By Elizabeth Chukwuma
The Wuhan Town in Hebei Province of the Asian country of China, emerged coronavirus, popular, COVID 19, which broke out on December 31, 2019 which have adversely affected the global economy, appear to have given signs that Nigeria is heading towards another round of Economic Crisis, an indication of worse days ahead.
The recession, according to business analysts, may not be unconnected to the basic fact that the country is part of the global economy which is facing its worst economic Crisis since the 1930s. The International Monetary Fund, IMF, under the close watch of Kristalina Geogieva, had dropped the hint of the recession in its 2020 forecast because of the cornavirus pandemic and lockdowns.
The multilateral Financial Institution had predicted a 3% contraction for the global economy this year, noting that it will be worse in the developing countries. She is right. This is because it has already started manifesting in Nigeria, an oil producing country, and a member of the Oil Producing and Exporting Countries, OPEC.
Hajia Zainab, minister of Finance, Budget and National Planning, who had given an insight about the recession which she had attributed it to the coronavirus pandemic. The pandemic, she had said had resulted in drop in oil revenue due to drop in oil price in the International market and drop in no –oil revenue due low volume of cargo traffic at the nation’s seaports.
The ministerial warning did not come to many as a surprise. As at last March, Hajia Ahmed, had started drumming it into the ear of Nigerians that the country ‘’might go into another round of recession if the coronavirus pandemic continues in the next six months when the IMF , reached out to member countries ‘’to take swift and sizable action to support their economic recovery as the disease has not shown any sign of declining.
Given an insider information, about the situation in Nigeria, the minister had said there is every cause for people to worry because ‘’the daily net oil and gas revenue that flows into the Federation account has dropped. The minister cited the total amount from crude oil sales that was paid into the Consolidated account in the first quarter of this year, 2020, by the Nigerian National Petroleum Corporation, NNPC, which was very discouraging.
According to her, N940.91 billion , was paid into the account from oil sales by the Oil Conglomerate, NNPC. Note that President Muhammadu Buhari, in his 2020, budget speech which was presented to the National Assembly late last year for consideration and approval had put the oil benchmark at $57 per barrel on a daily production output and sales of 2.1 million.
He got it wrong. The global outbreak of the COVID 19, may have shattered the budgetary plan , forcing the Hajia Ahmed and he ministry of Finance, Budget and National planning officials to review the budget at the instance of the Katsina state born Nigerian President.
The ministry officials were said t have reviewed downwards the oil benchmark to $30 per barrel on a daily production output and export of 1.7 million which, according to the ministry sources was the prevailing price at the International Oil market. Indeed, the continued drop in oil price in the International market as a result of the pandemic may have forced the government to adopt $20 as the country’s benchmark for oil..
An aggrieved minister of Finance, Budget and National Planning confirmed a shortfall of N125.52 billion or 31 percent of the prorated amount that was projected to have been realised from the sales of crude oil on the first quarter alone. The situation in the Oil sector was not different from what is happening in the NiGerian Customs Service, NCS, under the close watch of Hameed Ali, a retired Army Colonel aand Comptroller General, NCS. From a target of N2 trillion from non oil imports based on the country’s Fiscal policy, it was reviewed down wards to N1.5 trillion as a result of low economic activities at the seaports caused by the COVID 19.
She noted that the drop in oil price in the International market and low volume of cargo traffic at the ports , will contract the country’s Gross Domestic Product, GDP ,by 9.4 percent this year if the disease persists. But she is optimistic that going by the economic Sustainability measures that had been put in place by the government the Contraction will still drop to 4.4 as ‘’ we are working on the premise that there will a Fiscal surplus in the months ahead’’. This should gladden the heart of Nigerians as the Fiscal stimulus plans , which she had confirmed that the government is working on would further mitigate the GDP contraction with a negative 0.59 percent.
The drop in oil and non oil revenue in the first quarter of 2020, may have encouraged the government to seek for alternative sources of Funding the N10.33 trillion budget to boost the economy in this trying and difficult times. It was not surprising why the government was said to have approached the Georgieva led International Monetary Fund, IMF, for a $3.4billion loan. The Multi-lateral Financial Institution, did not hesitate in approving the $3.4 million facility , under its Rapid Financing Instrument, RFI, which is expected to be repaid in the next 3 – five years .
Note that if the country should slip back into another recession, as hinted by Hajia Ahmed, it would be second time the country’s economy had entered into recession had entered into recession under theBuhari Administration in less than four years. Godwin Efiele, the governor of Central Bank, had attributed the 2018 , recession to the late implementation of the budget, weakening Demand and consumer spending,, rising contractor debts and low minimum wage.
Emefiele also attributed the cause of the 2018 , recession to the flooding of the Nigerian markets , with foreign agricultural products, particular, foreign par boiled rice, pineapple, continued insecurity in the north east geo-political regions and growing level of Foreign debts. But the current recession knocking on the nation’s door has nothing to do with some of these risks to output growth but related to a global pandemic.
As a prelude to solving the economic problem, , members of the National Economic Council, NEC, Headed by Yemi Osinbajo, a Professor and the country’s Vice President at it its recent meeting were said to have resolved ‘’to ensure a more effective synergy between the Federal , state and local governments especially in matters related to fallouts of the COVID 19 pandemic and how to effectively and efficiently reopen the economy after the lockdowns and hut-downs across the country. The Osinbajo led NEC, were said to have also set up a seven –man Committee headed Ifeanyi Okowa, the governor of Delta state to work closely with Boss Mustapha , the Chairman of the Presidential Task Force , PTF, on COVID 19, and Secretary of the Fedration, to address the country’s economic Challenges in this COVID era.
Moreso, the Council members were said to have also agreed to Cooperate and Collaborate with the Economic Sustainability Committee inaugurated by Osinbajo, the Vice President at the instance of the Katsina state born Nigerian President for the development of a national economic sustainability Plan.
Such a plan, the Vice President had said is expected’’ to introduce a substantial stimulus package , that will run into trillions of naira to ensure that the country gets through the global Pandemic economic Challenes and chart a ‘’path for growth and development for the nation’s economy by ensuring massive productivity in several sectors such as the agriculture, power, infrastructural development, technology and mining, Manufacturing, Computer among others’’.