With COVID-19 inspired economic shutdowns dealing a severe blow to the global economy, especially those of poorer countries, the World Bank Group has advised developing countries and the international community to take steps now to speed up recovery after the worst of the health crisis is over to blunt long-term adverse effects.
Also, following the alarm raised by the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, that the global economic was heading for recession, the leaders of the Organised Private Sector (OPS) have called for the speedy implementation of the economic stimulus packages and palliatives measures announced for the private sector by the federal government and the Central Bank of Nigeria (CBN) in order to accelerate economic recovery and avert a recession and job losses.
The multilateral institution also noted that the scope and speed with which COVID-19 and the economic shutdowns have devastated the poor around the world are unprecedented in modern times, adding that current estimates show that 60 million people could be pushed into extreme poverty in 2020.
According to analytical chapters from the bank’s just-released Global Economic Prospects report, securing core public services, getting money directly to people, and maintaining the private sector would limit the harm and help prepare for recovery from COVID-19.
The analysis of the report was released yesterday ahead of tomorrow’s issuance of the full report, which would include the latest forecasts for the global economy.
The report observed that short-term response measures to address the health emergency and secure core public services would need to be accompanied by comprehensive policies to boost long-term growth, including improving governance and business environments, as well as expanding and improving the results of investment in education and public health.
It noted that current low oil prices also present an opportunity to review energy pricing policies as energy-importing emerging market and developing economies (EMDEs) like Nigeria need to move away from costly subsidy schemes and allocate their limited financial resources for higher-priority expenditures involving improvements in public health and education programmes.
According to the report, in the short-term, while restrictions on transport and travel remain in place, low oil prices are unlikely to provide much support for growth and may, instead, compound the damage wrought by the pandemic by further weakening the finances of producers, adding that low oil prices are likely to provide at best marginal support to global activity early in the recovery.
In a comment, the Director of World Bank’s Prospects Group, Ayhan Kose, said: “Oil-exporting emerging and developing economies entered the current crisis with eroded fiscal positions after having drawn on them to weather the 2014-16 oil price drop. In addition to the unprecedented public health crisis, these economies are now experiencing sharp economic downturns as their export revenues nosedive.
“Even if oil prices rise as global oil demand recovers, the recent plunge in prices is another reminder for oil-exporting countries of the urgency to continue with reforms to diversify their economies.”
To make future economies more resilient, the report said many countries would need systems that could build and retain more human and physical capital during the recovery – using policies that reflect and encourage the post-pandemic need for new types of jobs, businesses and governance systems.
The World Bank Group President, David Malpass, said: “The scope and speed with which the COVID-19 pandemic and economic shutdowns have devastated the poor around the world are unprecedented in modern times. Current estimates show that 60 million people could be pushed into extreme poverty in 2020. These estimates are likely to rise further, with the reopening of advanced economies the primary determinant.
“Policy choices made today – including greater debt transparency to invite new investment, faster advances in digital connectivity, and a major expansion of cash safety nets for the poor – will help limit the damage and build a stronger recovery. The financing and building of productive infrastructure are among the hardest-to-solve development challenges in the post-pandemic recovery.
“We need to see measures to speed litigation and the resolution of bankruptcies and reform the costly subsidies, monopolies and protected state-owned enterprises that have slowed development.”
OPS Seeks Measures to Avert Recession, Job Losses
OPS has called for the speedy implementation of the economic stimulus packages and palliatives measures announced for the private sector by the federal government and CBN to stimulate economic recovery and avert a recession and job losses.
Answering questions on the likelihood of a recession at last week’s budget defence session held by the Senate Committee on Finance, the minister of finance, budget and national planning had said: “The global economy is predicted to be also slipping into recession. What we are hoping to do by our own collective efforts – the executive and the National Assembly – is that we minimise how far we go into recession.”
Responding to this threat in the wake of the second phase of ease of lockdown announced by the Presidential Task Force (PTF) on COVID-19, the Director-General of Nigeria Association of Chambers of Commerce, Industries, Mining and Agriculture (NACCIMA) Mr. Ayo Olukanni, said: “To truly stimulate the economy, there is need for a more rapid processing and releasing of the grants and various loans promised to the private sector.
“The governor of the Central Bank of Nigeria himself, in an interview with THISDAY last Sunday, agreed that the process of granting funds under the various stimulus packages has been a bit slow. Therefore, steps should be taken to hasten the process and the disbursement of funds.”
Olukanni explained that NACCIMA has been engaging CBN and NIRSAL to “deliberate on how to ensure that our members who applied for the grants and cessionary loans receive quick responses because several businesses are on the throes of death and need to be kept alive and assisted back into production and operations.
That is the way to give the needed momentum to the economy to mitigate the imminent recession, retain jobs, and improve productivity.”
He said the new guidelines by the federal government represented another step forward in the struggle to come back to normality, adding that some of the measures could contradictory and not satisfy the urgent need to reopen the economy fully.
He stated: “The question is why retain the curfew and the slight shift to from 10.00 p.m to 4.00 a.m? We don’t think this is necessary. It has an impact on production. How do night shift workers get to work? How do we keep production lines continuous at a period we need to ramp up production? We don’t think the interstate lockdown is necessary any longer.”
However, the Director-General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, lauded the measures announced by the Presidential Task Force (PTF) on COVID-19.
But he stressed the need to get the economy back on track without compromising COVID-19 protocols through the implementation of specific policy measures that would enable the businesses to launch back in full force.
These measures, according to him, include the granting of zero import duty on raw materials and equipment meant for the health sector as well as the extension for six months, of import duty waiver for raw materials and intermediate products for manufacturing concerns.
“Import duty waiver on machinery without the need for any bureaucracy, for at least 12 months would facilitate the completion of ongoing projects by industrialists. The country needs growth and should encourage the completion of these projects to encourage job creation,” Yusuf said, adding that “agro-processing inputs should enjoy import duty waiver for one year.”
He noted that it’s instructive that restrictions on the hospitality and aviation sectors were relaxed because the hospitality sector is “labour intensive and highly employment elastic. It also has robust multiplier effects on many other sectors of the economy because of its extensive value chain.”
Similarly, the Director-General of the Nigeria Employers’ Consultative Association (NECA), Dr. Timothy Olawale, commended the federal government for adhering to the concerns of businesses to further relax the lockdown and open up the economy for more commercial activities.
However, Olawale called on the government to boost the economy by granting interest-free loans to companies in order to aid their recovery process from the effect of COVID-19.
He noted that this would enable companies to retain their employees, continue production and settle critical financial needs.
He said: “Issues on taxes and levies should be suspended for at least the next six to 12 months to enable companies to retain funds that would be deployed in their operations and ameliorate the challenges posed by the operating business environment.
“Power supply is very important as businesses rely on power for their activities, especially the manufacturing concerns. Regulatory agencies should also aid accelerated economic activities by avoiding complications in the operations of businesses, especially, when businesses were practically closed down for months.”
Olawale also observed that the implications of the retention of curfew, on the manufacturing sector, could be grave as companies that operate two shifts of day and night would be constrained by compliance with the curfew.
He said: “We implore state governments to grant waiver for manufacturing outfits that have day and night shifts to operate provided the workers are in the premises of the company within the period.
“In our views, we believe that keeping the entire economy locked down would not eliminate the spread of the virus, nevertheless, we are of the view that the economy should have been totally opened for full business operation while businesses and individual adhere strictly to the guidelines in preventing the spread of the virus.
“We are of the opinion that sustaining the ban on interstate travel cannot address the current pandemic within the context of our dear nation.”
Financial analysts also commended the decision of the federal government to completely reopen banking activities as one that would boost lending to critical sectors that needed funding urgently.
Speaking to THISDAY, the Managing Director of Kairos Capital, Mr. Sam Chidoka, said the decision to reopen the economy was the best at this time.
Chidoka said: “There is an economy that needs to be run. If you don’t run the economy, people are also going to be affected by issues around poverty and lack of access to medical care.
“Whether we have done it early or too late, only time would tell but I think that it is necessary we open the economy back. We cannot perpetually lock down the economy.”
Also, Senior Analyst, Financial Institutions Ratings, Agusto and Co., Mrs. Ada Ufomadu, said: “Opening up the economy now is good and is something we need for banks that are looking to lend to certain sectors they call resilient sectors such as healthcare, manufacturing, agriculture, energy and more. So, opening up the economy is good for the banks, which have opportunities to thrive in this period.”