COVID-19: Policy reforms critical to economy’s post-pandemic growth

With the unprecedented disruptions of Nigeria’s socio-economic systems by the COVID-19 pandemic over the past two months, experts believe that moving the nation forward by policy initiatives to achieve both financial and macroeconomic stability will demand more than past and present administrations have done so far. In this analysis, development experts with diverse academic backgrounds […]

With the unprecedented disruptions of Nigeria’s socio-economic systems by the COVID-19 pandemic over the past two months, experts believe that moving the nation forward by policy initiatives to achieve both financial and macroeconomic stability will demand more than past and present administrations have done so far.

In this analysis, development experts with diverse academic backgrounds and professional competencies share their views on how Nigeria can recover from the devastating impact of the COVID-19 scourge and translate the opportunities created by it to national socio-economic development advantage in the post-pandemic era.

Development experts have described the current crisis in the nation’s economic landscape, particularly the economic losses to a country that is just trying to fully pull out of a recession, as an ugly development with lessons for the Nigerian government to learn from and proactively respond to through policy measures in order to move the economy forward.

The experts who shared their thoughts on the nation’s past and present economic development policy initiatives in exclusive chats with Daily Trust largely harped on the need for the federal and state governments to focus on key infrastructure and human capital development strategies as a desirable option to strengthen the economy and assure its sustainable growth.

Power Sector is crucial to sustainable growth – Dr Joy Ogaji

Sharing her thoughts on the state of the economy and the role of the power sector in broad-based development, an industry expert, Dr. Joy Ogaji, maintained that a pivotal area requiring improved policy and funding support in order to bring about value addition, transform it and support the current diversification agenda of the government is the power sector.

Dr. Ogaji said post-privatisation progress in the power sector had been stunted by various deep-etched challenges.

She said there was need for Nigeria to do more in addressing lingering bottlenecks such as the sub-optimal utilisation of available generation capacity, low rates of collection and remittance, inadequate transmission infrastructure and high distribution losses.

She is of the view that there is need to rethink the Nigerian Electricity Supply Industry (NESI) discourse as necessary to establish the nexus to provide an updated shared vision; a more integrated approach for a viable and sustainable outcome for the benefit of all.

Dr. Ogaji said, “Issues such as providing better clarity to the roles and responsibilities of the various licensees and market participants and the impact non-performance have on other segments of the value chain should be prioritised in remedial policy measures. The re-powering can be as extensive as creating short-term markets to test efficiency and incorporate policies to increase renewables as part of a consistent market framework.

“The rethinking expected in the power sector reform should be geared towards substantive evidence-based evaluation around five key themes: cost recovery, utility governance and restructuring, power markets, regulation and political economy.

“The narrative should be around the reform dynamics as necessary to evaluate the impact of reform measures on key dimensions of sector performance, including reliability and security of supply, operational efficiency and cost recovery and energy access. The overall aim is for regulatory and policy makers to take the necessary re-structural steps to make the market viable.’’

Ogaji who is a former member of the Presidential Task Force on Power (PTFP), advocates the need for a new approach in the sector, especially on the management and control of electricity generation, transmission and distribution systems geared towards meeting consumers’ need of electricity that is affordable, reliable and sustainable.

Therefore, she said the proposed rethinking should primarily seek to improve the quantity and quality of supply to the underserved, deliver electricity to the un-served, minimise Aggregate Technical, Commercial and Collection (ATC&C) losses and ensure customer-centric initiatives or customer satisfaction.

Dr. Ogaji further said, “A critical component missing in the current market design is the lack of a post-privatisation roadmap which will act as a compass; leading us to a commercially viable market with all participants held accountable to their obligations. Transparency and service level agreements to all licensees and market participants, including the government agencies, should be the battle cry.

“The ripple effect from an efficient and productive power sector will be felt across all sectors that rely heavily on power, including agriculture, manufacturing,  information technology, education and health.”

Finance Act represents a catalyst for nation’s fiscal efficiency – Chief Mark Dike

Commenting on the nation’s fiscal regimes over the years and the way to go, a past President of the Chartered Institute of Taxation of Nigeria (CITN), Chief Mark Anthony Dike, has pointed out that the Nigerian economy had been in dire fiscal straits prior to the outbreak of the COVID-19 pandemic which caught the global economy by storm.

Chief Dike said the economy which was heavily dependent on crude oil sales as its main foreign exchange (forex) earner, got into deep straits when prices plummeted to around $22 per barrel by the end of March, 2020, far below the $57 per barrel used as the budget benchmark by the government for the 2020 federal budget.

he said, “The situation has since gone far worse than that leading to an urgent review of the 2020 budget benchmark by the Federal Executive Council (FEC) on Monday, March 9, 2020. The review included the following: reduction of the crude oil benchmark from $57 to $3, cut of the N10.59tn budget to N9.09tn and reduction of 20 per cent on approved capital expenditure estimates, as well as 25 per cent of recurrent expenditure estimate.”

He added that the obvious effect of this, given the fragile nature of the economy, was horrendous.

Explaining further, Dike said, it meant that all the tiers of government would have great difficulties in meeting their obligations given their high debt burdens.

The fiscal policy expert said the federal and states’ tax authorities, especially the Federal Inland Revenue Service (FIRS) and the Lagos State Internal Revenue Service (LSIRS), had taken the lead in relaxing the tax returns filing periods in order to relieve the reporting entities/taxpayers from the pressures which the pandemic had occasioned.

He, however, pointed out that as desirable as these steps by the fiscal authorities were, they did not go far enough to address the potential challenges and difficulties that businesses were likely to face.

The chartered tax expert further clarified that, “As a matter of fact, a number of states are currently under total lockdown with offices and businesses closed. Under that circumstance, such business enterprises will be severely constrained in meeting their obligations to their employees since they are not making any revenue.

“It must be recalled that the passage of the Finance Bill 2019 and its subsequent assent by President Muhammadu Buhari expeditiously was indeed an icing on the cake for Nigeria after many years of failure to have a finance act that will address the gaps in fiscal policy measures to meet the ever burgeoning expenditure profile.  That act, in one single stroke, addressed many of the lingering fiscal challenges facing the economy over the years.”

Dike, a retired Director of the FIRS, listed some of the changes introduced by that act: exemption of companies with turnover below N25m from paying income tax, reduction of the tax rate for companies which turnover is above N25m but below N100m from 30 to 20 per cent, the tax rate for companies which turnover is above N100m remains at 30 per cent; and introduction of new commencement and cessation rules.

He said others were inclusion of definition of goods and services under the Value Added Tax (VAT) Act thereby removing a lot of ambiguities surrounding the issue since the inception of VAT in Nigeria; the increase of the rate of VAT from five to 7.5 per cent was justified from the point of view of maximising tax revenue collected through indirect taxes rather than direct taxes because of its obvious empirical advantages.

Restructuring economy, entrepreneurs’ innovation key to growth – Amb. Ayoola Olukanni

The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has said the impact of the COVID-19 pandemic on Nigeria’s economy is huge.

Reflecting on the impact of the pandemic on the real sector, the Director General (DG) of NACCIMA, Amb. Ayoola Olukanni, said, “We would say the COVID-19 pandemic is a bigger threat to the Nigerian economy than the economic recession faced in 2016.

“The global pandemic is thus a dual threat; directly affecting the health of the population, negatively impacting on the productivity of the nation’s human capital and indirectly stifling economic activities through its impact on global crude oil prices, its impact on foreign exchange (forex), financing the national budget and its impact on consumer spending.”

He said NACCIMA was working closely with the Federal Government through the Ministry of Industry, Trade and Investment’s COVID-19 Committee on Sustainable Production and Distribution of Essential Products to ensure that the private sector did its utmost best to sustain operations in order to avoid reduction or shutdown of production activities and to encourage manufacturers to scale up production of essential commodities such as pharmaceuticals, consumables, sanitary and hygiene products needed to curtail the spread of COVID-19.

Olukanni explained further that, “NACCIMA is also working with city and state chambers to coordinate public-private sector collaboration in their respective states.”

He said NACCIMA’s members “are feeling the negative impacts in the following forms: rising prices of imported raw materials due to global supply chain disruptions, negative impact on sales revenue due to the lockdown, higher investment risk and cost of funds and rising costs of production (where production is possible) due to the overall rise in price levels.

“However, members involved in digital service delivery, logistics and production of essential commodities such as food and energy have seen a significant rise in demand.”

He said NACCIMA was advising private sector operators to take the lockdown period to review current operational procedures with a view to becoming more adapting and innovative given the possible scenarios of an extended lockdown and/or intense changes to work processes.

The industrialist also hinted that the OPS had been requested to devise innovative ways via online and virtual operations where possible, especially those in the service and e-commerce and the digital economic sector.

On what government needed to do to revitalise the economy, the former envoy said, “We would advise government to develop and implement policies and strategies that will help to stimulate the economy. These policies and strategies should stimulate economic activity to stave off recession.

“These policies should also focus on resolving the issue of workforce depletion brought about by the health implications of COVID-19. Such policies could include targeting the production of goods and services and prevent depletion of workforce.”

He added that COVID-19 and its impact on the economy presented an unprecedented opportunity to restructure the Nigerian economy; to make it more resilient and less import- dependent, explaining that, “This can be done through diversification and paying attention, especially to  the non-oil sector, particularly agriculture, mining and IT, by expanding opportunity for the private sector in these areas.”

Tackling surging inflation, debt burden should be prioritised by government – Prof. Seth Akutson

On his part, Professor Seth Akutson has advocated the need for the Central Bank Nigeria (CBN) to come up with an appropriate monetary policy regime that will reduce inflation rate to a single digit and ensure price stability; borrowing from cheap sources such as treasury bills and open market operations.

Akutson, a Professor of Economics and Entrepreneurship Development at the Nassarawa State University, said printing of more currency would further exacerbate the high inflation rate currently being experienced, adding that  the nation’s huge debt burden should be addressed with fresh negotiations for possible cancellation or moratorium that allowed for favourable payment terms and rates rebate.

He canvassed that, “Government should increase consumption capacity with needed fiscal policy through massive government spending and tax incentives for citizens and small businesses, block every budgetary leakage and spending profligacy by embarking on strict financial frugality, address recurrent expenditure, particularly the huge overheads on political office holders, boost agricultural production and food supply through incentives to farmers, low-priced fertilisers supply and a strong development finance for manufacturers to cover for lost ground arising from substantial food consumption during the lockdown without corresponding supplies.

“Focus should be placed on Cotton, Garment and Textiles (CGT) to revitalise the textile industry and aggressive population control occasioned by the COVID-19 baby boom.”

The don also advised the Federal Government on the need to explore the capital market for long-term financing such as long-term bonds.

He said the unprecedented challenges brought by the COVID-19 pandemic would remain with Nigeria for many years to come if the Federal Government failed to take the appropriate steps to mitigate them as experts are of the view that developing economies like Nigeria, will undoubtedly go into recession, if not depression, as a result of the sharp drop in global oil demand and prices, suspension of production as a fallout of the lockdown, increased fiscal spending by governments, dwindling revenues and incomes, as well as debts.

Prof. Akutson said the nation’s economy could build some bulwarks to mitigate the damaging effect of the pandemic and revitalise its economy back to growth trajectories, but rhethorically asked, “Will the country’s economic handlers take the appropriate steps?”