COVID-19: Nigerian Economic Summit Group Reveals Why Nigeria Needs N10.1 Trillion

 

The Nigerian Economic Summit Group (NESG) has revealed that Nigerian businesses and households need N10.1 trillion worth of interventions from the Federal Government considering the over 100 million individuals living in poverty within the country and the continuous impact of coronavirus on the economy.

According to NESG's Chief Executive Officer, Jaiyeola Laoye, the Nigerian government needs to increase the intervention effort in order improve the economy. He said with the interventions from the Central Bank of Nigeria (CBN), fiscal authorities and donations, the intervention effort of the government is estimated at N4.5 trillion (3.1 per cent of GDP). Recall that Nigeria had recently received $3.4 billion from International Monetary Fund.

Why Nigeria need N10.1 trillion?

Laoye made the disclosure during the virtual dialogue organised by the Ministry of Finance, Budget and National Planning and the Department for Internal Development (DFID). He said Nigeria needs at least N10.1 trillion to address unemployment and underemployment rate which he pegged at 43.3 per cent.

He also stated that the trillions of naira will be used to rejuvenate the economy which has been experiencing slow growth due to the COVID-19 pandemic which compelled Nigeria to shut most of its economy. His statement comes days after the Managing Director of the IMF, Kristalina Georgieva, said Nigeria has difficult days ahead.

Allnews had reported that Georgieva said Nigeria's economy will get worse this year. Georgieva made this known while revealing the impact COVID-19 will have on Nigeria's economy and factors that contributed to the economic downturn. Georgieva said while COVID-19 has spread less in Nigeria, the country is still experiencing the adverse effect of the coronavirus due to some measures the government took and external factors as well.

Laoye said the N10.1 trillion will also address the decay in the health sector and support the dominance of the informal micro, small and medium scale businesses. This would lead to further borrowing by Nigeria which Laoye said “is faced with the dual problem of declining revenue and the absence of adequate savings either in the form of external reserves or fiscal buffers to finance such a huge gap”. He said in The Nation report.

Laoye's take on how Nigeria can close the gap

He said there are several options available for Nigeria to fund the intervention. According to Laoye, Nigeria should request for loan from international financial institutions or issue medium-to-long-term domestic bonds (domestic borrowing) but should also be mindful of rise in domestic debt, “There are several options available to the Nigerian government, each with potential benefits and drawbacks.”

Laoye, however, warned that “the significant rise in domestic debt often leads to higher domestic interest payments, which is detrimental to the private sector”. Adding that, to close the gap, Nigeria should “secure loans from multilateral institutions like World Bank, IMF, IFC and AfDB (external borrowing).

“Nigeria may have to follow some conditionality, which may have unpalatable implications on socio-economic stability, especially at this period.” Aside from the domestic and foreign loans, he said Nigeria can “consider the purchase of government securities (Quantitative Easing, QE)."

But according to him, this also poses a problem as well, "The implication is that Quantitative Easing can also deteriorate exchange rate stability and can put more pressure on inflation”.

Nigerian government's transparency issue

Laoye said businesses and households are expecting interventions from the government to survive the COVID-19 period, so transparency matters when distributing the palliatives. He said the interventions must reach the affected businesses and households, “transparency of government initiatives and interventions. We must ensure that federal and state governments’ initiatives reach the affected businesses and households across the country”.

He added that, “There is the need for government to provide constant update to the private sector and citizens on how much has been disbursed, number of beneficiaries, their sectors, location and scale of interventions received.

‘’The private sector also demands that government should ensure that “support for businesses in targeted sectors leverages technology and include informal players. Specifically, government interventions need to include loan guarantee schemes to support production as well as income support payments to workers whose employers are unable to pay their salaries.”

The IMF had also beamed the light on Nigeria's transparency, stating that Nigeria must provide receipt for the $3.4 billion loan it obtained from the fund.