Bola Tinubu explains how his eight stimulus policies can help Nigerian economy recover from COVID-19 crisis
A former governor of Lagos State, Bola Tinubu, has highlighted the economic challenges posed by the COVID-19 pandemic that may plunge Nigerian economy into “something worse than recession” and recommended eight stimulus programmes that should be implemented to save the economy from the looming crisis.
The pandemic is gradually pushing the world economy into what experts have described as an unprecedented crisis, forcing policymakers in Nigeria and other parts of the world to start rolling out fiscal stimulus plans. Socio-economic activities have been halted in several cities across the nation. The nation’s economic nerve centre, Lagos and neighbouring Ogun state, a hub of industries, have been on a lockdown that will continue till the end of the month when it may likely be extended.
The Punch in its analysis of the nominal Gross Domestic Product of Lagos, Ogun and the Federal Capital Territory, reports that at least N1.62tn is expected to be lost in terms of monetary output by businesses and firms as a result of the initial two weeks lockdown imposed on the three cities. With the extension of the lockdown for another two weeks, it means at least N3.22tn will be lost.
Tinubu, in a document released on Wednesday titled “Economic policy: Coronavirus economic stimulus program”, painted the likely bleak future for the nation’s economy and suggested way out. His suggestions are coming barely 24 hours after the Central Bank of Nigeria (CBN) rolled out its immediate, short and medium term plan to reboot the economy during and after the COVID-19 pandemic.
Before delving into politics, Tinubu had a career in accounting and auditing with Deloitte and Touche, a leading auditing and accounting firm in the United States and later as an accounting executive with Mobil Oil Nigeria.
In the economic stimulus document, Tinubu warned, “We dare not underestimate the twin dangers posed by the virus itself and the economic consequences of the public health response. Our goal must be that the people live neither with disease nor in hunger.”
According to the former governor, the Nigerian private-sector economy operates on a tripod sector – Agriculture, Service and Industry – and each sector, has been affected by this crisis but with different degrees of severity and in entirely different ways.
“The worst of this dark potential can be avoided if the government is prepared to act in ways that not only feed people but protect the basic contours of our private-sector economy so that it can more quickly revive once normal conditions return,” he said.
Here are his recommendations:
1. Suspend/Amend 5% deficit limit of the Fiscal Responsibility Law
He advised that the 5% budgetary limit for this fiscal year be suspended. Alternatively, the limit should be raised to 25-30% to allow the federal government more room to make the minimum expenditures necessary to save the economy and the people.
2. Emergency Sustenance Payments
Provision of emergency sustenance relief to most Nigerian households, especially the recently unemployed, via cash payments with their BVNs. He said such payments can be done in either one or in a combination of three ways. First, designation of a stipend for every household, enough to pay for the monthly needs of an “average” household for food and other basics.
Second, the stipends could be given as a form of emergency unemployment insurance to those who can prove they were relieved of employment due to the crisis. Third, rendering payroll support to companies and businesses seeking to retain workers. The stipend could help companies stay in operation while maintaining workers on their payroll.
3. Agricultural Market and Commodity Boards
To maintain an adequate supply of food and ensure price stability, the government should re-establish commodity boards for strategically important crops. These boards will specify a guaranteed minimum-maximum price range for these crops in order to maintain and stabilize farm incomes as well as consumer prices.
4. Farm to Market Facilitation
In addition to the work of the boards, the government and the boards must take additional action to improve the transportation of goods from farm to market. Constructing new storage facilities in major urban centres will help maintain supply, keep prices lower and also provided employment for those constructing and maintaining the storage berths.
5. Import Suppression
With exceptions to medicine, essential raw materials and vital products such as petrol imports not produced locally in sufficient quantities, all other imports should be strictly discouraged through a mixture of policy measures including luxury taxes, higher tariffs and higher import processing fees due to the partial closure of ports of entry due to the coronavirus.
6. Maintain and Expand School Feeding Programmes
Tinubu advised that the programme must move beyond its pilot status by expanding it to as many schools in as many states as possible. He said expanding this programme will help government feed the most vulnerable children while creating extra jobs and bolstering food production and farm incomes.
7. Diplomatic Push for Debt Relief
African Finance and Foreign Ministers should join a coordinated effort for debt forgiveness, a “Debt Jubilee.” Alternatively, the World Bank and other DFIs should agree to a wholesale rollover of the debt of African nations by reducing the interest rate burden of African nations by at least one half.
8. Financial Sector Measures
CBN should lower interest rates to single digits. To ensure the health of commercial banks, the CBN should give liberal access to its discount window at a virtual zero interest rate policy. To assist large businesses maintain operations and their payrolls, CBN can give conditional interest-free loans. Conditions could include firms maintaining their workforce and even hiring an extra 10% for 2-3 months at a more reduced wage.
