The economic aftermath of COVID-19 by Lateef Adewole

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President Muhammadu Buhari PIB Girls sars
President Muhammadu Buhari
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The Insight by Lateef Adewole

Sometimes ago, I had a lengthy discussion with a friend concerning the fate of our country in the event of this Covid-19 that has wrecked unthinkable havoc on countries and their economies around the world.

Our discussion centred on the consequences of oil money that is fast drying up, vis-a-vis sustenance of our government at all levels in Nigeria. This is made worse by the “feeding bottle” federal system that we run. The survival of the federal, state and local governments is hinged on our mono-product (oil) economy, which coronavirus has ruined.

As I write, if not for the gradual easing on lockdown and reopening of economies around the world which has triggered a marginal recovery in crude oil prices to the current $30.97 per barrel (pb) for our brent crude, WTI ($24.74) and OPEC basket ($22.91), oil was completely useless few weeks ago, with the American WTI entering negative price. Meaning that, buyers were paid to accept supplies. That was unimaginable. At that time too, brent crude which Nigeria sells, was trading at less than $20pb.

Deal of the day

As things stand now, if what the GMD of NNPC, Mr. Mele Kyari, said about the average cost of crude oil production in Nigeria being  $30pb is anything to go by as well as being a joint venture investment, any price below $30pb as was witnessed in the past two months, means selling at a loss.

The double jeopardy is our inability to still sell despite at loss figures. I read somewhere that Nigeria has over 50 crude oil cargoes on the high seas without buyers. Likewise, 12 cargoes of LNG are stranded. Keeping them there is at a cost to the country in demurrage.

Apart from revenues generated from VAT, import duties at the ports, taxes, stamp duties, etc, all of which have been negatively impacted by the lockdown due to Covid-19, while there is none or not much in coming from oil which accounts for about 90% forex earnings and 80% of revenue to the Federation, the implication is that, there is little or no money to be shared by the three tiers of government (FG, states and LGs). Finally, the chicken has come home to roost.

When capacity to repay debts is constrained, the prospect of getting loans on favourable terms becomes challenged as lenders will be wary of the repayment ability. The likely ones available may come with excessively stringent conditions that could even threaten the sovereignty of any nation. So, what options do we have as a country?

flights extended
Chairman of the Presidential Task Force on COVID-19, Boss Mustapha

At individual levels, the lockdown for just five weeks exposed many people’s financial vulnerabilities, just as it did to us collectively as a country. Many people who previously thought they were in good place financially, gradually descended into poverty level. Had the lockdown extended further than we experienced in Lagos, Ogun and FCT in particular, previous averagely “well-to-do” people could have started begging for foods after exhausting their savings. The previously poor people’s condition simply got worse.

It was an eye opener for many salary earners too. Apart from government workers who were sure of being paid one way or the other, many private sector workers had their hearts in their mouths. Nobody was sure of anything apart from some big organisations.

Rumours of sacks, right sizing, downsizing, retrenchment, compulsory early retirement, and leave without pay, rented the air. Many companies actually sacked workers. It could have gotten worse if the situation has continued.

But for the intervention of the CBN, banks would have led the sacking spree. We are not out of the woods yet, as this is but a temporary relief from the partial opening.

So, apart from China and few other countries that are quickly rebounding, economies of many countries are in shambles. The World Bank and IMF stated that over 100 countries have requested for emergency financial assistance. The global economy is projected to contract by 3% in 2020 provided the pandemic is contained early enough and Nigeria economy to contract by 3.4%. The world has gone into recession. What is being battled is not to go into depression. All the big economies have been badly hit. The only up and running country all this while is China from where the virus originated, supplying all the needs (especially medicals) of the rest of the world. Strange!

My opinion on what our political leaders are likely to do is to go “sorrowing” (I mean borrowing). The lazy attitude to governance, prioritising self-interests, irresponsibility by many and lack of accountability to the electorates, will make it impossible for them to take the hard-line and difficult paths. This is because, it will have to start with them, something they will not want.

Nigeria Finance Minister, Zainab Ahmed
Nigeria Finance Minister, Zainab Ahmed oversaw the receipt of monies from World Bank and IMF

My friend actually disagreed with me, insisting that they have learnt their lessons with the current challenges of the pandemic and that they are ready to make necessary sacrifices. I don’t know where his optimism is derived from, though, he is an APC member and an ardent supporter of President Buhari. I hope and pray that his expectations really happen.

His defence was that, our leaders are wiser now after running helter-skelter just to meet the basic needs of their citizens as the virus ravaged. The exposure of the terrible state of our healthcare facilities which warranted the knee-jack, adhoc arrangements all over the country. Then, the failure in their support system to the most vulnerable in the society during the lockdown, in spite of the claims to the contrary. The government failed the people.

Therefore, it was a pleasant surprise to me when I heard of the directive by President Buhari that the Oransaye’s report be “exhumed”, dusted and tabled for implementation. I still take that with a pinch of salt. My worry is that, our leaders resort to such actions whenever a situation pushes them into a corner.

The crash in the crude oil prices and dearth of revenues from it is responsible for this latest directive by the president. If by any miracle, the oil fortune turns around and price skyrockets, will the president still maintain the same position?

Also, at face value, the president could have given that directive. When the report is opened up and the wider implications of its implementation are revealed to him, will he still have the political will to see it through even if that is the best thing for the country despite the fact that some toes might be stepped on or some interests cut off? All these remain to be seen.

It is clear to any reasonable person that it is time to take the hard way. Unfortunately, the majority of the Oransaye’s report was focused on restructuring and re-enginering of the unwieldy and overbloated civil service but made less mention of the equally wasteful public service positions occupied by political office holders, either elected or appointed. A situation where a political office holder has a retinue of assistants, advisers, special assistants, special advisers, senior special assistants and senior special advisers. What kind of madness of a democracy is that?

This happens at all levels of government and particularly in the two arms (executive and legislative). It is worse in the executive at federal and states levels. All these are drainpipes on our meagre resources. These appointees will be paid salaries and other emoluments. They may need cars fuelled and maintained from the state purse.

Had many of them truly added value to governance, it would have been understandable but unfortunately, many of them have no substantive jobs.

They were just engaged as political patronage and compensation for them or their godfathers for their election contributions. What a waste.

Vice President Yemi Osinbajo is in self isolation in accordance with NCDC protocols
Vice President Yemi Osinbajo chairs the Economic Sustainability COmmittee

How will the recurrent expenditures of the annual budget not continue to gulp 60 to 70% of the entire budget, while a paltry 30% is left for capital? Now that “oyel money no dey again”, what will the government do? The federal government has reviewed the 2020 budget once and plans for another review, both within two months. These became imperative following the previously projected oil benchmark of $57 per barrel in the budget. With the current reality, it was reviewed downward to $30 and later $20 few days ago. The projected daily lifting was also reviewed from 2.18 to 1.7 million barrel per day (mbpd).

With this shortfalls, a budget at 21% deficit (2.2 trillion naira) at $57 reviewed to $30 with a deficit at 50.4% (5.18 trillion naira), what will it escalate to when further reviewed to $20 benchmark? How will such deficit be financed? Debt? With the debt servicing at over 2.45 trillion naira? Additional debt means debt service could be up to 70% revenue or more. Why should that be?

This is where leaders are distinguished from mere “office occupiers”. The time to slash all the useless expenditures and wastes is now.

In the past few weeks, “mannas have been dropping from heaven”. Another tranche of the Abacha loot was just received few days ago. It was a sum of $311 million. A financial request by the FGN from IMF was approved by the management of the global organisation last week. That stood $3.4 billion. An external borrowing plan of 850 billion naira in the 2020 budget was approved to be obtained from local sources by the national assembly last week. The EU donated €50 million (21 billion naira) last month to Nigeria as Covid-19 support. The private sector support in the fight against Covid-19 is over 25 billion naira. What will happen to all these money?

Like my friend hoped, they will be judiciously used to finance projects they were earmarked for. What will then be used by the political office holders to finance themselves and their expensive and wide appetites?

The issue that bedevilled Nigeria for a long time is not just inadequate funds but reckless spending and wastages in government due to high cost of governance. Let’s hope proper implementation of Oransaye’s report will be seen through to the end. That will have substantial impact on this cost as wastages in civil service would have been dealt with to some extent.

Director General of NCDC, Dr Chikwe Ihekweazu
Director General of NCDC, Dr Chikwe Ihekweazu says Nigeria has recorded 3912 cases

President Buhari should lead by example. A critical look at the annual budgets will reveal too many avenues for wasteful spendings and loopholes for stealing. The president should begin by cutting all those bogus allocations to the presidency; kitchen, clinic, wardrobe, entertainment, refreshments, travels, vehicles, fueling, maintenance and repairs (many of which are unnecessary), and so many others in his office, the VP’s office, Chief of Staff, SGF, NIA, and other agencies under the presidency, including their remuneration packages.

Same should be applied to all the MDAs, after being restructured, and any source of wastefulness should be blocked. The remunerations of the ministers and other political appointees should be restructured to reflect current realities of no money. Anyone not satisfied should be free to resign. Once the president has done this to himself and his executive arm, proposing a similar cut in the national assembly jumbo budget will not be much of a problem for him. After all, “eni te eti aso re mole, ko ni ti teni eleni faya” (he who marches on his own cloth while walking, will care less in tearing someone else’s own).

If all these are done, the government would have eliminated over 40% wastages effectively, and the little amount available will be sufficient to pay the leaner salaries and still have left over to do capital projects.

While I will not actually propose an outright sack of civil servants, I believe they should be made to work for the money they are paid as obtainable in many private businesses. I have always wondered how government could have numerous competent civil servants and still be giving out the jobs for which they were employed as contracts. Why? I reasoned that it is through such award of contracts that many political office holders steal public funds, in connivance with many civil servants who are actually the “bigger and more permanent” thieves. They teach politicians how to steal and from where. Or what does a newly elected or appointed “stranger” know?

Now is the time to adopt direct labour policy in all MDAs. How can Engineers and engineering personnel be sitting down in the offices while contractors are given road constructions, building of housings, schools, hospitals, and other infrastructures? What exactly is their job? To carry files around? Ludicrous. Government workers should be deployed to the field to get the jobs done. All workers in MDAs should be on direct labour.

Paying lip-service to diversification is no longer fashionable. Government must walk the talk. Agriculture remains one major alternative to oil but not in the peasant way it is currently being done, but through mechanisation. I have argued that agriculture cannot replace oil as main source of revenues, especially in the short term. However, it is important to ensure food security with its wider implications. The importation of food items will end or drastically reduce, thereby reducing the demand for forex, and consequent lesser pressure on naira.

Government must encourage private sector to invest in the agricultural value chain by providing incentives. That is where the real business is. From the mechanisation of the farming to mechanised harvesting. From the industrial storage of farm produce to processing, to transportation, to marketing of finished products, to export after local demands have been met. That will then earn forex. Millions of jobs will be created, poverty will be reduced, increased contribution to GDP, leading to a more prosperous and healthier nation.

Ministry of Communications and Digital Economy should not be in nomenclature only, it must act its name. We have all witnessed how ICT came to the rescue of the world with the disruption of our social lives by physical distancing. Virtual operations took over from the usual physical operations. Employees worked from home. Businesses transacted via online. Meetings, conferences, webinars, teachings, entertainments, and many aspects of our lives were carried out on zoom, skype, whatsapp, and many other platforms. Government should make ICT our “new oil”.

This should also prompt a review in our education curriculum. Teaching subjects that are irrelevant to the core needs of our society is a waste. Our education should be tailored to addressing our challenges and solving them. Funds should be pumped into education, researches in science, engineering, and technology. It is embarrassing that we became helpless as the coronavirus ravaged the country and only looked and still looking up to foreign countries for many basic needs. We should begin to look inward for solutions to our problems. Afterall, the man leading the invention of latest drug, Remdesivir, used in treating infected persons is Dr. Babafemi Taiwo, who graduated from the College of Medicine, University of Ibadan. So, we can do it. Yes, we can!

All the above should be cascaded from the top to the grassroots at the local government levels. Governors are bigger culprits when it comes to wastefulness, lack of accountability and financial recklessness. All that must stop, going forward.

On individual levels, Covid-19 lockdown should have taught us the importance of savings. As the saying goes; “kobos saved is the naira gained”. Likewise, many employees who thought they have jobs security should have realised such folly by now. There is no job security anywhere. Hence, everyone needs multiple streams of income, no matter how little. The comfort that comes with knowing that money will come from other sources can only be imagined by whoever has lost their job to this pandemic induced economic downturn. We should see it as a second chance, if we survive this.

May God continue to protect us and guide us aright.

God Bless Nigeria.

Lateef Adewole is a political analyst and social commentator can be reached by email [email protected] or via WhatsApp +2348020989095 and @lateef_adewole on Twitter