As the country braces for the inevitable adverse economic impact of the raging coronavirus pandemic, the federal and monetary authorities, the legislature and the private sector have separately been rolling out a raft of measures to stave off catastrophe. From cumulative multibillion naira cash outlay by the Central Bank of Nigeria and fiscal policy reviews by the Federal Government to a stimulus bill rushed through the House of Representatives and interventions from corporate bodies, there has been a scramble to save the economy alongside measures to defeat the disease. This is the time for the President, Major General Muhammadu Buhari (retd.), to provide leadership by assembling a formidable team and coordinating a response with a comprehensive recovery action plan.
The world is in turmoil and, with it, the global economy. Roiled by the deadly pandemic, countries are scrambling to contain the fallout and avoid catastrophic meltdown, which, some say, may be worse than the Great Depression of the 1930s when global Gross Domestic Product fell by 15 per cent between 1929 and 1932. Already, the world is in recession requiring $5 trillion in urgent spending to revive, says the International Monetary Fund.
Nigeria’s situation is particularly dire. Prices of oil, its mainstay and budget anchor have crashed, prompting a downward review of the 2020 budget by 20 per cent. Buffers are sparse, with the Excess Crude Account virtually empty and foreign reserves under pressure from lower oil revenue receipts, defending the naira and repaying debts. Investors are fleeing the bourse. The naira is losing ground, the fear of runaway inflation, factory closures and mass layoffs in an economy already beset by youth unemployment figure of 55.4 per cent are palpable while productive activities have been disrupted in many areas by insurgency and banditry.
The times require sure-footedness, vision and a rallying of the best economists, administrators, the states and the private sector to join hands to lift the country from unfolding meltdown whose trajectory is still uncertain. Measures elsewhere are markers: the overriding aims are to save jobs and boost consumer demand by putting money in people’s hands; ease lending and provide loans to the private sector; and ameliorate the impact on the populace through easier access to health care, food and medicines, while supporting the financial system and providing critical infrastructure.
Locally, interventions also espouse these targets. The CBN’s includes a N50 billion loan fund for households, small and medium businesses; reduction from nine to five per cent interest on its N3 trillion intervention funds; special credit lines for pharmaceutical producers, hospitals and others in the health sector. The CBN has also eased its rules on banks, enabling them to meet higher cash withdrawals and lending to the productive sectors. In partnership with the private sector, N120 billion will be raised in support.
The House bill seeks “temporary relief to companies and individuals, and to alleviate the adverse financial consequences of a slowdown in economic activities brought on by the outbreak of the COVID-19 disease…” If passed by the Senate, the law will authorise the government to offer tax rebates, waivers and moratorium on credit to companies and mortgage finance providers. Support for the states and duty waivers are planned by the Federal Government, while private sector organisations and donors have contributed money to support heath care delivery and the vulnerable segment of the population.
But missing is the reassuring presence of the President at the head of an action-driven, well-coordinated programme. Buhari’s trademark exclusionary, aloof and foggy approach has to give way to inclusion and rallying of all stakeholders to save the economy. He needs to deploy the National Economic Council − comprising the 36 state governors and the CBN governor, and headed by the Vice-President − and the Presidential Economic Advisory Council. The government should walk in lock-step with the organised private sector and state governments.
A comprehensive stimulus programme should control inflation, stimulate production, prevent job losses, fund critical infrastructure, keep sectors such as health, maritime trade, agriculture and manufacturing going. Putting money in people’s pockets as recommended by the World Economic Forum, through support for the SMEs, will be critical. Like Iceland, measures to allow people to access a limited part of their contributory pension should be considered. Nigeria may not have the resources or the institutional capacity to directly pay cash to citizens as the record $2 trillion emergency stimulus adopted by the United States aims to do or like Denmark, to provide 75 per cent of private sector workers’ salaries for three months, or Canada that will pay C$2,000 each to the jobless. But, as the World Economic Forum advocates, it should help save jobs and wages through support for agriculture and tax reliefs.
To this end, the government should join the CBN to support the banks and prevent a run, reduce credit through hefty intervention funds and prevent runaway inflation. Abuse and corruption should be avoided.
Implementation of the Value Added Tax increase from five to 7.5 per cent should be suspended and waived outright for the health and drug producing sectors. Priority should be accorded to boosting pharmaceuticals and incentives given to companies to avoid layoffs. A time like this demands cutting luxuries such as the obscene purchase of 400 cars by the House of Representatives, the retention of nine presidential aircraft, renovation of the National Assembly complex, purchase of computers and accessories and the large retinue of aides retained by public officials.
Italy’s €3.5 billion stimulus, France’s €45 billion, Australia’s A$17.6 billion, South Korea’s US$9.8 billion and China’s $270 billion loan relief programmes are designed to provide immediate succour to the sick, maintain infrastructure, keep companies and wages afloat and support consumer spending. Efforts by Nigeria should aggregate these objectives. It is essential for the Federal Government to harmonise the interventions of states, individuals, donors and companies. More states should produce their own stimulus plans as the US states, Canadian and Australian provinces are doing.
Where will the money come from? Spending or not spending money by a sovereign state is always a political choice. This is the time to make that choice of spending without “the pay for” factor. The Executive and the Legislature should agree on a robust stimulus package with the goal of getting lots of money to the Nigerian people (and companies) without subtracting a lot away from them.
Buhari should imbibe the resolve of leaders like President Emmanuel Macron whose battle cry to the French people is: “We are at war,” summon an economic war council, delegate where necessary to the capable, not cronies, and rally the people and together confront the pandemic and its calamitous economic fallout