With the increasing negative impacts of COVID-19, it is becoming clearer that Nigeria is really in an unprecedented socio-economic and health crisis. Everything seems to be going south- unemployment, inflation, diaspora remittances, poverty, insecurity, foreign reserve, investments, exchange rate and firms’ profitability.
In the revised 2020 budget, not only has projected oil production been reduced from 2.18 mb/d to 1.7mb/d, the oil price has also been adjusted downwards from $57/bb/l to $30/bbl. Relatedly, while revenue projection has been reduced from N8.42 trillion to N5.08 trillion, the deficit has increased from N2.17 trillion to N5.2 trillion. However, of the key items that have been adjusted, expenditure received the lowest reduction from N10.59 trillion to N10.27 trillion while the exchange rate moved from N305/US$ to N360/US$.
To address the multiple challenges, the federal government has been responding through different policies. These include the fiscal stimulus of N2.3 trillion to execute the National Economic Sustainability Plan, increasing domestic and external borrowing, intensifying tax revenue generation, refocusing recurrent expenditure among other factors. While these policies and actions are commendable, they are insufficient if we want to grow from our revised 2020 GDP growth of negative 5.4 percent to the positive 2.4 percent projected in 2021 and beyond. More creativity and effective leadership are required.
To get a better idea of the complexity of the challenges we have, it might be better to use a risk approach. Clearly, Nigeria is presently facing four major types of risk- economic, health, insecurity and emerging political risk with our economic outlook and outcome from 2021 and beyond dependent on the way we handle these risks in terms of our mitigation strategies.
As the benefits of the tree planting suggestion will take about three years to manifest, there is also an urgent need to pursue other immediate strategies to enhance our preparedness and resilience amidst COVID 19 challenges
On the economic risks, the key challenge is how to craft robust fiscal and monetary policies to diversify the economy and increase revenue. Using the National Economic Sustainability Plan with a focus on Agriculture, it is very possible to permanently generate over N18 trillion revenue every year. Please note that I mean over N18 trillion which is almost double of our 2020 budget of N10.27 trillion. This will address our revenue problems; reduce insecurity through the millions of jobs that will be created and lead to a better exchange rate due to the massive foreign revenue that will be generated. In the National Economic Sustainability Plan, the budget for Agriculture is N634,982,256,367.46. Interestingly, with good vision, just about N200 billion of the N634,982,256, 367.46 can be used to permanently and positively change the course of Nigeria on many fronts.
All that will be required to do is to clearly identify about ten economic trees that can generate about N25,000 annual revenue per tree and then mandate each state to plant a minimum of 20 million trees. Examples of such trees include Palm, Coconut, Soursop, Avocado, Guava and Bitter Kola. At a subsidised rate of N250 per tree, the 20 million trees will cost each state in Nigeria about N5billion and N180 billion for the 36 states.
Using improved seedlings that fruits after about three years means that each state in Nigeria will be able to generate about N500 billion every year which means additional revenue of about N18 trillion every year for Nigeria. With such an amount every year, it means that we can generate almost double of our total budget of about N10.27 trillion from Agriculture and precisely from two to three economic trees. In addition to the direct revenue that can be generated from selling the outputs as just raw materials, the value chain will be a magnet to foreign investors leading to more spill over opportunities and investments.
While Indonesia made about $18.4 billion from palm oil (about N7.2 trillion) in 2017, Nigeria’s encumbered 2020 federal budget is only N10.27 trillion! In the same vein, while India’s coconuts are valued at about $10 billion, Philippines $6.7 billion and Indonesia $4.5billion, the three countries account for about 60 percent of the $35.6 billion global coconut market. So, while Indonesia makes about $23 billion from just two economic trees- coconut and palm trees, Nigeria borrows $3.5 Billion from IMF and begging World Bank for an additional $1.5 billion.
As the benefits of the tree planting suggestion will take about three years to manifest, there is also an urgent need to pursue other immediate strategies to enhance our preparedness and resilience amidst COVID 19 challenges. First, we need to pursue a unified exchange rate that will likely result in about N400-N420 to $1. This can be achieved through the average of the multiple exchange rates we have and deliberate mopping up of the excess liquidity in the market. With such move and proper forward guidance policies from key regulatory agencies such as CBN on key issues such as interest rate and inflation, a better stability will be achieved.
Second is the urgent need for deliberate efforts to reduce the cost of governance. Its urgency is like yesterday. We cannot in the face of an overwhelming crisis such as COVID 19 continue to run a very extensive and expensive system of governance as we currently do. The need to fully implement the Orasonye Report cannot be over emphasised in line with the saying that leading by example is an excellent way to teach, President Buhari needs to exhibit courage and urgently reduce the number of ministers and aides to serve as a reference point for others to follow. This is also the case with the high cost of running the National Assembly.
With courage, the President needs to clearly agree and pursue the necessary constitutional amendments and persuasions required to make our National Assembly work a part time one with significant reduction in the number of National Assembly members. A suggestion will be to have only one chamber (upper or lower) with each state having only three members.
Third is the need to pursue devolution of powers particularly transferring some items from the exclusive legislative list controlled by the federal government to the concurrent and residual lists controlled by the state and local governments? This will help liberate our economy enhancing more private sector participation through the reduced regulation that can be achieved.
Fourth and for immediate liquidity is the need to sell many government assets that are idle and wasting. As they say, where there is a will, there is a way!
Dr. Ngwu, is an Economist/Associate Professor of Strategy, Corporate Governance & Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- [email protected],
