Many countries, whose economies have been disrupted by the coronavirus pandemic, have commenced conversations on new economic policies and urgent review of existing ones that will stimulate economic recovery. Undoubtedly, Nigeria is one of the countries hard-hit by the ravaging virus. Though it is uncertain when the pandemic will end, nevertheless, experts see the economic fallout from the COVID-19 as presenting the best case for the government to initiate policy reforms, intensify diversification and stir the economy away from the present import dependence and increase non-oil revenue.
Lacking enough buffers to withstand external shocks, and with a hefty fiscal deficit of over N5trillion in the 2020 revised budget, the Nigerian economy is apparently in a big hole
Politicians, economic and financial experts are in agreement that there is need for a comprehensive review of our economic policies to tackle the effects of the pandemic. This is in addition to whatever recommendations the government’s Economic Sustainability Committee headed by Vice President Yemi Osinbajo may come up with. According to the Chartered Institute of Bankers of Nigeria (CIBN), tough choices have become necessary because the present economic outlook for the country is unfavourable considering the sharp fall in global oil prices and the impact of the coronavirus on the economy that resulted in unprecedented shortfall in government’s projected revenue.
We believe that a lot of options are open to the government and the monetary authorities to chart a new course for the economy after the pandemic. One of such policy options is for the Central Bank of Nigeria (CBN) to revise the current high interest rates, a position that has been canvassed by many experts, including the chieftain of the ruling All Progressives Congress (APC), Senator Bola Tinubu, and the Lagos Chamber of Commerce and Industry (LCCI).
According to Tinubu, the high interest rate charged by banks has hamstrung domestic investment and consumer borrowing. Together with an unreliable power supply, this has posed a formidable obstacle to real sector investment, growth and productivity. Other countries whose economies have been battered by the pandemic have driven their prime interest rates below one percent, while that of Nigeria is in double-digit. This cannot stimulate the economy.
To stimulate the kind of economic recovery that the country needs at this difficult time, the financial authorities should, as a matter of urgency, formulate policies that banks must reduce the high interest rates, especially on existing business loans to the new general rate that should be a single-digit rate. This will serve as reprieve for borrowers, who are in dire need of credit for investment that will create employment opportunities and stimulate economic growth. Our economy requires more resources and massive injection of funds to ramp up growth.
To save the nation’s economy from collapse, the government must salvage investments across all levels -micro, small and medium and large-scale enterprises. We support the position of experts, including the LCCI, that at a time like this, there is urgent need for engagement between the Bankers Committee and the business community to discuss the details of monetary component of a rescue plan for the economy.
This is the right time to intensify diversification of the economy through huge investment in the non-oil sector. Though the government has made some efforts in this direction, much more need to be done in the diversification drive to boost the economy and grow the country’s exports and Gross Domestic Product (GDP). Other sources of revenue to cushion the effects of dwindling oil prices abound that will create employment. These include agriculture and agro-processing industries, tourism and the creative industry, among others.
No doubt, the months and years ahead will be tough. This is a time that requires good leadership and imaginative thinking by policymakers to formulate economic policies that will navigate the country out of this stormy period. The government should strive to create the enabling environment for both local and foreign investors to invest in the economy. Ease of doing business should improve more than it is currently, while insecurity should be tackled frontally. This should not be left for government alone. The private sector needs to do more to salvage the economy. In all, we urge the government, the National Assembly and other relevant institutions to begin now to set agenda for the post-COVID-19 economy.