It is indeed uncertain times. Nobody is spared. No organisation is the same again. Most companies have crumbled; those that are still alive will have the big scar of Coronavirus with them for a very long time.
Indeed, the COVID-19 pandemic has hit Nigerian economy below the belt thereby worsening the already deteriorating bad situation before the global outbreak of the virus in late December last year.
Today, Nigeria’s economy has been hard hit by the pandemic that it is sliding into another recession.
The pandemic despite being a health issue, has continued to have dangerous impact on the economy, businesses and the lifestyle of citizens.
It has, indeed, caused disruptions, and consequently reshaped the ways of doing things in the bid to achieve a “new normal.”
Already, the Minister of Finance, Budget and National Planning, Zainab Ahmed, has set the tone of what to expect, when she disclosed during the week in Abuja, at a session with the Senate Committee on Finance, that with the deficit financing of the revised N10.509 trillion 2020 budget rising from N1.847 trillion to N4.563 trillion, the economy might be heading for another recession.
Therefore, there is no doubt that the country is in for difficult times. This has equally presented the leadership with the herculean task of devising practical and workable ways to lift the citizenry out of despair and poverty.
While Nigerians are losing their jobs by the day with hunger biting harder, inflation is also on the increase as the value of the naira continues to go down.
Analysts have continually lamented Nigeria’s sluggish growth in the second half of last year, but the scenario has deteriorated this year amid the twin shocks of the COVID-19 pandemic and the global oil price crash.
The lockdown measures imposed across the nation, especially in the commercial nerve centre, Lagos, and the Federal Capital Territory (FCT), Abuja, worsened the hit on the economy as the services sector is reeling from the massive reduction in consumption.
With the drive to stem the spread and flatten the curve of the Coronavirus from getting into high gear, the continued disruptions to productive activities undoubtedly further darken the nation’s economic outlook.
Economic analyst and university teacher, Dr Obong Nkak, told Sunday Sun that there are sufficient indications already that the economy may contract again this year and bring things close to where they were during the 2016/2017 recession.
He said one such indicator aside the menace of COVID-19 is the collapse in crude prices, which may hinder domestic production, batter forex and fiscal revenues, and add pressure to the nation’s international reserves and the currency.
There is the challenge of unemployment in the land as most workers continue to lose their jobs, resulting in rising poverty.
Against the background of the recent report which stated that Nigeria had overtaken India as the nation with the highest number of people living in extreme poverty across the world with an estimated 86.9 million people adjudged to be living on less than $1.25 (N381.25) a day, there seems to be great danger ahead.
The revelation was part of findings by the Brookings Institution, a non-profit public policy organisation based in Washington DC, the United States of America.
Although the Federal Government was quick to dismiss the Brookings report, analysts linked rising incidents of crime in the country to widespread unemployment and asked President Muhammadu Buhari to prioritise job creation in his second term.
The Lagos State Chamber of Commerce and Industry believes government must move to salvage investments across all levels to be able to rescue the nation’s economy from collapse.
Director-General of LCCI, Dr Muda Yusuf, who made this known to Sunday Sun, said that the Nigerian government must assume the role of the main driver to propel the stimulus process as seen in other countries in the world.
“To save the economy from collapse, we need to salvage investments across all levels – micro, small, medium and large enterprises. Without investments, we cannot have jobs; aggregate demand would remain weak; government revenue would be in jeopardy as tax revenue plummets and economic sustainability will be at risk. This underscores the imperative of an urgent rescue package for businesses to enable investors ride out of the storms,” Yusuf said.
The LCCI boss noted that the activation of the stimulus process could be done through the injection of liquidity, depending on the fiscal space or through policy measures that offer some accommodation that facilitates economic and business recovery.
He, therefore, called for tax breaks and concessions for aviation, hospitality, health sector investors, agriculture and agro-processing, for at least one year as well as the suspension of PAYE for employees for a period of six months.
This, according to him, would put some money back in the hands of the employees during this period to strengthen the purchasing power of citizens and stimulate output within the economy.
Other recommendations, according to the DG of the LCCI include: fiscal policy palliatives for the real sector and the aviation industry; debt reprieve to commercial bank customers in the private sector as well as windows of opportunities for loan moratorium, restructuring of facilities, refinancing and interest rate concessions in the light of the unprecedented downturn in the economy, among others.
On its part, the Nigeria Employers Consultative Forum, NECA, called for synergy between the fiscal and monetary policies in order to rescue the nation’s economy from total collapse.
NECA’s position is contained in a statement by the Director-General of the body, Timothy Olawale.
NECA called on the government to open up the non-oil economy for more productivity, as well as to reduce the anticipated shocks from the crash in global oil prices.
The employers’ association commended the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) at its May 2020 meeting, to reduce the Monetary Policy Rate (MPR) from 13.5 per cent to 12.5per cent.
The association stated that the MPC decision “signals a pro-growth response that could lead to reduction in the cost of credit, increase investments and impact positively on output growth in order to address the current global challenges, adding that the MPC held other key parameters unchanged. Cash Reserve Requirement (CRR) remained at 22.7 per cent, while the liquidity ratio was kept at 30 per cent. It retained the asymmetric corridor around the MPR at +200/-500bps.”
NECA stated: “With the negative effects of COVID-19, the twin challenge of the low global oil prices and over-exposure of our economy to external shocks, this decision is a welcome development that the monetary authority, by easing its policy in order to protect the economy.
“We applaud the current decision of the Monetary Policy Committee, which aligned perfectly with the association’s earlier recommendation.
“It is our belief that the committee understands that high interest rate is a risk to the economy at this time. We, therefore, call for synergy between the fiscal and monetary policy in order to move the economy, which is already in bleeding stage. Development of more robust and coordinated stimulus packages for the sectors that are worst hit by the pandemic, and opening up the non-oil economy for more productivity, to reduce the shock expected from falling global oil prices, would be a welcome development in pulling the economy from nose-diving into recession.”
Some experts say the Federal Government’s move to roll out new set of palliatives for Micro Small and Medium Enterprises (MSMEs) is a commendable one as millions of such businesses have no support in any form despite being the bedrock of the economy.
The execution plan they contend is the challenge at the moment just as they argue that the palliatives which appear to be piecemeal should not be so.
Notable banker, Nnamdi Korie, told Sunday Sun that the nation’s economy has always been sustained by small and medium business operators and as a result the government must be sure they are given attention in terms of ensuring they get non-interest loans and financial stimulus.
His words: “Nigeria’s wobbly economy has been sustained by the small business, even at the most trying times so they must be captured and given serious attention. Consider the contributions of market women, hairdressers, barbers, vulcanizers, mechanics, tailors and a host of other similar businesses at the grassroots level of the economy. These people are at their corners doing their own things.
“They constitute the invisible hands holding the economy at all times. And their contributions should not be discounted. Besides, a robust economic recovery plan to deal with post-COVID-19 economic downturn should be the starting point, and the government stimulus should target the entire economy if it must be meaningful.
“Unfortunately, the formal financial sector comprising commercial banks and other non-banking institutions like insurance companies, deposit takers and building societies have no place for SMEs in their credit lending scheme. The SMEs can’t meet the credit conditions set by these institutions.
“Whereas the MFBs are supposed to advance credit to the poor on easily affordable terms, experience has shown that the banks seem to have even more stringent conditions than the commercial banks. Some businessmen and women who have attempted to access credit from the MFBs have been disappointed. So the government must find a way to financially empower SMEs given their relevance to the economy.”
Niyi Soleye in his analysis of the situation told Sunday Sun that it might be a miracle for Nigeria to escape a recession, but urged the government to do the needful so as to salvage the situation fast.
“There is a possibility that we are gradually moving into a recession, but of course it has not been officially declared, but when you look at the economy you will discover that a lot of things are going wrong which is largely due to the COVID-19 pandemic and lockdown.
“Look at the aviation industry, for instance, that has been grounded, and people are finding it very difficult to eat; some of these things are not officially reported. The truth is that the economy is not in its best shape at the moment, which can be directly attributable to the COVID-19 issue and the oil crash.
“Officially, we cannot say we are in a recession because there are a number of empirical indices you have to put into consideration before you can say that a country has gone into a recession. But definitely if things don’t pick up it is not unlikely that we are on the road there soonest,” Soleye said.
His advice is that the government should start to ease up the economy and embrace diversification to the agricultural sector.
“As much as possible it is commendable that the government is easing up the economy and things are gradually coming back to shape. So, the government should continue to do the gradual and calculated easing of the economy because we can’t continue this way.
“Before the COVID-19, the economy was not really buoyant and now COVID-19 has made the situation worse. The economy should be re-opened as quickly as possible and also taking into cognizance that the COVID- 19 issue too is also a plague, so it is about choosing between life and survival.
“I said life because COVID-19 is a killer and survival because people need to eat, they need to feed and people need to do business, so the economy should be re-opened on time. Another thing is that government should reduce deficit financing, they should stop accumulating debt.
“You can see that the president has requested for another amount, over US$5 billion debt from the House of Representatives members, all of these things have a way that it impacts on the economy because at the end of the day when you are joining up the budget a particular part of the budget will still be tied to debt servicing and how are we sure that even the money that was borrowed will be used for the purpose it was borrowed.
“Trust itself is really low on the side of the government. Of course, cost of governance is high in Nigeria so these are some of the things that can be done to ensure that the country does not go under. There is also the issue of overhead, administrative capital item when parastatals adjoin their budgets, when you look at overhead alone it is a large chunk that still needs to be reduced.
“Generally, we need more transparent people in government. The cost of corruption is really high in this country and it is frightening , but in all there is urgent need for diversification, not on lip service. The simple fact is that diversification is the key to growth. We should see agriculture as a business because there is a lot of potential in the agriculture sector,” he said.
Observers contend that President Buhari should not lose focus on improving infrastructure such as building the transportation network (roads and railway), improve other wide-ranging infrastructure and fix the electricity grid as a prop for economic growth. (Sunday Sun)
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