The International Monetary Fund (IMF) in its recent release had predicted a likely episode of the 1930 economic depression with more alarming consequences on the less developed economies, including Nigeria.
In response to the warning signals, President Muhammadu Buhari in his recent address to the nation on COVID-19 said: “To ensure our economy adapts to this new reality, I am directing the Ministers of Industry, Trade and Investment; Communication and Digital Economy; Science and Technology; Transportation; Aviation; Interior; Health; Works and Housing; Labour and Employment; and Education to jointly develop a comprehensive policy for a “Nigerian economy functioning with COVID-19”.
“This is in addition to the N50 million released by the Central Bank of Nigeria (CBN) to Small Scale Industries (SMEs) as stimulus package.”
On the part of the states, some economic experts have challenged respective governors to look beyond federal allocation, predicting financial disequilibrium, which would affect their obligations to the citizens.
The President, Nigerian Institute of Bankers, Prof Segun Ajibola, in an interview with Sunday Sun, said: “The signs are ominous.
“To say that things will not undergo severe problem in a way that will affect their obligations to their citizens is like shying away from the reality. The reality is that most states will go into financial disequilibrium whereby they will not be able to match their revenues with expenditures. Salaries will not be paid, capital expenditure will remain suspended until there is a reorientation towards what we call quick-win like development of agriculture.
“Even before now, you know how many states were unable to pay minimum wage of N30,000. With what is happening now in respect to reduction in allocation from the federation account, many states will not be able to meet basic overhead expenses much less payment of salaries or capital expenditure. How will the states that are harbouring impoverished citizens raise tax in the face of crumbling businesses? It is a very worrisome development. When a nation is ill-prepared for this kind of challenges, this is usually the outcome.”
Suggesting the way forward, he added: “So many areas of agriculture can bring about quick-win that can bring back life to the states. They can also latch on the incentive coming from the federal, central bank and international organizations like World Bank and so on. With all of these, states may be able to reorganize themselves to access some of these programmes to revamp their economies. But it can no longer be business as usual. There is a need for them to put on the thinking caps now.”
According to him, the great economic depression of 1930 might be child’s play, if the ravaging effect of COVID-19 persists further, as no developed economies would be in a strong position to bail out the less developed countries as America did after World War 11.
He said: “We still have a long way to go. We can only pray that COVID-19 will end soon so that we can rebuild the economy through the economic stimulus package and some steps being taken by the Central Bank of Nigeria in terms of interventions and the stimulation of the various sectors of the economy, especially the SMEs. But in total, if this continues for a while as predicted globally, we may be in for the like of the great depression of the 1930s.
“In fact, if COVID-19 remains the way it is, the economic depression of the 1930s may even be child’s play because in the 1930s, American economy still remained strong and resilient despite the great depression in the UK and the Second World War, which was why America assumed the role of the economic manager globally after the World War 11. The way it is now, no economy of the world is being spared. I cannot as at today identify a particular economy that would play that role of a coordinator to help the weaker economies. Every economy is undergoing a lot of challenges even though there are some countries like Europe and America that are more resilient because they have shock absorber compared to the less developed economies like Africa, Asia and Latin America. In all, everything put together, the signs are very ominous.”
On his own part, Dr Tayo Bello of Department of Private and Property Law, Babcock University, Ilesan, Ogun State, advocated a paradigm shift to a knowledge-based economy, saying that the era of dependency on federal allocation had gone.
He said: “The governors of these states must definitely sit tight. If they want to be serious, they should know that the era of sharing federation allocation is gone. One, they most create knowledge-based economy that involves data usage about citizens. What they can do now is to have appropriate data of firm or industries within their jurisdictions. Productivity is the engine room of economic growth and development. What palliative measure do you want to give when you don’t know how many industries are operating in your domain?
“There are some companies that are paying their taxes regularly, they need to protect them. This is the hard time to protect them. If they go down, the economy of the states too will go down. If they are properly protected, the state economy will be protected. But again, the question is: do they have money to bail them out?
“Secondly, they should let environment in their states determine what policy measure to adopt. Ogun State, for instance, has a lot of opportunities as the gateway to the nation. I see no reason Ogun State has not become an oil-producing state as at today. I don’t see any reason Ikorodu Local Government should rely on the state government for salaries because the revenue from informal sector is more than what they need to pay.”
Bello also advised the governors to rid themselves of unnecessary ostentation of office to reduce the cost of governance.
Recalling the austere style of the administration adopted by the UPN administration in the Southwest during the Second Republic, he said: “I remember in 1979, when the UPN won elections in the Southwest states and a chieftain of the ruling NPN threatened that some states would crawl on their kneel to get allocation for the implementation of their free health and free education programmes, Papa Awolowo told the governors to bring the list of their income and expenditure. The expenditure on tea alone which he struck out of the list was what they used to finance free education in Ogun State at that time. He also told the public servant that ‘it is the duty of the state government to provide telephone for you, but it is your duty to pay any amount incurred on that telephone.’ It was the saving they made from that policy decision that they used to provide free textbooks for the pupils. Today, you see a governor going with about 30 cars. What is he going to do with it? You can imagine consumption of fuel alone and other paraphernalia of office. That is why most state governments are highly incapacitated.”
Meanwhile, some governors have declared their action plans for economic sustainability amid the Coronavirus pandemic.
In Kebbi State, for instance, some of the measures already outlined included a review of the 2020 budget, mobilization of IGR, as well as reduction of unnecessary expenditures of government to meet the emergency needs.
Governor Abubakar Atiky Bagudu said: “I accepted the proposal that we must set up committee on this issue to guide us on what to do. One thing that is certain is that it will not be business as usual”.
The Permanent Secretary, Ministry of Budget and Planning, Hajia Aisha M. Usman, at a recent stakeholders meeting also declared: “With the fall in oil prices down to $26 per barrel, oil revenues to the Federal Government will almost be zero. The current and forecasted events clearly indicate that state government’s finances will be badly affected.
“In view of low IGR and dwindling FAAC allocations, the states will have to productively plan ahead on how to manage their economies and provide for the Global Health emergency of COVID-19”.
In a similar manner, the Bayelsa State government has also adopted lean appointive system and aggressive revenue generation as part of the policy measure to keep the state afloat.
IGR under the administration of former Governor Seriake Dickson was put at N1.3billion. His successor, Governor Douye Diri, promised to sustain the tempo through aggressive revenue generation drive.
The Technical Adviser to Bayelsa Governor on Finance and immediate past Commissioner for Finance, Mr Maxwell Ebibai said that Bayelsa was facing a great threat.
At a recent stakeholders’ meeting in Yenagoa, Ebibai said: “You requested for appointments, but our government will run a lean appointive system. We have plans to support you and every Bayelsan in various ways. I, therefore, call on you to join us in educating our people that we cannot continue to depend on government for everything.
“Our government will like to support businesses. We will provide opportunities for wealth and job creation for our people, particularly our women and youth through skills acquisition and loans.”
Also investigations revealed that Governor Diri has approved a policy position to right-size, down-size and streamline government ministries, departments and agencies in line with the policy direction of the government.
Findings indicated that the ministries have been reduced to 21 while there are moves to downsize the state work force.
Sunday Sun also gathered that Governor Rotimi Akeredolu of Ondo State had raised an economic team to plan for post COVID-19 in the state.
The team, according to a source, comprises the governor, the Finance Commissioner, Permanent Secretary, Ministry of Finance, state Accountant General and some other functionaries involved in financial matters.
Likewise in Enugu State, the Governor Ifeanyi Ugwuanyi administration has constituted a technical committee to prepare the state for post COVID-19 pandemic.
According to the Commissioner for Information, Chidi Aroh, the Committee, which consists of expert members drawn from various fields, is to work out short and long term economic strategies that will keep the state afloat.
He said that government was not unaware of the global economic downturn with the fall in oil price and the attendant disruption of economic activities by the pandemic.
For Niger State, reduction in government expenditures, 36 per cent downward review of the 2020 budget, 50 per cent reduction in overhead cost to Ministries, Agencies and Departments (MDAs), as well as travel expenses by government officials are some of the proposals already on the table.
The state Commissioner for Finance, Mallam Zakari Abubakar, while speaking to Sunday Sun, said that the government had drastically reduced the cost of governance to the barest minimum, starting with reduction by 50 per cent overhead cost to MDAs. “We have said enough. I think it time to act, the narrative must change. We cannot continue to pay lip service to diversifying the economy. There is a big lesson to learn from this COVID-19, but if nothing changes then I have my fear”, he submitted.
In Anambra State, the Commissioner for Information and Public Enlightenment, C. Don Adinuba, told Sunday Sun that the state government would study the economic situation and come up with appropriate line of action. “What is clear is that most governments are about to review their 2020 budgets. So, there will be a comprehensive review starting with the budget. I think the government of Anambra State will pursue with greater vigour, our mantra of doing more with less,” he declared.
Similarly, like most of its counterpart in Anambra State, Sokoto government is also considering the option of budget cut as well as suspension of multi-million contracts to curtail the state expenditure and balance it with the accruing revenue.
Already, Governor Aminu Waziri Tambuwal through State Executive Council has announced a slash in the 2020 budget from N202 billion to N153 billion and the amended appropriation bill, amounting to N49 billion, has since been sent to the State House of Assembly for approval.
According to the State Commissioner for Finance, Hon. Abdulsamad Dasuki, the review will affect all Ministries, Departments and Agencies (MDAs) as well as other projects.
For Taraba State, Governor Darius Ishaku has said that the state is going to rationalize its expenditure in order to keep afloat and continue to provide basic services to the people.
The Senior Special Assistant to the governor on media, Mr Bala Dan Abu, who disclosed this to Sunday Sun in a telephone interview, however, said that the state was not considering suspension of ongoing projects or cutting down the number of political appointees or their allowances.
Benue State Commissioner for Finance, David Olofu, while admitting the inevitable fall in the Internally Generated Revenue (GR) as well as the state share of federal allocation due to the impact of COVID-19 pandemic, said the extent of the total effect would determine the appropriate measures to adopt to keep the state going.
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