By BONIFACE CHIZEA
The Federal Executive Council on Wednesday, 24th June 2020 approved for immediate implementation a N2.3 trillion Economic Sustainability Plan. This is a 12 months transit plan between the Economic Recovery and Growth Plan (ERGP) and ERGP successor plan which we understand is currently under consideration. As was reported, this approval was given following thorough deliberation by the Ministers. The Committee that was charged with the responsibility for the preparation of this plan comprised all the Ministers including the Governor of the Central Bank and the Managing Director of Nigerian National Petroleum Corporation (NNPC).
Therefore, there is something sort of incestuous with regard to the preparation and approval of the plan; those who prepared the plan were those who in turn jointly approved it. Well, I guess in the circumstance there is not much else that could be done as there is hardly any other envisaged option. We commend the Federal Government for the presence of mind to have empanelled the Committee. It is a relief of sorts that we are, at least, beginning to witness some action with this plan. For the records the Committee was constituted on March 30, 2020 and headed by the Vice president, Yemi Osinbajo.
Following the presentation of the report within the stipulated deadline, there was the familiar silence during which there was some concern as there was the need for prompt, determined, focused and concerted action if the country was going to experience a V shaped recession; that is in the sense that the recession in itself will be short lived as the length of time it takes for us to experience an uptick in production has considerable implications for the lasting effect of its impact on the economy and the extent of this impact on the generality of the population.
There are some who have argued that we have to wait for the Gross Domestic Product (GDP) to contract in two successive quarters before we could in keeping received wisdom establish that the economy is truly in recession. That is esoteric of sorts pushed a bit far. The reality on ground is that we found ourselves on uncharted waters; an unprecedented situation when because of the pandemic all the economies of the world went into shutdown with massive supply chain disruptions across board as most countries of the world were forced to close their borders and focus inwards in the process inflicting considerably and may be permanent damage to the concept of globalization as we have hitherto known it to be.
There is no doubt that the new normal whenever it arrives would see considerable change in the way and manner economic relations have hitherto been organized. Nigerians must gird their loins for it is difficult to foretell when the pandemic will come to an end except if a vaccine is discovered. The situation in the country was made even relatively worse because before the pandemic suddenly happened on us, we were already experiencing some economic slow-down due to sharp drop in the price of crude petroleum as a result of disagreement between OPEC and non OPEC members led by Russia on how urgent production cut backs were to be shared. The price of crude which was projected in the 2020 Budget at the level of 58 dollars per barrel at some point crashed to as low as 30 dollars and was still falling.
Therefore the fiscal challenge that confronted Nigeria could not have been less dire to necessitate a stimulus. The stimulus package as noted above was of a total amount of N2.3 trillion to be sourced from N500 billion stimulus package already included in the 2020 Budget, N1.2 trillion structured loans from the Central Bank and other development partners and the balance from sundry external and bilateral sources. There are loud complaints that relative to its peer countries that Nigeria would seem to be punching below its weight with regard to the amount of the stimulus package, but Nigeria has to be realistic by not announcing a package that is beyond reach.
But what remains surprising is that before this formulation and release of this package, that the Central Bank of Nigeria in its proactive manner had released to the public a stimulus package of a whopping amount of N3.3 trillion which the Bank has already commenced aggressive implementation. Why has it not occurred to us so far that we are talking of the same economy? And therefore, when we talk of the amount of the stimulus package made available that it should be an aggregation of both the stimulus proposed by the Fiscal authorities as well as that proposed by the Central Bank.
To avoid deep recession the Plan has focused us on the need to avoid rebid retrenchment of capacities. There is the urgent need to keep the economy ticking by assisting private sector operators to sustain operations. In some jurisdictions and as has been proposed in the Plan there is the need to assist the private sector to sustain employment through providing direct support for the payment of the wage bill.
In some countries of the world, Britain for instance, it has been reported that support of up to 80 percent of the wage bill is underwritten by the Public Sector. There is the need for urgent action in this regard. It should be obvious to all that it is unconscionable for us to be experiencing mass retrenchment as recently reported to have been undertaking by some dominant companies as we discuss. Government must intervene to ensure that this does not become the vogue.
The recent move with all controversies pertaining thereto to hire one thousand persons in each of the 774 local government areas in the Federation is therefore a movement in the right direction and must be commended. It is also not the time for industrial action as was recently contemplated by our health workers. For crying out loud the primary challenge of this pandemic is essentially the preservation of lives and thereafter livelihoods and therefore we must all rise to the sacrifice which this realization entails.
It is also the period to pay particular attention to operators in the Micro, Small and Medium Scale sectors of the economy. This category of businesses constitutes the engine room of the economy as they account for over 50 per cent of the country’s GDP and about 60 per cent of total employment. As has been indicated in the plan one of the major thrust of the strategies the country will adopt is that of looking inwards to consume what we produce contrary to the prevalent practice hitherto whereby we import what we should be able to produce thereby putting considerable pressure on scarce foreign exchange as well as the exchange rate of the Naira.
Could we imagine what could have happened to us if we did not attain local sufficiency in the production of rice! It is now that the Central Bank must be roundly acknowledged as the organization which saw tomorrow as it aggressively championed the local production of rice through its very successful Anchor Borrowers’ program amongst other sundry attempt to deny official foreign exchange for the importation of the now famous 43 items for which it was roundly lambasted and pilloried but stoutly stood its ground.
For SMEs the steady availability of power supply is crucial for their profitable operations. It has been estimated that just by making meters generously available could easily add 20 million customers to the books of the Distribution Companies and if consumers pay an average of five thousand Naira a month, this will add an additional of N1.2 trillion in yearly revenue. And for the viability of operations there is the need to allow cost reflective tariffs. In spite of the multi-year structured tariff order, tariffs have remained without review since 2015 because of lack of political will. But now that the impending World Bank loan for the sector is tied to freeing up the tariffs, it seems that there is a glimmer of light at the end of this dark Tunnel as a review has been programmed to commence in the month of July, 2020.
Nigeria has an informal sector which by many accounts has been estimated as constituting 60 per cent of the economy. There is therefore the need to ensure that all programmes aimed at widening the social safety net are accorded deserved urgent attention. There is certainly the need for greater transparency, inclusiveness and for an upgrade in the modalities for the disbursements of unconditional cash transfers. Not a few eye brows have been raised with regard to the amount that have been alleged to have been disbursed under this program particularly when considered alongside the paltry budgetary allocations that have been made to the crucial social sectors of education and health.
As should be expected ministerial committees have been proposed to be established for the implementation of the programmes and policies included in the plan. And this is where we envisage some problems. We have never been known for our prowess with plan implementation and this is the albatross to be frontally confronted as we know a plan not implemented is a dead plan.
Dr. Boniface Chizea is a financial expert and CEO of BIC consultancy