Covid-19: Economic Stimulus, Oil Price and Social unrest
By Abubakar Jimoh
Effort to mitigate the socio-economic impacts of Covid-19 pandemic on businesses and citizens brought to the fore a newly introduced legislative framework titled “Emergency Economic Stimulus Bill, 2020” initiated by the House of Representatives.
Sponsored by the House Leadership led the Speaker, Femi Gbajabiamila and other Members, the Bill aims at providing temporary relief to companies and individuals to alleviate the adverse financial consequences of a slowdown in economic activities caused by the Covid-19 disease; protecting the employment status of Nigerians who might otherwise become unemployed as a consequence of management decision to retrench personnel in response to the prevailing economic realities.
Other objectives of the Bill include to eliminate additional fiscal bottlenecks on the importation of medical equipment, medicines, Personal Protection Equipment (PPE) and other such medical necessities as may be required for the treatment and management of the Covid – 19 Disease in Nigeria, to ease the burden of importation; and catering for the general financial wellbeing of Nigerians pending the eradication of the pandemic and return to 5economic stability.
The fiscal stimulus package of the Bill provides any employer duly registered under the Companies and Allied Matters Act Cap C20 LFN 2004 which maintains the same employees status without retrenching their staff as at 1st of March 2020 till the 31st of December 2020, with entitlement to 50% income tax rebate on the total amount due or paid as PAYE under the Personal Income Tax Act Cap C8 LFN 2004 as amended.
If signed into law, the Bill will give tax relief to corporate bodies, providing mortgage systems, suspend import duties on medical equipment, medicines and personnel protective gears for the treatment of COVID-19.
Moreover, the Bill provides that all payments of mortgage obligations on residential mortgages obtained by individual contributors to the National Housing Fund will be deferred for a period of 180 days effective from 1st of March 2020. This may be extended by the President for a further period not exceeding 180 days subject to a majority vote by members of the National Assembly.
Beyond the tragic health hazards and human consequences of the COVID-19 pandemic, the Centre for the Study of the Economies of Africa, has anticipated economic uncertainties, and disruptions that may resultantly come at a significant cost to the global economy. The last unemployment report released by the National Bureau of Statistics (NBS) ranks Nigeria 21st among 181 countries with an unemployment rate of about 23.1%. Also, the country has been rated as the poverty capital of the world with an estimated 87 million people living on less than $2 a day threshold.
Similarly, the International Air Transport Association (IATA) has projected that Nigeria’s aviation industry would lose at least $.76 billion to COVID-19 pandemic, which has crippled the country in the past three weeks. The international airlines association also said that the sector in the country risks 91,380 job loss and $0.65 billion in contribution to Nigeria’s economy, while no fewer than 3.5 million passengers would be lost to the pandemic.
A recent report published by the African Union (AU) has estimated that vulnerable African economies could be strangled by the coronavirus pandemic with the possibility of up to 20 million job losses and the potential for social unrest. The report attributed these to direct consequences of tumbling oil prices which might disrupt the economies of big oil producing countries notably Algeria, Angola, Cameroon, Chad, Equatorial Guinea, Gabon, Ghana, Nigeria, and Congo Brazzaville. It warns that Nigeria forecast its budget on the basis of oil at US$67 per barrel, yet crude languishes at just US$26 per barrel, threatening to worsen Nigeria’s budget deficit.
According to the report, stress placed on African economies due to Covid-19 will translate to governments experiencing reduced tax revenues, while overall Africa could lose up to 20 to 30 per cent of its fiscal revenue.
As at 21st April, the Nigeria crude traded at $12 and $13 per barrel. The report came after traders gave account of how 10 million barrels of crude made available for sale in April were still unsold with another 60 million expected to hit the market in May.
Meanwhile, in a recent published study titled “Rethinking tax in Africa to respond to COVID-19” the World Economic Forum has advised tax administrators in African nations to embrace specific measures in managing economic downturn posed by Covid-19 through extension of tax filing deadlines, payment deadlines and waiver of tax penalties, reduction of tax rates. It further recommended an exemption from all duties, taxes, levies, and fees on import and sale of pharmaceutical inputs and products, as well as medical materials and equipment linked to COVID-19 for six months.
Adopting these measures in a fragile economy like Nigeria will without doubt threaten its Internal Revenue Generation and weaken the country’s capacity to finance the ailing critical sectors.
Nigeria is currently suffering from social vices and unprecedented inflation on general goods and services as global supply chains breakdown. For instance, hundreds of gang members, mostly teenagers, fleeing police in two Nigerian states under a coronavirus lockdown tricked residents into believing that coordinated armed robbery attacks were underway. As a result, Residents set up makeshift checkpoints with burning tyres in border communities between Lagos and Ogun states after forming vigilante groups to protect themselves from the imaginary armed robbers. For days, groups of anxious residents—young and old, and mostly male, reportedly kept night vigils on their streets, armed with machetes, bottles and other household items.
Also National Human Rights Commission (NHRC) has revealed that security forces enforcing the lockdown in parts of Nigeria have killed more people than coronavirus itself, a local rights group says. It says law enforcers have killed 18 people in Nigeria since lockdowns began on 30 March, when Coronavirus killed 12 people, according to National Centre for Disease Control (NCDC) data.
It would not be a surprise when a recent report by National Bureau of Statistics (NBS) disclosed that Nigeria’s headline inflation rate for March 2020 rose marginally by 0.06 percent points higher than the 12.20 percent rate recorded in February. According to the report, the figures rose marginally by 0.06 per cent points to put the Consumer Price Index at 12.26 per cent in March, the highest since April 2018. At the same period, the composite food index rose to 14.98 per cent, largely driven by an increase in basic food prices. Also, the core inflation stood at 9.73 per cent in March 2020. This represents an increase of 0.3 per cent when compared with the 9.43 per cent recorded in February 2020.
The Presidential Committee on the Review of the Impact of Coronavirus on the Economy recently admitted that the outbreak of the virus has finally crumbled Nigeria’s economy. It equally observed that the crashing in price of oil at the international market was also not helping matters. By April, 2020, the Federal Government had request to borrow over $6.9bn from international lenders including the World Bank, the African Development Bank and the Islamic Development bank to help counteract the impact of coronavirus on the economy. This is in addition to the United Nations in Nigeria, European Union and private donations from corporates and individuals.
Civil Society agitations
In a recent statement made available to the press, the Executive Director of CISLAC, Auwal Ibrahim Musa (Rafsanjani) applauded the proactive decision of the National Assembly in the introduction of the Emergency Economic Stimulus Bill, 2020 which has gone through relevant stages in the House of Representatives.
Observing that conclusive stage of the Bill was halted by the emergent legislative recess necessitated by Covid-19 pandemic, he called for prompt finalization and transmission of the Bill for Presidential assent at resumption of legislatives activities to provide appropriate legislative framework on relief to companies and individuals to alleviate the adverse financial consequences of a slowdown in economic activities caused by the Covid-19 disease; protect the employment status of Nigerians who might otherwise become unemployed as a consequence of management decision to retrench personnel in response to the prevailing economic realities; and implementation of holistic measures to mitigate the impact of Covid-19 lockdown on the vulnerable groups at all levels.
Earlier in a separate statement, the Executive Director had demanded sincere effort by relevant authorities to ensure Covid-19 relief materials and other financial assistance are deployed accordingly to the common citizens with holistic and transparent strategy to adequately capture citizens at grassroots level, where Bank Verification Number (BVN) might not be relevant. This according to him, would alleviate impacts of the pronounced lockdown at all levels.
Give the global trend, Rafsanjani observed that the lockdown could not be meaningful without adequate proactive palliative measures by the Government on the provision of basic amenities like sufficient food stuff, water and regular power supply to genuinely address the plights and agitations of common citizens, whose daily means of income would be largely affected.
While calling on the government to ensure total transparency and accountability of covid-19 relief process, the Executive Director expressed worry that the development has revealed government’s inadequate preparedness capacity to mitigate impacts of the pandemic and other national emergency with existing poor national storage capacity for food and other basic needs to respond adequately.
Abubakar Jimoh writes from Abuja