Time to rebuild the economy and prioritise public spending

Shocks from the Covid-19 pandemic hit Nigeria when its shock absorbers were at their weakest — worsening the precarious state of the economy, costing Nigerians their jobs, weakening economic growth and increasing the number of the poor.

Nigeria is at a point where all hands must be on deck to build a more vibrant and sustainable economy by prioritising public spending. The Federal Government’s ‘I am self-sufficient and well able’ disposition and policies no longer work. So, the private sector must be carried along.

In every economic crisis, households bear the brunt eventually through increased cost of living, job losses, health complications etc. This category of economic agents also accounts for more than 70 percent of contributions to the nation’s Gross Domestic Product (GDP).

Hence, it only makes sense that policy options that can help mitigate the effects of the crisis on this group must be focused on. This will help lay the foundation for a strong economic recovery, generating more jobs and improving employment.

To help save lives, prevent increase in poverty rate and protect livelihood of the poor and vulnerable, the government must reprioritise public spending to protect critical development expenditures and stimulate economic activities. One way will be to lessen the Covid-19 induced pressures on the Nigeria agricultural sector.

The Nigeria agricultural sector has remained a major contributor to GDP compared to other sectors of the economy. In 2019, the sector contributed 22.12 percent to Nigeria’s nominal GDP coupled with employing about 70 percent of Nigeria’s working population. The sector also has the largest economic activity in the rural area where almost 50 percent of the population lives.

Read also: Lagos Public, private schools to reopen January 18- LASG

However, the outbreak of the Covid-19 has caused the sector to contract, also bringing to the fore many of the existing structural challenges in the sector. Farmers and dealers in agricultural goods struggled through the period of lockdown, as security agents routinely declined to grant ease of passage.

With farmers unable to access their farms, some that should have harvested during the months coinciding with the lockdown were unable to, while those that should have been preparing their land for the planting season were equally restricted.

According to the International Food Policy Research Institute (IFPRI), the Nigerian Agriculture GDP contracted by -14 percent in April/May 2020. Export crops such as Sugarcane, Beverage crops, transnational export crops declined 47 percent, 45 percent and 58 percent respectively due to falling export demand and input supply disruptions. But these crops account for less than 1 percent of agriculture GDP.

Decline in investment spending and construction activities also reduced demand for timber and wood products. This led to the forestry subsector which accounts for 1.1 percent of Agric GDP plunging by -25 percent during the period.

Meanwhile root crops which are the largest food group and agriculture subsector in Nigeria which account for 43.3 percent of the sector’s GDP contracted by 5 percent. Other subsectors moved in similar direction.

Moreover, the shutdown of Indorama, a leading fertiliser producer, due to the death of three workers related to Covid-19, as gathered by BusinessDay, was termed the major challenge for farmers in this difficult time.

We urge farmers to find a way of multiplying their farm harvest to prevent food shortage in 2021.

Projections by national leaders of some agricultural commodity producers has shown productivity this year could reduce by an average of up to 47.5 percent. Nigerians face a harsher reality of food shortage and job losses if reforms and policies targeted at increasing the processing capacity of agricultural produce by farmers and producer organisations are not initiated.

We hope that, with such reforms, Nigeria would be able to mitigate the negative effects of the pandemic, while generating more jobs and improved employment.

We join the World Bank in warning that without bold reforms, strong fiscal and monetary policy actions, the macroeconomic implications of Covid-19 in 2020 and 2021 will be severe, including loss of lives and possibility of five million more Nigerians being pushed into poverty. Action must happen now.