The global upheaval caused by covid-19, the novel coronavirus, has shocked authorities in Nigeria to action. While commendable, the ministry of finance and the central bank must be bold and vigilant.
Nigerian authorities must be proactive. They can’t afford to be complacent even if there are only 12 confirmed cases of infections and no death has been recorded. The rate the deadly virus spreads and the economic turmoil it has unleashed around the world are enough reasons to remain alert to respond faster and for further reforms.
The measures taken so far are commendable. A cut in the oil benchmark for the budget to $30 a barrel is realistic, securitising the four trillion naira the federal government owes the central bank is a wise decision and the one trillion naira stimulus to boost local manufacturing and all critical sectors make sense.
More, however, can and must be done – the coronavirus-induced economic crisis is a once-in-lifetime opportunity to put in place measures that will make the economy less vulnerable in the future. It must make more room for the private sector. A reduction in the pump price of petrol rather an outright deregulation of the oil sector is a half-measure that may come back to hunt the government. Price reduction is not deregulation. Deregulation takes the government out completely of every business activity in that space; this is time to pass Petroleum Industry Bill. This is the time to make the gas revolution that will power electricity and manufacturing a reality. Level of control in private businesses isn’t over for the FG. Recently, the FG reduced price of fuel to N125 from N145, a way to lessen the burdens of its citizens.
To delay such reforms for another day or a different government or wait for another existential threat to force change is foolhardy. Waiting to be forced to do what is right when things seem out of control is costly. This must stop.
Nigeria’s reluctance to make the right policies over the years has put her in a more precarious economic condition. Another pending major reform is the exchange rate. The obsession of the central bank with the naira based on, as it believes, market fundamentals that support its stability are dubious. The naira is overvalued and the fundamentals show that Nigeria is ill-equipped to keep this artificial value. An adamant defence of naira is complicated by the fast depleting external reserves which now $36 billion, down more than 20 percent.
Micro, small and medium scale enterprises (MSMEs) account for 90 percent of all businesses in the country and contribute to 50 percent of total goods and services produced. But these businesses, which run with capital as little as N50,000 to N1million, face the risk of suspending and possibly shutting down their operations because of the coronavirus outbreak .
The ripple effect in the form of job loss and income will be negative and could swell the already bulging number of people in living in extreme poverty. Fiscal incentives that make doing business easier, that reward rather than penalise small businesses for stepping out of the shadows of the informal sector will help these businesses expand and generate jobs.
While Nigerian authorities are preoccupied with churning out short-term measures to combat the effect of covid-19 on the economy, they must not ignore long-term measures; Critical reforms across key sectors that are long overdue. Now is the best time to enact them. they cannot afford to continue living in denial.