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The challenges of CORONANOMICS – By Boniface Chizea



Macroeconomic stability, by Boniface Chizea

The above interesting coinage was not envisaged to be the topic of this article. Temple Asaju of Channels Television had come to interview me at home on related issue and I mentioned to him that I was contemplating an article on the Nigerian economy today under the rampaging Coronavirus; what steps we have taken so far for containment, its consequences on the economy, what was left to be done and the outlook, when he suggested the above title. And I have since realised that it is a word that is gaining traction as being generally accepted going forward.
Coronavirus; we are all now in uncharted waters as we discuss. It is almost surreal. How do you begin to get yourself into a frame of mind to discuss an economy when all the countries of the world with insignificant exceptions are facing the same situation of a lockdown of their respective economies? When the challenge is the same; that of saving the life of the populace as the toll is now so massive, unrelenting, furious and scary as we pray for curve to begin to flatten?
In Nigerian on Thursday, April 9, 2020 the gruesome moving statistic indicate that the country has 276 confirmed infections, 6 deaths with 44 so far discharged. We are not to be complacent as most of the countries today with frightening number of daily deaths; up to 800 deaths a day were at some point in time at the same stage as we find ourselves now. Another feature which makes this pandemic worrisome is that an infected person could be without symptoms while actively spreading the virus.
As should be expected some concern has been voiced that maybe we could have acted a bit earlier than we did. Be that as it may it is correct to note that once we took off we did so with speed. The Central Bank to its eternal credit was at the forefront as it galvanised action to contain the pandemic. The Governor led private sector interest to rally round as humongous sums of monies were pledged towards confronting this enemy virus even as the Central Bank itself followed up rapidly with targeted funds to reach out to the more vulnerable sectors of the economy.
A whopping amount of N1.1 trillion was indicated as intervention funds for support of the critical sectors of the economy; local manufacturing and those engage in areas that could foster import substitution and for those in the health sector; laboratory, researchers and innovators. There was also N50 billion targeted credit for Small and Medium scale enterprises, for households badly affected by the virus whereby a maximum loan of N25 million for SMEs was imposed at a low interest rate of 5 per cent with repayments scheduled to align with the particular characteristic of the cash-flow of the business.
The problem with the targeted funds has always been that potential beneficiaries encounter the brick wall in attempting to access them. In view of the obvious urgency now we appeal that the Central Bank should go the extra distance in ensuring that the funds reach the hands of those who are able to deploy them profitably to jump start dormant activities in the economy. The particular advantage of investments arising there-from is that they are more reliable as they have the potential of changing the lives of the beneficiaries positively.
In response to prevalent market conditions the Naira exchange rate was allowed a 15% loss in value to debut at 360 from the previous 305 exchange rate to the dollar. The rate differential with the parallel market and the Investor/Exporter window could not be wiped out which could have been the preferred outcome. The rates remain the significant distinguishing features of the various windows.
Obviously, in this crisis situation it will be unrealistic to worry now about the economic fundamentals of inflation, interest rates and exchange rates. The Quantitative Easing across board in many affected countries as they provide palliatives would most certainly cause spike in inflation. But let’s achieve containment; preserve lives and thereafter there will be plenty of time for such routine and other important concerns to be taken on board.
Someone jokingly remarked that for once the Fiscal and Monetary authorities are pulling in the same direction. Well, that is as it should be as there is only one direction to pull now which is against the pandemic. The Fiscal authorities have risen to the occasion with cash transfers which have generated some controversy regarding the spread of the beneficiaries and some even complained that the knowledge of the scheme as it operates is quite limited.
There are issues regarding transparency surrounding the scheme which have caused eye brows to be raised when the office of the Accountant General of Federation was up in suspicious flames as the National Assembly started asking about records to back the alleged humongous outlay on the scheme. The lesson from this experience is that this country should have long ago gotten to a stage whereby something like unemployment benefits are institutionalised.
The fact remain that some of those in leadership position are not sensitized to the fear of insurrection by the down trodden which may end up engulfing all concerned in governance. Otherwise it is in the enlightened interest of all to encourage the establishment of such welfare schemes and this I suppose should be one of the major takeaways from this pandemic.
Former Vice President Atiku Abubakar has made every reasonable recommendation which is endorsed by a majority of the informed amongst the population that developing countries ravaged by the pandemic should stand on the moral high ground to demand debt forgiveness from the West. Afterwards the infection arrived our shores by those infected who have visited overseas countries.
There also cannot be a better time for Nigeria to put behind her the shame of the payment of graft infested subsidy. There have been good sound bites to this effect but we do pray that the political will would be found this time to stop encouraging the smuggling of products to neighbouring countries as an attempt is made to take advantage of the arbitrage in the pricing of products across our land borders.
Nigeria must embark on shuttle diplomacy as an important stakeholder regarding the fortunes of the oil market. We must not allow only Saudi Arabia and Russia to call the shots and determine what goes on with the Cartel. It is in our enlightened self- interest to have to do this to return some stability to the oil market.
It is commendable that the 2020 Budget has been reviewed awaiting the appropriation by the National Assembly with price of oil now at 30 dollars per barrel and daily production down from the previous 2.1 million barrels per day to 1.7 million per day. The Budget size is now at N5.08 trillion down from 8.41trn previously.
It is a pity that the benefits expected to accrue from the harmonisation of the Calendar year with the commencement of the Budget has now been differed to another day. One expects that some of the controversial allocations in the Budget such as the sum of 500 million dollars for the digitalization of NTA as well the allocation for the renovation of National Assembly Building have been drastically reviewed downwards. With the debut of 5G technology it is advisable that intentions with regard to the upgrade of the NTA technology be put on hold for now.
The Discos have promised to align with the fiscal authorities to give electricity supply free for the next two months to consumers with attempt to make the supply steady. This should not be so difficult now considering that the rest of the economy is on lockdown with power that should have been given to offices and factories now available to be given to those enduring self-isolation in their various homes.
Power supply would certainly cushion the drudgery of isolation. There have been demands to the effect that Value Added Tax should be suspended. But I don’t believe that there is much mileage to be gained in doing so since this is an indirect tax. You can avoid it if you think it so important to you by avoiding items affected.
Most certainly the growth of the Nigerian economy will slide his quarter. And most probably next quarter also which means that by then we will be confirmed to be in a recession. What happens beyond this time would depend on how long it takes to quit the isolation phase and how deep the recession. It is probably early to recount the lessons of this experience as it is still unfolding but most certainly expect changes in work style going forward.
But the need to diversify the economy away from its mono-cultural status couldn’t have been more forcefully brought home to us. Also the need to upgrade critical infrastructure particular in the health sector couldn’t have been made more urgent. We pray that we are able to avoid protracted lockdown experience as a majority of our citizens will not be able to endure such and for an efficacious vaccine to be found to put an end to the sting of this nightmare.

Dr. Boniface Chizea
Good Friday, April 10, 2020

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