Economic consequences of Covid-19 and way out for Nigeria (II)

To get prepared for meeting the economic challenges posed by Corvid19, the Federal Government has undertaken some measures. The Vice President Yemi Osinbajo is chairing an Economic Sustainability Committee, a team of policy wonks to coordinate government’s response in this regard. The team has been engaging multilateral agencies in a bid to provide some financial […]

To get prepared for meeting the economic challenges posed by Corvid19, the Federal Government has undertaken some measures. The Vice President Yemi Osinbajo is chairing an Economic Sustainability Committee, a team of policy wonks to coordinate government’s response in this regard. The team has been engaging multilateral agencies in a bid to provide some financial relief to plug the shortfalls of the budget 2020 which projections has been wiped out by about  quarter as a result of the economic fallouts of Corvid-19.

Out of that effort the International Monetary Fund (IMF) has approved the sum of 3.4 billion dollars loan to cover balance of payment deficits. The Senate too convened to approve the borrowing of 800 billion naira from domestic sources while the African Development Bank (ADB) is considering Nigeria’s request for a bridging loan.

The government has approached the Chinese government for loans to finance infrastructure and transportation projects in the country.

It is not the loans that are of issue here. What should concern us is what the loans are sought for vis-à-vis the circumstances we find ourselves under the raging Corvid-19. The 2020 budget had about three quarters devoted to recurrent expenditure leaving just about a quarter for capital spending. Again of the over ten trillion naira budgeted, over two trillion was to be sourced through borrowing from local and foreign sources. With about a quarter of the budget wiped out as a result of Corvid-19 induced global economic downturn we have literarily been caught square. Aware of this the government itself has indicated that a drastic scale down in infrastructural projects marked down under budget 2020 should be expected.

To put it in proper perspective having taken capital spending out of the picture, budget 2020 will be devoted solely to pay salaries and allied recurring expenditure arising from Corvid-19. The coming of Corvid-19 has provided a reason (genuine or not) to dispense with our usually token consideration for capital projects.

Faced with a possible collapse of the economy I understand the need by government in seeking the loans to shore up its finances and meet its statutory obligations in order to stave off potential social and political crises. But I also believe fundamentally that this is the time to get out of the short and medium term template that has become the hallmark of our economic thinking and management.

When you are faced with an imminent collapse of your economy which has been predicated around the export of one commodity whose value has plummeted drastically, you do not need any one to tell you to change tack. If you have an opportunity to engage with a multilateral lending agency like the IMF in these circumstances you should not be asking for loans just to pay salaries. Ditto when you seek out the Chinese for infrastructure, you should be asking for the total package of electric power plants to run electric trains rather than refurbished diesel power trains or roads that are only a little better than push cart paths.

It is time to get real and our officials need to up their game in terms of our economic priorities as a country. We need to think big and set down far reaching economic initiatives for the future of our country. The two greatest deficits in the Nigerian economy are the lack of industrial manufacturing and production, and cutting edge infrastructure. Industrial production rather like the heart in the body is what drives and gives a country the competitive edge in the world economy, and the infrastructure which distributes the goods functions like the veins and blood vessels that ensures a steady supply of blood throughout the body. For our government and economic planners it is almost as if it is a taboo to think along those lines when it comes to determining our economic priorities.

Industrial manufacturing and infrastructural development are strategic necessities which a country like Nigeria must aim for if it must be economically relevant in the comity of nations. I have observed that the countries in Nigeria’s peer group of nations, like Brazil, Mexico, Malaysia, Indonesia, Egypt and South Africa have attained an appreciable level of industrial manufacturing capacity which makes them competitive in the global economy.

The pertinent question to ask then is how do we close this necessary gap in our quest for economic development especially now that Corvid-19 has ruthlessly exposed our economic shortcomings?

It is now time to apply politics to economics. As a country with such a huge resource endowments, coupled with its strategic importance in Africa and the world, Nigeria has not utilized the full range of opportunities and options available to it in the world.

In our quest for industrial development, we need to engage on a higher level with the principal industrial economies and development institutions of the world than we currently do. One of the principal factors that aided our peer group countries in their industrial development is their ability to push and secure concessions from the principal industrial economies leveraging on their strategic value and mutual interests.

Of special reference in this regard is the level of our engagement with the United States of America. I do not think all these years we have compelled America to take a more than cursory interest in our quest for economic development.

America is a corpocracy run on special interests. Governments around the world try to influence the thinking and action of the American government through the various caucuses in the American congress and the executive. In our own case we have the black congressional and oil caucuses, two very important groups among the many that can help secure favourable terms for our quest for industrial development. If we are able to line these groups behind us through strategic engagements our negotiations with the IMF, World Bank and even the European Union and other Industrial economies will be more favourable than what we currently have. The world will only give us what we want only if we show that we know what we want and how we want it.