Business News
COVID-19: Short-term reforms needed to reduce impacts on the Nigerian economy -NESG
The Nigerian Economic Summit Group said the Government needs to develop some short-term reforms and take actions to reduce the impact of the Coronavirus pandemic on the Nigerian economy.
The Nigerian economy has remained very weak and since exiting recession in 2017. The growth rate has only been around 2%. In the same vein, the country’s external reserves have declined from about $45 billion in August 2019 to about $34.5 billion as of April 7, 2020, due to the crash in crude oil prices.
Nigeria’s over-dependence on oil for its revenue and foreign exchange earnings continues to weaken the fiscal capacity, just as the high rate of unemployment, infrastructure deficit, poor power supply, among problems have increased vulnerability to external shock.
The outbreak of the Coronavirus pandemic has led to disruptions to the global economy and people’s lives, with adverse effects in the oil market, tourism, investments, supply chains, capital markets, funding of the 2020 budget and so on. These highlighted conditions and others negatively affect Nigeria’s macroeconomic stability and resilience to external shock.
(READ MORE: COVID-19: What businesses must do to mitigate crisis)
In order to develop some strong resilience against these external shocks, the country needs to develop some short term reforms and actions to reduce the impacts of the Coronavirus pandemic on the Nigerian economy. In a report published by the Nigerian Economic Summit Group (NESG), as seen by Nairametrics, some of the needed short-term reforms were highlighted. See below:
- Restructuring Nigeria’s debt basket to allow for more domestic borrowing: Here, the government needs to increase the domestic debt limit because this is key to the country’s ability to secure external debts. This will ensure that there is enough funding to stimulate economic activities and growth through stimulus spending by the government.
- Review of 2020 budget to reflect current realities in terms of revenue and implement broader budget reforms: This calls for the urgent need to review the 2020 budget to reflect current realities. All non-productive spending should be dropped for projects with high impact on productive sectors and economy. In addition, the procurement process needs to be reformed so as to allow for timely execution of capital projects and judicious use of public funds. Note that the government has already taken steps in this regard, as earlier reported by Nairametrics.
READ ALSO: CBN, Bankers committee back N3.5 trillion stimulus package for Nigeria
- The Government should stop the determination of fuel price: The Government should reconsider its role in the petroleum downstream sector, especially with price regulation. The best option now is to stop fuel price determination/control and let market forces dictate the price. This will ensure the limited available resources are judiciously used for infrastructural development rather than supporting consumption through subsidy.
- Monetary Policy Consolidation: The government needs to make some critical monetary reforms such as moving away from multiple exchange rates, among others. Also, there is the need to create an instrument for maturing Open Market Operation (OMO) securities in order to get into the buy-in by investors. This will help mop-up liquidity in the system and reduce inflationary pressure. Most importantly, the government must work on strengthening the Central Bank of Nigeria (CBN)’s balance sheet, which will provide some support to the financial system and ensure its stability.
- Work on attracting FDI: The Government should also work on consolidating all policies that affect trade, economic activities, and investments. The current business and investment environments are hostile to both foreign and local investors. The provisions of the Finance Act 2020 show examples of the kind of activities required. For example, there was about $58.4 billion worth of foreign direct investments (FDI) that were delayed in 2019 due to unclear regulations in the country. In the same view, there is an urgent need to stop total reliance on the government for infrastructural funding. A more private sector-driven approach should be considered. A framework for Public-Private Partnership should also be strengthened.
READ ALSO: Impact of COVID-19 on startups
- Stop ad-hoc policymaking and engage stakeholders: The policymaking approach must be properly coordinated and consistent with existing plans. Engagement with relevant stakeholders before critical decisions are made should be practised across board. Also, relevant government Ministries, Departments, and Agencies(MDA) must conduct a cost-benefit analysis in the process. Not only does this send the proper signal to investors, but it also provides concrete evidence to support or challenge a course of action.
- Urgently revisit the closure of the land borders: The NESG urged the government to work with regional neighbours towards resolving the issues concerning the reopening of land borders as the adverse effects of border closure on trade and employment are increasing.
Energy
Nigeria to fix irregular power supply in 40 years- Senate
Four decades is needed due to underfunding and the FG’s failure to fix the challenges of electricity generation.
The Nigerian Senate has said that it will take Nigeria 40 years to fix irregular power supply.
This was disclosed by the Senate Committee on Power on Tuesday after the Minister of Power and his team made a presentation to the Committee, according to Guardian.
The four decades wait, according to the lawmakers, is due to underfunding and the Federal Government’s failure to fix the challenges of electricity generation.
The committee was astonished by the submission of the Minister of Power, Mamman Saleh, that of the N165billion required for capital projects in 2020, N4billion was given as bribe of which only N3billion was cash-backed.
In lieu of this, the Committee dismissed claims made by the minister over raising hope on early provision of constant power supply, while Managing Director of the Transmission Company of Nigeria (TCN), Sule Ahmed Abdulaziz, painted a gloomy picture during the ministry’s budget defense.
A member of the Committee, Danjuma Goje, expressed concern that based on Abdulaziz’s presentation, N165billion was proposed, but the ministry gave N4billion in envelope, insisting that it would take 41 years to deliver constant electricity when N165billion is divided by N4billion.
Backstory
Recall that Nairametrics had earlier reported that it will take nothing less than $100 billion to enable stable power supply in Nigeria.
What they are saying
Mr. Danjuma expressed pessimism over hopes of stable power supply in the country. He went as far as stressing that even if ongoing projects are being completed there is still no hope for stable transmission of power in the country.
Mr. Danjuma was quoted as saying: “Going by the minister’s presentation that transmission gas increased from 5000 to 8000 megawatts, it is not enough. When dishing out figures, we should bear in mind that capacity, transmission, and distribution have increased and that Nigerians, manufacturers, and industrialists want to see stable electricity.”
ENDSARS
#EndSARS: ECOWAS calls for protesters to remain peaceful in their demonstrations
ECOWAS has called on protesters to be peaceful in conducting their protests.
The Economic Community of West African States (ECOWAS), has called on protesters to be peaceful in conducting their protests and urged Nigerian security operatives to exercise restraint in the handling of protests.
This was disclosed in a statement by the organization on Tuesday and comes on the heels of statements by other International bodies and personalities, who have expressed worry over the nature of brutality meted on protesters, especially after the Lekki shootings.
Press Release on #ENDSARS Protests in Nigeria pic.twitter.com/hht0YjVclo
— ECOWAS-CEDEAO (@ecowas_cedeao) October 27, 2020
“ECOWAS Commission notes with concern that demonstrations by Nigerian youth calling for Police reforms, particularly the abolition of the Special Anti-Robbery Squad (SARS) of the Nigerian Police force, accused of misconduct by those demonstrating, have turned violent,” they said.
The body said it recognizes the right to peaceful protests and also called for protesters to be peaceful, due to the rising reported cases of lootings post protests during the curfews.
“While ECOWAS recognizes the right of citizens to freedom of expression and peaceful assembly and protests, it also wishes to stress that those rights should be exercised in a nonviolent manner.
“In this regard, ECOWAS calls on all protesters to remain peaceful in the conduct of their demonstrations. It also urges the Nigerian security operatives to exercise restraint in the handling of the protests and act professionally.”
Bottomline
The tone of ECOWAS’ message is different compared to the rest of other stakeholders including the statement of the Lagos State Governor, House of Reps Speaker, and the Vice President, who all acknowledged that the protests were peaceful and the protesters were attacked and that the violence from the curfews was not done by the protesters but by hoodlums.
The ECOWAS message is also the first statement by West Africa’s most important regional body since the #EndSARS protests started in the first week of October.
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