• Thursday, September 28, 2023
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Post COVID-19 strategy, Nigeria’s economy and the transport sector

transportation sector

The transport industry has a great role to play in helping Nigeria rebound after the negative impacts of the COVID-19 which has resulted in major economies sliding into recession. With over 80 million people using the sector daily in Nigeria the industry is very fundamental in the movement of people, essential goods, services and products across the nation.

In 2019 the transport sector increased its GDP from $642.927 to $720.241 million and it is believed that more development in this sector will help attract both local and international investments. Around 80 percent of global trade is transported by commercial shipping and maritime trade accounts for nearly 25 percent of global traffic volume and so it is very imperative for mid and long-term recovery strategies to be made to strengthen sustainability and resilience of the sector in the areas of  job security, international trade, business development and opportunities .

The unprecedented impacts and disruptions of COVID-19 have ravaged most economies and markets globally. It has also affected the Nigerian government’s projection to generate N2 trillion from the maritime industry and the economy has been seriously impacted by the outbreak of the pandemic which has resulted in 634 deaths as at 4th July,2020 in Nigeria.

In 2017 a world bank indicator that promotes trading across borders measured the efficiency of different ports globally and ranked Nigerian Ports at 183 out of 185 countries.

The impact of the pandemic recently made Nigeria’s Vice President, Yemi Osinbajo-led committee on Economic Sustainability plan to warn Nigerians that about 39.4 million people might be unemployed by the end of 2020, if the government fails to take pre-emptive measures.

The impact has also led to  loss of businesses resulting to drop in government revenues as federal agencies such as the Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian Ports Authority (NPA), Standards Organisation of Nigeria (SON), the Nigerian Agency for Food Drug Administration and Control (NAFDAC), Nigerian Agriculture Quarantine Services (NAQS) among others that generate revenue from authorising the release of cargoes. All these have resulted in significant revenue loss to the sector and economy at large.

Interestingly, before the outbreak of COVID-19, the federal government had given Nigerian Customs Service a revenue target of N1.5 trillion which the service jacked up to N2 trillion. In 2019, it generated N1.341 trillion, thereby exceeding its target of N937 billion by N404 billion and also generated N1.20 trillion in 2018, but the current outbreak of the pandemic has seriously affected the N2 trillion revenue target because the economy has slided into recession.

The government also made efforts to bolster aggregate demand by increasing government spending and tax cuts for businesses by increasing public budget from N8.83 trillion ($24.53 billion) in 2019 to N10.59 trillion ($29.42 billion) in 2020, representing 11 percent of the national GDP. It also exempted small businesses from company income tax and revised the tax rate for medium-sized businesses downwards from 30 to 20 percent to cushion the effects of the pandemic on the economy.

Our government should focus more attention on ways of investing resources in the Transport sectors development to be a major source of revenue generation to our nation, boost the economy, create more employment opportunities and also sustain the sector

With all these efforts and  NPA generating N299.56 billion in 2017 and N118 billion in seven months in 2018, while NIMASA in 2018 contributed a total of N22 billion to the federation account ,all these revenue generating agencies cannot  raise as much this year because of the impact of the pandemic as there are significant reduction in the number of vessels that can call into our ports due to fear of the pandemic.

Another area where the pandemic has negatively impacted our economy is reduction in the level of imports arriving at our ports which has dropped significantly. Port calls to China have also decreased as a result of fear of the virus and has slowed down economic activities between Nigeria and China (our key business partner). All these have deterred cruise liners, container ships, oil tankers and bulk carriers from stopping at our nation’s ports and that of most nations globally.

In addition to the above about our relationship with China, Nigeria has more than 50 per cent of its import from China and has resulted to many of our nation’s importers reluctance to receive cargoes from there, even as millions who usually travel there have all stopped. China, United States of America (USA) and India are Nigeria’s major import trading partners and contribute 31.34 percent, 11.35 percent and 7.49 percent (respectively) of imports trade. Our nation’s total imports come from these countries and we need to brace up for economic challenges ahead.

The drop in the arrival of commercial vessels in our ports and the fall in port calls at an estimated 30 percent in February 2020 in addition to decline in our container throughput to approximately between 20 and 30 per cent. Our nation’s maritime sector urgently needs to adopt new policies, strategies and also inject new ideas to drive the sector.

The recent statement by Nigeria’s Vice President that millions of citizens will fall into extreme poverty before COVID-19 ends and that Gross Domestic Product (GDP) has slid to between -4.40 percent and -8.91 percent is a confirmation of the economic hard times ahead.

The lack of a well-diversified economy and our weak healthcare system pose a great challenge that can affect our efforts to reposition the economy in addition to the review of the GDP growth rate from 2.5 percent to 2 percent by International Monetary Fund (IMF) as a result of the relatively low oil price and limited fiscal space are all additional reasons why we need to brace up for the challenges ahead.

A world bank indicator which promotes trading across borders measured the efficiency of different ports globally and ranked Nigerian Ports at 183 out of 185 countries in 2017.

Furthermore, the country’s debt profile is also a source of concern for policymakers and developmental practitioners, as the most recent estimate puts the debt service-to-revenue ratio at 60 percent, which is likely to worsen amid the steep decline in revenue associated with falling oil prices.

All these constraining factors will definitely aggravate the adverse economic impact of the COVID-19 outbreak, increase economic hardship for Nigerians and also make it more challenging for the government to manage the economic crisis looming ahead if urgent steps are not taken to manage the crisis through developing the inherent potentials of the sector.

Our government should therefore focus more attention on ways of investing resources in the Transport sectors development to be a major source of revenue generation to our nation, boost the economy, create more employment opportunities and also sustain the sector.