical in this fight for the informal economy and communities. For example, UN-Habitat released their COVID-19 response plan recently with a keen focus on supporting community driven solutions in informal communities. One thing stands sure, a post COVID-19 world will be incomplete without a thriving informal sector.