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Uche Usim (Abuja), Adewale Sanyaolu, Chinelo Obogo, Steve Agbota, Chinwendu Obienyi and Chiamaka Ajeamo
Although the National Assembly is yet to conclude legislative consideration of the N13.08 trillion 2021 national budget, there are ominous signs that the Executive arm of government may have a bit of headache implementing it when it eventually becomes law in the new year. This because beyond the known threats posed by the effects of COVID-19 pestilence, the recent massive destruction and looting of the economic infrastructure by criminal elements during the #EndSARS protests also stand as headwinds against its successful implementation.
Just like the Muhammadu Buhari administration twice tweaked the 2020 appropriation Act following the shock of COVID-19 pandemic, some commentators are now urging the Federal Government to rework had had its 2021 revenue and spending plans to accommodate emerging exigencies of the recent #Endsars protests which has not only ruptured the economic life raft of oil-reliant nation.
At the peak of the COVID-19 pandemic in April, the Nigerian government, in its efforts to lower the temperature and de-escalate socio-economic tensions, rolled out a N2.3 trillion war-chest of monetary and fiscal policies to bolster lending to the real sector and reactivate other moribund arms of the economy affected by the plague.
Although governments at various levels are counting their losses, there seem to have been no national plan to mitigate the devastation yet other than the nation’s 2021 budget But it known that the ferocious headwind in the unprecedented #EndSARS protests that rocked the various states of the country and the Federal Capital Territory with carnage recorded in the broad spectrum of its economic landscape, shook the foundation of the country’s unity.
During the period, many businesses across the country were shut down with scores of lives lost coupled with destruction of critical infrastructure when criminals hijacked a hitherto peaceful protest and turned it into a national disaster.
It is projected that as an emerging market Nigeria will register a negative per capita income growth in 2020 due to the aforementioned problems.
According to Oxfam’s 2019 report, close to 70 percent of the country’s population live below the poverty line; just as young people under 30 who currently face severe hardship and chronic unemployment make up more than 40 percent of Nigeria’s population. For an economy still recovering from a previous recession and buffeted by COVID-19 and civil unrest, analysts predict that a greater part of 2021 will be rough for the citizens even if the country escapes depression.
Experts who spoke in the wake of the global and national economic shocks maintain that there is likely going to be more job losses, heightened inflation, fiscal imbalances and worsening poverty and misery, even as they acknowledge that the nation’s economic potential is constrained by several structural issues, including inadequate infrastructure, tariff and non-tariff barriers to trade, obstacles to investment, lack of confidence in currency valuation, and limited foreign exchange capacity.
Indeed the peculiar nature of the protests showed how Nigerians in the Diaspora channel funds to supporting the protests in Nigeria, leading to a remarkable dip in offshore remittances which represent a substantial percentage of the Gross Domestic Product (GDP).
As the ashes from the widespread arson settle, several states have started counting their losses, with the House of Representatives Speaker, Femi Gbajabiamila, estimating the cost rebuilding torched infrastructure in Lagos at about N1 trillion.
Among other federating units, the Plateau State government alone said it might have lost over N75 billion to the carnage.
These revelations, according to experts only point out to the devastations that are feared may rubbish the proposed N13.08 trillion 2021 budget, tagged the “Budget of Economic Recovery and Resilience.”
For most commentators, the 2031 budget may no longer accelerate the pace of economic recovery, nor promote economic diversification and competitiveness expected to move the economy to the promised land.
From a global perspective, the International Monetary Fund (IMF) has noted that the protest was not just against police brutality, but an eruption of sedimented frustration, mirrored in widening unemployment and poverty.
The Director of the African Department of IMF, Mr Abebe Amero Selassie, in his statement said; “where you have these kinds of economic difficulties, you know, social protests are not uncommon”.
He advised: “It is critical for the nation to get policy-induced barriers out of the way to facilitate stronger economic growth. The government needs to do more to raise revenues through the area of non-oil resources to be able to invest in health education which would, you know, allow people to be more successful at getting jobs but also improve the economy’s potential. So, I think that the development agenda that Nigeria has, I think, has to be tackled with gusto and vigour so that the millions of jobs that the country needs can be created.”
Commenting on the development, Odilim Enwegbara, a developmental economist said that the socio-political challenges of Nigeria have been compounded by poor leadership, profligate nature of governance and lack of restructuring.
He said: “Nigeria is saddled with poor leadership. We must restructure the economy and country at large. The economy is part of the system. Enough is enough with regards to mismanagement of our meager resources.
“It is time to decentralise governance. No country allows the centre to dictate everything. Why centralise everything? Our needs are different. What the northeast needs is different from what the south-south needs.
“Having said that, we should ensure that small businesses are allowed to grow. The Chinese and US economies are 70 percent run by small businesses, not those big names you know. We should do the same and that is why I appreciate Mr Godwin Emefiele, the CBN Governor. He has used the unconventional approach to run the economy by creating funds for SMEs at very low interest rates because commercial banks will give you high rates.
“So, many SMEs that meet the criteria are getting facilities to boost their businesses. In fact, I’ll advocate that a N10 trillion business fund be earmarked to support agriculture and other sectors and their value chains. Producers, processors, and other activities in the value chain will keep youths engaged and less restive.
“After that, we should block foreign made goods from entering Nigeria. You can’t ask me to produce locally and also allow foreign goods to come in and compete with me when they have the infrastructure to make their goods much cheaper. We can’t grow this way.
“For instance, herbal medicine products and the likes can be locally developed to block Chinese and US medicines from coming in.
“Another that should be urgently tackled in insecurity. It’s really killing the economy. That is why I insist that security should be localised. State and local council police should be encouraged.
Let the people decide who protects them.
“Also, we must reduce the cost of governance. Spending 80 percent of our budget on recurrent is not sustainable. We also need to address infrastructure decay most urgently. It’ll relieve the government of relentless pressure of borrowing to address that.
When it’s private sector driven, infrastructure will be built according to real needs and economic viability and not to score cheap political goals using borrowed funds by government.
Look at the planned rail project to Niger Republic, they know it can’t pay back itself in decades yet they are embarking on it using federal power. That is pure injustice.
Injustice won’t allow Nigeria to develop”, he said.
For his part, Professor Segun Ajibola, former President, Chartered Institute of Bankers of Nigeria (CIBN) said that another round of recession was around the corner.
“With a 6.2 percent negative growth in the second quarter of 2020 and another negative growth in the third quarter, I cannot see any reversal of the negative trend in this fourth quarter. IMF, World Bank and other international rating agencies had equally projected negative growth rates and recession for Nigeria come 2021.
“The proposed budget for 2021 was expected to lessen the hardships on the economy resulting from the stress of recession. But this has been made more difficult now with the unwarranted destruction of private and public properties by the hijackers of #ENDSARS protests, as much resources from the already exhausted sources would be needed to rebuild the destroyed facilities.
“There is likely to be, much more than earlier projected, job losses, heightened inflation, fiscal imbalances and worsening poverty and misery.
The economy that has been on lockdown since March this year courtesy of COVID-19 pandemic and just coming back to life, is likely to still bleed heavily for the greater part of 2021. Nigerians have to brace up for tougher times ahead.”
In his reaction, Partner, Bloomfield Law Practice, Dr Ayodele Oni, said depression can only be averted by stimulating production forces such that the manufacturing and industrial sectors of the economy are incentivised for growth.
According to him, the current approach of government in giving food palliatives and cash handouts are not sufficient.
“N20,000 to N30,000 cannot lift a person out of poverty. In truth, it has the opposite effect of worsening inflation, thereby contributing to a depressed economy”, he noted.
Oni explained that a proper approach would be to develop micro industries and creative hubs/havens with tax waivers which are accessible to the average person through an uncomplicated process.
“The reforms that are needed are institutional not peripheral such as cash handouts and empowerment by bags of pure water and foodstuff. The export and logistics process has to be liberalised. The checkpoints on the road for extortion of transporters need to go. A lot of people are not able to go into the agriculture business because logistics are a nightmare. For instance, it is easier and cheaper to move pineapples to Lagos from Benin Republic than from Benin, Edo State. These are some of the structural issues we need to address if we want real economic growth.’’
For the Chairman, Nigerian Port Consultative Forum, Mr Tunde Folarin, in 2021, corporate taxes and other taxes will not be achieved as projected.
He said: “The only surprise that will come in now is the issue of #ENDSARS protests because of the economic slowdown. The ports were slowed down, industries were closed and so many other commercial businesses were affected.
“Basically, you expect the performance of the budget in 2021 to be affected by recent events. There is no question about that. According to him, predictions by the International Monetary Fund (IMF) on declining national Gross Domestic Product (GDP) should be expected. He added that what is expected of Nigeria now is to look at areas where it can have savings.
“I suggest that capital expenditure should probably be pruned down by a percentage just as recurrent expenditure. But then, it is going to be very difficult to cut down recurrent expenditure because of the need to spend new intervention funds needed to get employment and jobs for the youths and universities currently on strike for certain reasons.
Meanwhile, the President, Shippers Association, Lagos State, Mr Jonathan Nicol, said that Nigeria cannot have a coordinated budget in the midst of poor government policies. “You cannot have a progressive budget when businesses are dwindling”, he said.
Also commenting on the likely effect of the economic shocks on the country, Senior Research Analyst at Cordros Capital, Mr Gbolahan Ologunro, said that the analysis of the #Endsars protests shows that there were no major increases in prices on goods and services between October 8, when the protests started and October 20 when the Lagos State Government imposed a 24-hour curfew.
“In our view, we think that the social unrest will not impact on domestic prices significantly in the short term. However, the impact could have been aggravated if curfews had been prolonged. Consequently, we believe the impact will be lagged and thus will influence the headline inflation in November.
“This is supported by our expectations that the current average stock can partly offset increasing demand for the next five days, after which the widened supply-demand gap in remaining days of the month will not be significant in stoking price pressures for October. As such, we maintain our inflation forecast for October at 1.51 per cent month-on-month (m/m), translating to 14.21 year-on-year ( y/y).
“Over the rest of the year, we expect the lagging impact of the October unrest to translate into increased prices of goods and services in November due to the disruptions at the Lagos ports and as households stockpile commodities in expectation of another lockdown.
As such, we expect the year-on-year inflation rate in November and December to print 14.80 and 15.58 per cent respectively, implying average inflation of 13.19 per cent for the full year of 2020”.
