Tackling COVID-19 economic challenges in Nigeria

Tackling COVID-19 economic challenges in Nigeria

The novel corona virus pandemic has hit the world as the most difficult challenge since World War II ended in 1945.  Defying the advancements recorded in science and medicine over the centuries, the COVID-19 has not only shown the limitations of man’s ability to solve all the problem bedeviling him, but also created socio-economic challenges, even as governments across the global battle to contain the spread of the disease.

With almost two million people infected globally, and over 114,979 deaths recorded as at Monday 13th April, according to the World Health Organization, WHO, report, no government in the world will pretend to be unaware of the threats posed by the pandemic to not just health, but also to the global economy.

In Nigeria, even though the first case of the virus was reported on February 27 in the south western city of Lagos, the government became alert, when the disease began to take its toll on global crude oil price which fell below the rebased bench mark of 30 dollars per barrel to as low as below 20 dollars per barrel .  Crude oil, the mainstay of the Nigerian economy, providing over 90% of revenue, is affected by changes in global oil prices.

Nigeria’s 2020 budget of N10.59trillion was based on 2.18 million barrels of crude oil per day and the predicted price of US$57 per barrel.  But with oil price continuing its downward trend in the global market, the Nigerian government began considering scaling down its 2020 budget in line with prevailing realities occasioned by the COVID 19 pandemic.

In early March, Minister of Finance, Budget and National Planning, Zainab Ahmed, said the cabinet had set up a committee to look at the impact of the COVID 19 on the budget.  The committee, which also has the Minister of State for Petroleum and Governor of the Central Bank of Nigeria, CBN, as members, was asked to determine the size of the budget to be cut.

Government followed this up by cutting the 2020 Budget by over one trillion naira and reducing the oil bench mark to US $30 per barrel.  Government also announced 20% reduction in capital expenditure and 25% cut in recurrent expenditure.

With this, the Nigerian government has made preparations for the expected challenges that would come even as the novel corona virus is being contained.

The Nigerian government has also announced palliatives to enable Nigerians cushion the effect of the lockdown of cities in the country to make people stay at home, aimed at preventing the spread of the virus.  In a nationwide broadcast on Sunday, March 29, President Buhari announced the approval of a three-month moratorium for the repayment of such safety nets as tradermoni, marketmoni loans.

The Nigerian leader directed that similar moratorium be given to all federal government funded loans given by the Bank of Industry, BOI, the Bank of Agriculture,  BOA, and Nigerian Export/Import Bank, NEXIM.  And for on-lending facilities using capital from international and multi-lateral, President Buhari directed Nigeria’s financial institutions to negotiate concessions to ease the pains on the borrowers.

Equally noteworthy is President Buhari’s directive to the Ministry of Humanitarian Affairs, Disaster Management and Social Development to work with state governments to develop a strategy to sustain the school feeding programme.  Although this has been criticized in certain quarters because of the closure of schools, it is to be noted that this plan could still record a huge success because of the proximity of the schools to homes from where pupils go to school.  The school feeding programme has seen about 9.8million pupils being fed across the country.  Even the concerns expressed over the implementation of the social distancing policy in sustaining the Home Grown School Feeding Programme could still be addressed while feeding the children.  The most important thing is that government has thought a means to provide a balanced meal to pupils during this trying period.

The setting up of the Economic Sustainability Committee, headed by Vice President Yemi Osinbajo, also gives an insight into the Nigerian government’s thinking about the economic challenges of the COVID-19 pandemic.  The committee, which has since been inaugurated, is mandated to develop a clear economic plan from now till 2023 and to the identify fiscal and monetary measures to enhance oil and non-oil revenue to fund the plan.

The committee will also work to develop a stimulus package and is expected to release clear-cut measures to create more jobs, while keeping existing ones.  Osinbajo indicated last week after meeting with President Buhari that government was considering more palliatives to cushion the effect of the lockdown on those Nigerians who earn daily pay and who could no longer go out to earn a living.

These well thought out measures have been designed by the Nigerian government to tackle the economic challenges arising from the COVID-19 pandemic.   The measures will provide succour to Nigerians as the battle against the virus rages, ensure that the economy does not cave in to pressures from market forces in the global oil market and prepare Nigeria for any economic crisis that might come after the virus is contained.