OPS seeks policy to insulate economy from global shocks
With the gradual fall in global oil prices below the Federal Government’s projected $57 on which the 2020 budget was premised, the Nigeria Employers’ Consultative Association (NECA), has sought policies that will insulate the economy from perennial global shocks.
The association also called on the government to ensure that the economy does not recede back into recession as the scale of the reduction is eliciting unpleasant memories of 2014 and 2015 oil price downturn.
Director-General of NECA, Dr. Timothy Olawale, expressed worry that the fluctuation of the oil price is already threatening the national budget benchmark and overall revenue of the government for 2020, with consequential negative implications for the proposed capital projects and other critical expenses.
He reiterated the need for the government to provide leadership and direction in diversifying the economy, adding that the nation cannot hinge its destiny on the price of a commodity in which it has no control.
Suggesting the way forward, the NECA boss urged the government to create avenues for more economic activities such as diversifying the tax revenue beyond oil.
He said the government should show clear fiscal discipline by cutting down costs and executing projects that will impact the economy positively as a result of plunging oil prices in the international market.
According to him, the shortfall in oil prices should not be a license to further mortgage the future of the nation with borrowing as the budget is already struggling under the weight of debt service.
“Government should resist the temptation to further tax the already over-taxed private sector. This will only further incapacitate the organised private sector and worsen the already precarious unemployment situation in the country.”
He said deliberate efforts should be made by the government to seek ways to finance some of its infrastructure projects through private sector investments through Public-Private Partnerships (PPP).
He said: “While it is too early to predict if this initial slump in prices will be sustained long enough to have serious repercussions for the economy, but if it stays this low for a long while, it could plunge our fragile economy into a contraction (negative growth rate), which when sustained for three consecutive quarters, pushes us into a recession.
“You can’t expect to generate more non-oil tax without having an increase in economic activity, championed by the private sector. Obviously the significant plunge in Oil prices will adversely affect our tax revenue as well as our external reserves used to stabilise the foreign exchange.
“So immediate concerns will be the potential impact on forex, which might make devaluation more likely. If the scarcity of FOREX is mismanaged, it would adversely affect key sectors such as manufacturing and trading that are more dependent on imports. This can then have a rippling effect on other sectors similar to what happened in the 2015 – 2016 period.”