The problem with a problem
The problem with a problem is that it creates more problems and worsens existing problems. Take the case of the coronavirus pandemic. It is primarily a health problem. Its primary challenge for world leaders is how to contain it, prevent more infections and save the lives of those who have been infected with it. That […]
The problem with a problem is that it creates more problems and worsens existing problems. Take the case of the coronavirus pandemic. It is primarily a health problem. Its primary challenge for world leaders is how to contain it, prevent more infections and save the lives of those who have been infected with it. That is the immediate global worry.
But the virus has also forced world leaders into the panic mode. It is worsening the existing economic problems in many countries. Ordinarily, we should worry about that after COVID-19 has been forced to yield to the superior forces of modern medical and health sciences. But no problem compartmentalises itself. We have to deal with the pandemic as a new problem and its capacity to worsen the existing economic problems at the same time. It is a double whammy for many struggling countries, ours not excepted.
Africa being the weak link in the chain of global economic development, you need not wonder about the fate of the continent now in the throes of the pandemic and what its fate would be the day after. The World Bank has already dropped the dreaded word: recession. The word is bad news for all countries and their economic managers.
In a statement issued on April 9, the World Bank group warned that the pandemic would force Nigeria, Angola and South Africa into recession. These are the strongest economies in sub-Saharan Africa. If they take the hit, no poorer countries in the region can hope for the miracle of not being counted among the devastated by a combination of its existing economic problems, compounded by the pandemic and worsened by recession.
According to the World Bank, which has the last word on the economies of all nations, “While most countries in the region have been affected in different degrees by the pandemic, real gross domestic product growth is projected to fall sharply, particularly in the region’s three largest economies like Nigeria, Angola and South Africa, as a result of persistently weak growth and investment.” This means that like the AIDS virus, coronavirus is also an opportunistic economic affliction. The conditions for its maximum damage already exist in these and other countries on the continent.
The World Bank could not help piling it on in Africa. Its vice-president, Hafez Ghanem, said “the COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard.” That is the post coronavirus challenge that our leaders on the continent have to contend with. It is not, to be sure, going to be easy. A recession puts a country in an economic hole. It may be in the hole for a long time or a short time but it cannot climb out of it without being forced to look down rather than up in its expectations in its economic and social development projections. Few things must be more worrying for a country that stepped into the new year on the first of January with rising hopes only to see its calculations gone awry because a killer virus chose this time to humble the world.
The federal government is already preparing for the day rain, not manna, would fall from wherever. The year began for the government on a hopeful note. But within only two months into the new year, the government is now forced to pare down its revenue projections on which it based the handsome 2020 annual budget of N10.33 trillion. It was a deficit budget by the way. That means that the projected revenue was not projected entirely on actual earnings. But there is no doubt that less, much less money, would now trickle into the national coffers, thanks to the virus with a bad attitude.
The implications of a federal government earning less money are, to say the least, both disturbing and devastating. The lack would flow down to the states, each of which would receive reduced monthly handouts from the federation account. In a proposal sent to the national assembly last week, the government reduced its revenue projection for the year from N8.41trn to N5.08tr. It represented a projected loss of revenue of N3.3trn. The government has pruned the various sectoral votes too to be more realistic in order to help it prepare for the rather tough task of managing poverty; not the easiest challenge for a country that has for decades faced and been hobbled by the tricky problems of managing its wealth.
This is the challenge that worries the World Bank and Atiku Abubakar, former vice-president. How the government tackles that challenge would determine in what shape we emerge from the pandemic. Abubakar said that “even when we are able to avoid a high human toll from this virus, we would not be able to escape a much higher economic toll.”
What makes the whole situation worrisome is that this country is already groaning under a heavy debt burden. “As of September 2019,” according to ThisDay editorial, “the debt profile had ballooned to N26.2 trillion from N25.7 trillion in the corresponding period of 218. More instructively, the nation’s debt has grown by 214.90 per cent over the past six years.”
Experts have repeatedly advised the government on what it must do to make its economic management less dependent on loans, internal and external. But the debt profile continues to grow, becoming progressively heavier. The government is asking for more external loans to take care of business. Coronavirus is not to blame. We were heading for the hole long before the virus struck.
As I have often argued here and elsewhere, a loan is an easy option for every country. No country depends entirely on its internally generated revenue to make great developmental leaps. Financial institutions exist to help countries in need of financial help. It is easier for a country to take the loans and more difficult for it to institute a regime of hard-headed economic management policy that is more inward looking and less outward looking. The coronavirus may yet leave in its wake a piece of advice on how not to continue to make our country look big for nothing.