Godwin Emefiele, CBN Governor

By UCHE CHRIS

The Central Bank of Nigeria (CBN), last week surprised most Nigerians with the release of its post-COVID-19 economic Marshall Plan to revive the economy, which experts and several international agencies, have warned would slip into above -3 per cent negative economic growth or recession after this crisis. The plan which will target the nation’s infrastructure deficit proposes an N15 trillion capital to be spearheaded by the private sector, contrary to the traditional policy thrust of this government based on public sector driven initiatives.

Since the oil price slump and the threat of COVID-19 pandemic that is ravaging countries of the world including Nigeria, the CBN has been bullish and proactive on policies directed at revamping the anticipated devastation of the economy to minimize its effects and ensure a quick recovery. The apex bank had earlier rolled out policies and programmes as the twin challenges hit home to address industrial growth and infrastructure development, which is generally recognized as the nation’s greatest obstacle to economic recovery and growth.

In the heat of the oil price crash and growing incidence of the virus in the country, the CBN had hosted a summit of private sector leaders where it announced an N3.5 trillion industry stimulus package to address the emergent problems for the manufacturing sector and small and medium scale enterprises, SMEs, to cushion the adverse effects of the economic downturn on the economy. It had earlier set up an N1.5 trillion private sector-led fund for infrastructure development. Other packages released by the bank include a moratorium on all CBN intervention credits and reduction of interest rate from 9 -5 per cent.

However, the new initiative contained in a document titled, “Turning the COVID-19 Tragedy into an opportunity for a New Nigeria”, is coming through the establishment of a public limited company, Infra Company Plc, with an N15 trillion equity capital, which will mobilise resources for the development of the nation decrepit and deficient public infrastructure. There is a consensus among experts that the bane of the economy is the inefficiency and inadequacy of key and strategic utilities and other infrastructure to power the economy.

A unique and novel aspect of the plan is the three-stage implementation timelines ranging from immediate (0-3 months), Short term (0-12 months), and long term (0-3 years). It said that the previous platform of global trade and relations has come under attack by the pandemic as every nation is focused inward on self-preservation with the introduction of all manners of restrictions on trade such that even the basic exports for the fight against the pandemic are embargoed.

For instance, the public power supply has remained the nation’s economic blight and weakness, despite the 2013 privatisation and the $16 billion expenditure by the Obasanjo government, which imposes heavy production cost on companies thereby making local products expensive and uncompetitive with inferior imports. According to the Lagos State Chambers of Commerce and Industry, LCCI, the cost of power constitutes almost 40 per cent of production cost to manufacturers.

Experts believe that fixing power alone will add almost four per cent to the nation’s Gross Domestic Product (GDP), which could be a massive stride in its economic development quest. By the 2012 Power Roadmap Nigeria is supposed to be producing between 18000 and 20000MW of electricity by 2020, which would guarantee about 20 hours of supply across the country.

However, the country’s current installed capacity has remained at 15,000 MW since 2017 while transmission capacity is stalled at 5000MW; but only about 3,500 MW can be evacuated by the Discos, which have become the weak link in the value chain. So while there is some capacity to improve output the distribution and transmission remain a severe bottleneck. But for the COVID-19 pandemic, power tariff was to be hiked again on April 1, 2020, which manufacturers have denounced strongly as a recipe for deindustrialization.

In contrast, South Africa produces about 94000 MW of power, Egypt produces 78 MW. Even neighbouring Ghana has had stable power over almost 20 years, with gas supply from Nigeria. This government had vowed to fix the problem when it came to power with the former minister for power, Babatunde Fashola, criticizing the former government of lack of seriousness, insisting that any serious government could fix it in six months. Well, he had it for four years without much improvement.

Other infrastructures urgently needed to raise economic activities in the country and boost GDP growth include fast-moving mass transit, such as rail, motorable roads, expansion of seaports, and affordable housing, which Nigeria is in a deficit of 23 million.

Before the current foray in fiscal leadership, experts had queried the usefulness and adequacy of the N1.5 trillion infrastructure fund, insisting that it is a drop in the river considering the enormity of the deficit after three decades of neglect and corruption. They argued that the amount will not solve the power challenge alone.

Dr Vincent Nwani, economist and consultant, believes that the CBN is acting like the tail wagging the dog.

“I refuse to be optimistic about what the CBN is doing; it is not its job and responsibility. It shows that this government has no direction and plan for the economy. How can the CBN be the one announcing stimulus package; don’t they see what other countries are doing. The money will not go anywhere to fix the power challenge alone, not to talk about the other aspects of the economy.

“All these actions by the CBN are unnecessary and a reversal of roles. CBN should focus on its core function and let the government perform its duty. The economy does not lack money or investment; what it needs is reform and the money and investment will come. This is where the problem is; let the government do the needful and the rest will fall in place.”

On the N15 trillion plan, Dr Nwani is sceptical, wondering where the money will come from given the looming recession, and the lack of investors’ confidence in the economy.

“I don’t believe in the plan; on the face value, it looks good, especially for publicity purposes, but as I said before, that should be the first step. The macroeconomic environment is unsuitable for investment so what we need is reform to attract investors. Once the environment is enabling, the money will flow to the country because money is looking for where to make money, he said”

However, Dr Boniface Chizea, a financial consultant, believes the plan is bold, ambitious and capable of transforming the economy.

“This is a well-thought-through package aimed at ensuring that Nigeria optimizes the opportunities inherent in the COVID-19 experience. As usual, the problem has always been with implementation. In the interest of the prosperity of Nigeria and of the coming generations, may it be a different experience this time around,” he said.