How The Federal Government of Nigeria Is Responding To The Fall In Oil Prices And COVID-19 Pandemic Through Its Fiscal Policy Decisions
I participated in a Virtual “Citizens Dialogue Session on Government Fiscal Policy Decisions in Response to the Fall in Oil Prices and the COVID-19 Pandemic” organised on May 5th, 2020 by The Federal Ministry of Finance, Budget and National Planning and the Department for International Development (DFID) PERL
At the session, I had the privilege to shed some light on the commitment and exhaustive efforts the Nigerian Government is taking to address the COVID-19 pandemic and the attendant looming economic recession through the Economic Sustainability Committee.
Q: We understand that you have been doing a lot of work, you have had sleepless nights over the lockdown period, we wanted to find out what are the details of some of the things you are working on and what are your recommendations in the Economic Sustainability Committee. Nigerians want to know, they want to hear from you the things you are considering and how you want to manage these twin issues and of course as the co-chair of Open Government Partnership (OGP) in Nigeria, we wanted to find out how you think Government should move in our current situation in complying with Open Governance Principles.
A: Good afternoon, Honourable Minister, Distinguished Ladies and Gentlemen. Can you all hear me, please? First, let me express my profound appreciation to the Partnership to Engage Reform and Learn (PERL) and the Department for International Development (DFID) for organizing this Webinar on citizens’ dialogue session on the Government’s fiscal Policy Decisions in response to the fall in oil prices.
Like the Honourable Minister [Zainab Shamsuna Ahmed] has said, we are fighting a dual pandemic, both health and economic pandemic. It is no longer a secret that Government revenues have collapsed, oil prices have fallen, demand for oil has also fallen and there is a glut in supply. This is generally affecting manufacturing and all other non-oil sectors. So, for the Economic Sustainability Committee, we had basically looked at some four/five broad policy objectives. One is “how do we save lives?” in response to the pandemic and support the presidential task force? How do we take care of the vulnerabilities that we have in the system? How do we keep our economy off the ravages of this pandemic? That is to say, we know we are going into a recession, how do we make it short-lived and shallow? How do we ensure that there is [a] quick recovery and that the recovery is not U-shaped but V-shaped? How do we build resilience going forward? What do we need to do to build the foundation for long-term growth?
Basically, the committee has been looking at how to build a resilient health system, provide funding for basic health infrastructure and operations, both from government and also from loans which will be based on a fund set up by government but funded by the commercial banks through the CBN. We are also looking at how to create jobs. First, how do we protect the jobs that are already existing and how do we create additional jobs within this next twelve months? We are looking at doing massive funding in rural roads, first to ensure that the food that will be produced can get to the market.
The Ministry of Agriculture and Rural Development would be working with the sub-nationals to help assist in the acquisition of land for private investors in order to increase that focus on food production; easy access to land acquisition and then funding, of course, in this area will also be coming from the commercial banks supported by CBN and we will ensure that government gives the guarantee to take off the production in the event that the market is glutted. Recall that we recently released about 70,000 tons from the strategic reserves and this also needs to be replenished. We are also looking at how to create jobs through the rehabilitation of our major roads. This is a way of boosting economic activities and also easing [the] transportation of goods and persons. To this end, we will be giving additional funding to FERMA to undertake interventions in major strategic roads nationwide. They would also be working around the special agro-industrial processing zone corridors, ensuring that bridges are maintained and the street lightings on some of our highways [are also maintained]. We are also looking at job creation for the youths. Like you know, Mr President already approved that a thousand people be employed within each local government. There are 774 local governments so this translates to 774,000 jobs across the country. This is going to be for three months; In the dry season starting from October.
We are also providing additional financing to the Humanitarian Ministry for the cash transfers where one million additional households are being added. There will also be support for small businesses, MSMEs, in order to ensure that jobs are protected and that more jobs are being created. We are also looking at how to support the Aviation sector. Like you know, a lot of planes are parked and this is costing almost N21 billion on a monthly basis. We are looking at how to provide some form of bailout support to ensure that the industry doesn’t die. We are looking at the area of the WASH Programme from the Federal Ministry of Water Resources and how to create jobs in that area and improve hygiene in markets and public places. Also, there is a programme on natural gas expansion being spearheaded by the Petroleum Ministry; this is to promote greater domestic use of natural gas. This is one area where we feel a lot of jobs also will be created because people will be trained on how to weld and produce cylinders; There is a lot in the value chain around this.
We also are looking at how to improve power in the country through solar home systems. NASENI, which is National Agency for Science and Engineering Infrastructure, has done a lot of work in this area and there are private companies that are interested to come in and set up to produce panels within the country and we believe a lot of local production can take place and skills also being transferred will ensure that about 5 million homes that are off-grid are provided with solar systems; This is being driven from the Ministry of Power.
There is also a programme around mass housing, to [promote] the use of local materials to create employment in these areas. We also expect that from about June, the States might begin to feel the effects of low revenues coming from oil and, therefore, might be having a lot of challenges in meeting up with obligations, especially the payment of salaries. Of the $2.5 billion facilities from the World Bank, about 1 billion of it will be going to the States as loans; These are concessionary loans. Mr President has already approved that we take $150 million from the Sovereign Wealth Account in support of [the Federation Allocation Account] FAAC. We are also looking at suspending deductions in respect of the budget support funding which was provided to the States as a way of easing [the effects on the States], so, discussions are on with the Central Bank [of Nigeria] and also how to provide [a] moratorium on the deductions in respect of the bailout loans.
Already, N10 billion has been given to support Lagos State; we also have the additional provision to cover the remaining 35 States and the Federal Capital Territory.
All in all, when everything is put together, both government funding and the funds we are expected to get from CBN, Bank of Industry (BOI) and other multilateral agencies and grants that we are receiving, we expect to get a stimulus of about N2 trillion going into the economy.
Thank you.
