Nigeria needs at least N10.1 trillion worth of interventions from the government to address the fallout of the Coronavirus pandemic.
Chief Executive Officer, Nigerian Economic Summit Group (NESG), Jaiyeola Laoye, stated this during the virtual dialogue organised by the Ministry of Finance, Budget and National Planning and the Department for Internal Development (DFID).
Nigeria’s intervention since the onset of the pandemic, Laoye said, is estimated at N4.5 trillion (3.1 per cent of GDP). This consists of interventions from the Central Bank of Nigeria (CBN), fiscal authorities and donations.
According to the NESG boss, Nigeria requires N10.1 trillion (seven per cent of GDP) worth of interventions to ameliorate the economy, given the slow and fragile growth with over 100 million individuals living in poverty.
According to him, other reasons for the interventions is to revamp the economy, address the high unemployment/underemployment rate at 43.3 per cent; the level of decay in the health sector and the dominance of the informal micro, small and medium scale businesses, that are in dire need of support.
Nigeria, he lamented, “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”.
To fund the gap, Laoye noted: “There are several options available to the Nigerian government, each with potential benefits and drawbacks.”
To close the gap, the government, he said, could “issue medium-to-long-term domestic bonds (domestic borrowing)’’.
He, however, cautioned that, “the significant rise in domestic debt often leads to higher domestic interest payments, which is detrimental to the private sector”.
Another option for closing the gap, he pointed out, is for the government to “secure loans from multilateral institutions like World Bank, IMF, IFC and AfDB (external borrowing).”
In this case, he noted: “Nigeria may have to follow some conditionality, which may have unpalatable implications on the socio-economic stability, especially at this period.”
Another measure to close the gap, Laoye stated, is for the government to “consider the purchase of government securities (Quantitative Easing, QE). The implication is that Quantitative Easing can also deteriorate exchange rate stability and can put more pressure on inflation”.
The organised private sector, comprising households and businesses, he said, has some expectations of the government on the way the intervention is handled. These include “transparency of government initiatives and interventions. We must ensure that federal and state governments’ initiatives reach the affected businesses and households across the country”.
“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.” Laoye said.
“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.”