Amechi Ogbonna
As the continent’s largest economy, Africa and indeed the rest of the global business community are looking up to Nigeria to show leadership and set the pace in reactivating the wheel of manufacturing, commerce and supply chains left comatose by the novel coronavirus pandemic over the past four months.
That expectation is no less onerous and compelling from Nigerian citizens themselves most of whom have since been dislocated socially and economically with the disruptions accompanying the COVID-19 pandemic.
In just about three months, a lot seemed to have changed so fast that companies that had posted robust balance sheets are now at the brink, with many heading toward bankruptcy and others in quandary over the future of work.
There are indeed glaring evidences across the country that millions of jobs have been lost in various sectors of the economy, while millions more may be gone post COVID-19, as the Nigerian Centre for Disease Control (NCDC) and other agencies of government and stakeholders battle to halt community transmission of the virus now dismantling the bond of relationships and affinities built over many years.
With global infection rate currently over four million in 212 countries and territories while its death toll has risen to 275698 as of May 8, 2020, according to Worldometer, governments in various jurisdictions, including Nigeria have also been unrelenting in adopting critical policy measures to stem its collateral consequences.
For Nigeria in particular, coronavirus -related jobs losses or threat of sack since the outbreak have further been aggravated by the unprecedented collapse of global commodity prices that brought crude, the country’s main foreign exchange earner under immense threat, with implications for both citizens and the 2020 budget.
Indeed, when President Muhammadu Buhari presented his 2020 Appropriation Bill to the National Assembly, on October 8, 2019, his expectation was to finance the budget with an oil benchmark of $57 per barrel, with crude production flowing at 2.18million barrels per day, coupled with taxes from VAT, custom duty and oil royalties complementing his government’s revenue profile, to achieve an anticipated GDP growth rate of 2.93 percent at a single digit inflation rate.
But not too long after his presentation, the coronavirus pandemic struck and turned Buhari’s projections to mere wishful thinking, thereby forcing him to cut the key budget benchmarks on two occasions to $30 and later $20 per barrels.
However, based on the magnitude of economic disruption and financial losses suffered by businesses in the economy, some pundits, including the International Monetary Fund promptly predicted economic doom for Nigeria, warning that chances of a relapse into a second recession and possibly a depression in four year were higher now than hopes of any positive GDP growth should government fail to implement comprehensive stimulus packages to resuscitate businesses and the vulnerable groups hurt by coronavirus fallouts.
For instance, while outlining its short to medium term perspectives on COVID-19 vis-a-vis the Nigerian economy last week, the Lagos Chamber of Commerce and Industry ( LCCI), warned that the outlook appears quite dire and bleak.
LCCI president, Mrs Toki Mabogunje, recounted that the pandemic has precipitously triggered the collapse of global commodity prices , exacerbated an unpleasant capital flight out of the country and caused enormous turmoil in the domestic capital market.
She equally expressed concern with the disruptions in supply chains that serviced several sectors of the economy by the pandemic with wider destabilising consequences for commercial and economic activities across the country.
“Hence we resonate with the International Monetary Fund position on looming severe contraction of the economy by year end in 2020,” she said.
But despite its unhealthy outcomes, the LCCI boss believed that the current COVID-19 stalemate still presents an ample opportunity for the government and policy makers in the country to pursue structural reforms if only it can put in place homegrown policies that can engender growth across sectors of the economy, including the privatisation of redundant public assets and the provision of key infrastructural facilities urgently needed to escalate economic prosperity for the citizens.
To further fastrack the rebirth of a bullish economy in the new normal, Mabogunje also advocated a one -year tax break for manufacturers in the real sector including pharmaceutical companies, airlines, small businesses, and agro-allied processors to enable them navigate through the COVID-19 induced economic crisis, while urging the Federal Government to suspend the 7.5 VAT raise, as well as the PAYE for at least six months by way fiscal policy re-engineering.
Perhaps, the Lagos Chamber’s advisory to the Buhari administration can better be appreciated if viewed against the backdrop of last week’s poverty survey report by the National Bureau of Statistics (NBS) which puts the number Nigerians living in extreme at about 83million.
One of the clear messages from that report is the ominous threat of job losses that may accompany the coronavirus pandemic, should government and other stakeholders fail to introduce stronger policy measures to create more jobs to stem rising unemployment post pandemic to avoid widening the poverty.
It further raises the concern that Nigeria, whose gini -coefficient towered above that of its closest rival South Africa at less 40 percent a few years ago, would be sitting among the world’s poorest nations should the pandemic be allowed to wipe out more jobs going forward.
It was perhaps against this backdrop that the Central Bank of Nigeria and the Bankers Committee recently moved to stave off what would have been a clean sweep in the banking industry, when they ordered banking sector employers to halt a COVID-19 -induced purge as many were putting finishing touches to planned mass sack or salary cuts in an effort to remain as going concerns.
However, since exiting the 2016 recession with a lean 0.05 per cent GDP growth in 2017, the advocacy for government to build stronger economic buffers to hedge against future global shocks had featured in several national economic discourses to the effect that a nation of the size and resources base of Nigeria need not be comfortable exporting only crude oil as major foreign exchange earner. But obviously not much seems to have been done in that direction.
Today, again, under a novel coronavirus dispensation, Nigerians are still looking up to the CBN, the Federal Government for economic stimulus packages that can restore lost jobs, and put food on the table for families.
As expected, the apex bank, from the monetary policy standpoint is not losing sight of its key responsibility in this trying times, having lined up some stimulus packages that included a-one year extension of moratorium on principal repayment of intervention facilities, reduction of interest rate on such loans from 9 percent to 5 percent, creation of credit facilities for SMEs particularly those manufacturing pharmaceuticals as well as funding outlay of N1.1 trillion for critical sectors of the economy to boost manufacturing and support import substitution activities. The apex bank has also announced a three -month repayment extension for beneficiaries of TradaMoni, FarmaMoni and Market Moni loans.
But what is of concern to some observers is the commitment of the Nigerian private sector especially the small and medium enterprises operators to align with these policies in good time to expand the frontiers of the economy through job creation and local manufacturing.
With CBN war chest was announced barely three days after it pledged N50billion soft loan to small businesses operators as part of the Federal Government’s intervention programme, for support them glide over the pandemic.
In addition to that, the apex also made available a whopping N100billion for the pharmaceutical sector to boost the local production of medicines while urging the banks to raise their funding of the sector.
For Mr Godwin Emefiele, CBN Governor, policy emphasis on SMEs and MSMEs is quite understandable, considering that Nigerian economy consists of about 65 per cent of small businesses. By making credit available to them to retool and operate, he believes more jobs would be created while businesses would sustained pending when the larger economy begins to pick up again.
What perhaps the CBN should be doing at this point in time according to some commentators is to simplify the conditionality for accessing these facilities bearing in mind the objective for their introduction which includes ensuring it gets to the SMEs at the right price and in good time too.
With the benefit of hindsight, they have also urged the apex bank to watch out for political and portfolio entrepreneurs who have no business in manufacturing or running but are only interested in crowding out genuine businessmen and in the process frustrating the purpose of the intervention in order to collect the intervention funds without deploying same into productive enterprise.
Speaking to Daily Sun, recently President of the Pharmaceutical Society of Nigeria, Mazi Sam Ohuabunwa, pointed out for instance that the N100 billion promised drug producers by the CBN was yet to be disbursed to them even though it was supposed to be treated as a matter of urgent National importance because of the pandemic.
“CBN had listed 10 pharmaceutical manufacturers to benefit from the N100billion funding facility to cushion the effect of the COVID-19 on the sector. As at today, the apex bank is still assessing and approving applications, as more proposals are still being submitted, with the normal protocols and bureaucracies for lending money still in place,” he said.
On the fiscal side, President Buhari, last week approved tax waivers for importers of medical equipment while directing the Nigeria Customs Service and other agencies of government to ensure expedited clearance of such good on arrival at the nation’s port as part of government’s effort to curtail COVID-19 pandemic.
Meanwhile, in his reaction, Director, Centre for Petroleum Energy Economics and Law, University of Ibadan and member, Monetary Policy Committee of the CBN, Prof Adeola Adenikinju, noted that most parts of the economy are still under one form of lockdown and restrictions or other, while interstate movements are still largely restricted.
He argues that economic activities have not fully taken off to be able to benefit from any major economic stimuli, adding that palliatives are needed at this time to help vulnerable citizens and boost the health care system.
“There is a need to define the overall goal of the intervention efforts since it can only mitigate and not solve all the COVID-19 problems.
The CBN should ensure that more credits continue to flow into the economy, so that there would adequate liquidity in the system to ensure stability of the banking system. It must also encourage commercial banks to lend and to restructure current credit portfolios to minimise defaults and guarantee short -term facilities for companies and businesses to be able to weather the current economic situation.
The economy definitely needs more financial stimulus to reduce the economic and social impact of the pandemic but we don’t have significant savings and fiscal space to help it.
We failed to save when the price of oil was high. We also ran down the ECA. We have piled up debts. Under this scenario, our options are limited. Credit facilities from multilateral institutions like the IMF, the World Bank and African Development Bank are much needed at this time.
Also commenting on government’s intervention programme under coronavirus pandemic, energy expert and Partner, at Bloomfield Law Practice, Dr.Ayodele Oni, contends that government should reduce taxation as part of fiscal incentives for businesses to kick-start their operations, while employers who keep their staff and or hire new ones should be supported and given incentives by State and Federal Government.
Oni also urged government to sell its equity in some of the enterprises it holds shares to drive transactions and activities in the economy too, stressing there is need to trigger deals and transactions in the economy.
For his part, Kurfi Garba, Managing Director, APT Securities, said that the measures so far taken are good, but that governments needs to do it in such a way that also spreads opportunities across the nation to benefit the economy.
Mrs Toyin Sanni, CEO, Emerging Capital says CBN’s interventions are a welcome development but that it should be targeted more to SMEs with capacity to employ more people that large corporates cannot absorb. She urged governments to also seek partnership with the capital marketare indications that the Nigerian government is doing something to contain the spread of an issue that has brought the world to its knees.
“In terms of whether it is sufficient, there still remains things to be done regarding provision of support to the SMEs that provide jobs for the unemployed and so it is necessary that more interventions need to be channelled to the SMEs.