COVID-19: AN ECONOMY ON ITS KNEES AT RISK OF LYING PROSTRATE

Written by Ekene Onyeama

Nigeria is in desperate need for funding presently. The COVID-19 pandemic is seemingly relentless in its quest for the destruction of economies and the extermination of lives without recourse or regard to nationality nor continent. This has triggered a pure case of all hands on deck, as even individuals are tasked with certain level of responsibility to be collectively executed in preserving our individual lives, ranging from social distancing, to always keeping hands and environment clean, avoiding touching the face as much as possible, to dutifully complying with the imposed curfew during the period. As a nation, the government of Nigeria as well as those of other countries have the dual task of safeguarding and protecting the lives of its citizens and preserving their means of livelihood.

The deplorable state of Nigeria’s healthcare system makes colossal improvement a mandatory requirement. As a result, the Nigerian government drastically needs to not just spend, but to spend precisely and speedily in making researches and carrying out tests for better ways to manage and treat the corona virus and to purchase and provide the requisite amenities to effectively combat this global dare-devil. The Government needs also to remain fixated on and conscious to the economic threat a lull in activities as a result of the pandemic could warrant, with empathetic-eyed focus on its citizens, the conundrum struggle to safeguard the means of livelihood of employees ensuring as much as possible that it does not get to the point of them losing their jobs as well as the going-concern threat posed to the businesses of their employers who suffer from inactivity. These concerns were severely ill-managed in the United States of America triggering a rapid record of job loss in the first 4 weeks of the virus invading the US. ‘The coronavirus economic freeze could cost 47 million jobs in the US’ according to St. Louis Fed projections. A wise person learns from his mistakes, but one wiser, learns from the mistakes of others.

The glaring question is FUNDING. How does the Nigerian government generate funds to effectively manage and combat this virus whilst ensuring policies are in place for the economy to perfectly kick-start at restart? The note-worthy revenue generating source for Nigeria since the 70’s is Oil. With the recent drama of the Saudi Arabia and Russia and the global difficulties and consequences it births, the recent incessant questionable relevance of the Organization of Petroleum Exporting Countries OPEC which Nigeria is a member plus of course the COVID-19 pandemic, Oil prices have plummeted to an appalling new low. The current price of about $25per barrel pales awfully in comparison to price per barrel budgeted $57. This is alarming, calling for grave concerns from all quarters. How does Nigeria plan to make up its revenue target for this year to fund her budget? Will there be any sort of GDP growth in light of these events, what is Nigeria’s forecast? Besides the knee-jerk reactions we have witnessed of currency devaluation and restructuring the Treasury Single Accounts TSA to accommodate donations which clearly as a matter of conjecture are exhaustive and would prove unsustainable in the long run, are there any well thought through approaches to mitigate the looming risks? What options do the Nigerian government have and need to implement with immediacy to prevent a classic economic moribund?

The need to borrow -the unfortunate, sad and brutal cold truth for Nigeria is that despite her inadequate (500bn) intervention funds set aside for emergencies such as this, her debt profile is huge and hideous, Majority of countries are in sincere need of aid at this time, but the Government of Nigeria successfully has plunged itself deep into debts over the years with nearly half of all its external debts being with multilateral lenders. Nigeria owes the World Bank alone $10.1billion, with over $3.2billion owed to Export-Import Bank of China which it still pays interest on and this is not all. We seemingly look poised to scour and beg for ($7B), with our recently adjusted Credit Rating leaning towards the negative from B+ to B as rated by Fitch, it all but almost guarantees that should there be global consideration for disbursement of funds, Nigeria is certain to be neither first nor second options in the loan disbursement negotiations. Should any organization or body be willing to lend to Nigeria, expect the funds disbursing pre-requirements to be laced with such draconian and stringent conditions which could come back to hunt us; requiring our birth-right to give us the porridge as transpired between Egypt and the IMF recently (Even though the African country seems better for it now).But we still do sincerely need help and that is the hot fact. Profligate spending will not serve us well. It is advisable that we structure deals that will enable us obtain the requisite health equipment and appliances in place of direct funding.

The government can reduce operational and running costs. This strategy requires the government to look inwards to cut down unnecessary expenditures, restructure and reduce budgetary allocation to certain areas and industries, mitigate wasteful spending, ensure effectiveness and efficiency of use of resources. This move is bold and undoubtedly would insight the populace.  Leaders, legislators and executives across various levels from federal down to local level should take pay cuts for the time being. The revelations from Shehu Sani a prominent politician revealed that Nigerian senators alone are entitled to monthly expenses of N13.5 million in addition to their monthly salaries of more than $2000. This is simply ridiculous, these figures should be cut down by say 30 percent to provide the much needed funds in these dire times. This move is already being implemented in places like the UK where even major revenue generating sectors such as sports are implored to agree in principle for a temporary pay cut

With the sustenance and survival of the private sector in perspective, measures such as some form of rebates, granting tax concessions, extending deadlines for tax compliance, deciding to undertake a portion or percentage of private sector employee tax, granting guaranteed loans with plausible moratorium, would do so much in the aspect of encouragement and freeing up funds for the organization to work with and stay afloat. This is so paramount to prevent the error of the government blindly expending all of its resources towards combating COVID-19 without foresight and optimism as to how the economy would look immediately after the virus is contained.

Another strategy is for the Nigerian government to re-negotiate multilateral and bilateral loans with the Chinese seeking a deferral of interest payments we have hitherto serviced, and with immediate effect, ensure the discontinuation of subsidy payments on PMS-Premium Motor Spirit commonly referred to as petrol, despite this being the most contentious socio-economic policy issue. The government of Nigeria budgeted to spend N1.149 trillion on petrol subsidy and over N700billion in 2020. These funds should now be put into this more pressing need, making the NNPC like any other player, making market forces the major sway in price determination.

Ekene Onyeama

Ekene Onyeama is a young chartered account and private banker currently plying one of the Tier 1 banks in Nigeria.
For discussions and enquiries do send a mail to onyeamaekene@gmail.com.