‘Government should find a way to support businesses so they don’t go into bankruptcy’
The Coronavirus (COVID-19) pandemic has cost Nigeria and the global community so much economic dislocation, leading to the country cutting down on her 2020 Budget revenue projection by as much as N1.8 trillion. The Central Bank of Nigeria has so far made several economic stimulus interventions while the Federal government is yet to come up with plans to shield the economy from sliding back into recession. In this interview with ANTHONY OTARU, renowned economist and leading Management and Financial Consultant, Mr. Odilim Enwagbara, bared his mind on possible implications of the dreaded COVID-19 disease on the nation’s economy, what steps government must take to avert severe consequences and other sundry issues.
What are the implications of the Coronavirus pandemic for Nigeria?
Recession is inevitable. The numbers are already showing that. It’s unfortunate that we are where we are today, economically, because we have failed to industrialise. Had we industrialised, the effect of this ravaging Coronavirus on Nigeria would have been less than what it is about to be, which steep recession, if care is not taken, will have the potential of possible bankruptcy. In such a global economy that is so interdependent, it is obvious that if bigger economies fall, small economies will possibly disappear.
What about the global economy?
Global economy will slip into deep recession that could wipe out a large chunk of the global economy. With the erosion of tax receipts and huge deficit spending, difficulty to service sovereign debt obligations, most governments will find themselves in such a state of bankruptcy with little or no option to avert it.
Do you think the Federal government is taking any proactive action to cushion the effects for Nigerians?
You can see it for yourself. It seems as if our President is trapped somewhere outside of this planet because if he is here with us, being someone trained to lead wars, he would have been better in leading at times like this. But the President seems complacent while Presidents and Prime Ministers around the world are leading their nations and people at this dangerous time.
Is another economic recession looming?
Corona virus has so far caused enormous disruptions in global economy, and Nigeria being smaller player, lacks the kind of economic shock-absorbers necessary to reduce the consequences of the tsunami-like economic and financial shocks being witnessed across the world’s economic centres. Having said that, let us not forget that there are good things that can come out from this Coronavirus pandemic in Nigeria, as it could end up a blessing in disguise. One of the war-like unintended realities is that as we may soon be starved of imported essential consumer products, our indigenous startup producers will end up filling the supply gap. For example, new local pharmaceutical companies may soon emerge from nowhere to take advantage of the possible gap created by Indian, Chinese and European pharmaceutical product suppliers.
Certainly, if corona virus continues with its economic havoc, Nigeria will save as high as $3 billion of Forex from official government travels, pilgrimages to Saudi Arabia, Israel and Vatican City (Rome) alone. Other important Forex savings include expensive medical tourism and overseas vacations. At least as high as $2 billion will be saved this year alone.
Thirdly, with lack supply of manufacturers from China, India, South Africa etc, especially as these countries are in lockdown states, local makers of the same goods are going to begin to surface in mega shopping malls such as Next, Shoprite etc. Soon, without imports, our locally made healthcare products will begin to gain higher market share. Local food producers and suppliers will begin to gain more market share. Small neighborhood shops will become the ones supplying most of our needs as shoppers avoid crowded supermarkets.
Of all, the most important is that, with members of our elite class forced to remain in Nigeria, there is the possibility that they will soon discover the urgency to fix our healthcare infrastructure since they, too, will have to use it in the time being.
What proactive measures must government take?
Create Federal isolation centres in the 36 states of the federation plus Abuja. Increase the number of medical personnel to be dispatched to potentially coronavirus pandemic areas, government should find a way to support businesses to ensure they do not go into bankruptcy. This is because bankruptcy will mean their inability to pay companies income tax, layoff of workers who, besides losing their livelihoods, will also lose their purchasing power, meaning becoming unable to contribute to pay both Personal Income Tax and the Value added Tax (VAT).
Could anything positive come out of it for the country?
So long as we run an over centralized economic system that encourages corruption and ethno-religious politics it will be hard to expect something good in Nigeria especially with the kind of overbearing feudalist power that can only survive in such an overly centralised government.
The CBN has so far made economic stimulus interventions while the federal government is yet to come up with any plan to shield the economy from sliding back to recession. Is the CBN intervention adequate?
That is why for me, the CBN’s N1.1trillion intervention is too insignificant to have the kind of pro-investment, pro-growth and pro-job we need to have while Coronavirus ravages the global economy. Where is CBN’s pro-business buyback policy, as stock market collapses with every investor in sell-off rush out of the market? Shouldn’t the CBN by now be calming the market by pumping in money as the sole buyer as most proactive central banks around the world are doing? I will want the CBN to set aside N5 trillion corporate debt purchasing program. It is by doing this that we will say that the CBN is truly pro-business. Since cash is king and becomes more powerful at a time like this, I will suggest that fiscal and monetary authorities should work together to ensure that states get enough federal money to combat Coronavirus. With about N10 billion to each state weekly for the next one month, there is no way we will expect drastic improvements in states’ healthcare infrastructure since the Coronavirus problem is in fact, a localised problem. This is the kind of problem time that our military should be seen everywhere. As it seems, the military is too quiet.
What measures should the fiscal authorities employ to save Nigeria from sliding back into recession?
Let personal income tax and companies’ income tax be halved till December 2020. In the case of petroleum products such as PMS, I suggest that rather than reducing the pump price of PMS to N125, it should have been left at N145, with the difference channeled into developing 21st Century healthcare infrastructure across the country. I think it’s an opportunity for deregulation and fixing of the country’s refineries so that with this, government will no longer have to be involved in petroleum products imports. VAT for hospitality and aviation sectors of the economy industry should be suspended until further notice. In the meantime, government should insist on mandatory improvements in their public sanitary facilities such as toilets and bars and rooms. Public hygiene professionals should be dispatched to schools and hospitals and hotels to ensure that they provide free sanitizers and other health safety services.
What’s your assessment of the Federal government’s general response to the containment of the COVID-19?
Let’s share your advice to the business community on next steps to take to avoid collapse in the short and long run.
The business community should demand single-digit interest rates. They should persuade the CBN and government to engage in corporate bond purchases along with fiscal authorities suspending companies’ income tax along for one year. In their Corporate Social Responsibility there will be no layoffs, and where necessary, companies should allow workers to work from home to avoid uncontrollable corona virus infection among workers, which could lead to a series of class actions against these companies.