Introduction: Following the health and economic emergencies caused by the COVID-19 pandemic, His Excellency, President Muhammadu Buhari established the Economic Sustainability Committee (ESC) on March 30, 2020.
Membership of the Committee: Membership of the Committee consists of:
(i) His Excellency, the Vice President;
(ii) Hon. Minister, Finance, Budget & National Planning;
(iii) Hon. Minister of State, Budget and National Planning;
(iv) Hon. Minister, Industry Trade & Investment;
(v) Hon. Minister, Labour and Employment;
(vi) Hon. Minister of State, Petroleum Resources;
(vii) Governor, Central Bank of Nigeria;
(viii) Group Managing Director, NNPC; and
(ix) Permanent Secretary, Cabinet Office – Secretary
Other Ministers Co-opted:
(i) Hon. Minister of Agriculture & Rural Development;
(ii) Hon. Minister of Humanitarian Affairs, Disaster Management & Social Affairs;
(iii) Hon. Minister of Works & Housing;
(iv) Hon. Minister, Aviation;
(v) Hon. Minister, Communication & Digital Economy;
(vi) Hon. Minister, Education;
(vii) Hon. Minister, Health;
(viii) Hon. Minister, Interior;
(ix) Hon. Minister, Science & Technology; and
(x) Hon. Minister of Transportation.
Terms of Reference:
(i) Develop a clear Economic Sustainability Plan in response to challenges posed by the COVID-19 Pandemic;
(ii) Identify fiscal measures for enhancing distributable oil and gas revenue, increasing non-oil revenues and reducing non- essential spending, towards securing sufficient resources to fund the plan;
(iii) Propose monetary policy measures in support of the Plan;
(iv) Provide a Fiscal/Monetary Stimulus Package, including support to private businesses (with emphasis on strategic sectors most affected by the pandemic) and vulnerable segments of the population;
(v) Articulate specific measures to support the States and FCT;
(vi) Propose a clear-cut strategy to keep existing jobs and create opportunities for new ones; and
(vii) Identify measures that may require legislative support to deliver the Plan.
Consultation of Other Stakeholders:
Consultation with the Presidential Economic Advisory Council (EAC): Apart from the FEC Members and Agency CEOs consulted by the Committee, the ESC also met with the members of the Presidential Economic Advisory Council and subsequently exchanged correspondence with them on the policy thrust and some particular aspects of the draft Sustainability Plan, including its implementation strategy.
Briefing of State Governors: As members of the National Economic Council and major stakeholders, State Governors were fully briefed on how the implementation of the Plan would necessarily entail their full collaboration, especially the mass agriculture, mass housing, broadband connectivity, domestic solar projects, etc. The Governors also submitted their views and contributions to the development of the Plan.
Consultative Session with the leadership of the National Assembly: The Senate President and Speaker of the House of Representatives led principal officers of the National Assembly in meeting with members of the ESC. After the draft Sustainability Plan was presented to them, the legislators commended its strategic approach and made some recommendations, which are to be taken into consideration in implementing the plan.
Other Plans Incorporated in the Proposed Economic Sustainability Plan:
(i) The Economic Recovery and Growth Plan (ERGP)
(ii) Report of the Economic Crisis Committee (headed by the Hon. Minister of Finance, Budget & National Planning)
(iii) The Finance Act 2019; and
(iv) Central Bank of Nigeria (CBN) Proposals.
Basis Of The Plan:
Immediate Challenges of the COVID-19 Pandemic: The COVID-19 pandemic has created severe Economic consequences for all countries around the world. Nigeria has also been very badly hit. The lockdowns have frozen economic activities, causing massive job losses and supply chain disruptions. It has also depressed the demand for crude oil and precipitated an unprecedented oil price crash. Nigeria’s dependence on oil for revenue and foreign exchange makes it particularly vulnerable in this situation.
It is expected that if oil prices average $30 over the rest of the year, oil revenues (assuming Nigerian National Petroleum Corporation reduces Joint Venture operating costs by 20%), would amount to about N88.4 billion monthly. Assuming that non-oil revenues are sustained at the lower level projected in the revised budget estimates, the total allocations to FAAC for the rest of the year would then be around N485 billion a month. This time last year total allocations to FAAC was N669.9 bn monthly. The very steep decline in revenues available for sharing among governments of the federation will have serious implications for wages, overheads and capital expenditures at Federal, State and Local Government levels.
Unemployment rate which was 23.1% (or 20.9m people) at the end of 2018 is expected to rise to 33.6% (or 39.4 million people) at the end of 2020, if urgent steps are not taken. The major problem with unemployment of a very large youth population is the hopelessness that gives rise to criminal activities and anti-social behavior, which can ultimately create potential recruits into the ranks of insurgents.
Even for those able to earn a living, the situation is dire. The NBS recently released a household survey of poverty in Nigeria, a five-year study which showed that over 40% of Nigerian households earn less than N137,000 per annum. This is barely N11,000 per month. With the COVID crisis, this poor income will drop much further.
Given these indices, the National Bureau of Statistics (NBS) projects that economic growth could fall by as much as minus 4.40% to minus 8.91% depending on the length of the lockdown period, the potency of the economic plans that are put in place, and, in particular, the amount of stimulus spending.
The time-tested approach to fighting a recession is a stimulus package. The size of the stimulus package will usually determine how shallow or deep the recession would turn out to be. We asked the NBS to give us a model of what the macro implications of four scenarios would be if we had the good fortune for oil prices to average at $30 per barrel in 2020.
(i) Scenario 1: With no stimulus, i.e., if we simply stick to our budget the economy will decline by minus 4.40% at best.
(ii) Scenario 2: With a stimulus of just N500 billion, the economy will decline by minus 1.94%.
(iii) Scenario 3: With a stimulus of N2.3 trillion, the economic decline will be lower at minus 0.59%.
(iv) Scenario 4. With a stimulus of N3.6 trillion there will still be negative growth but only of -0.42%
Given our low level of revenues and the importance of monetary stability, we settled for a stimulus package of N2.3 trillion, which raises the question: How will this funded? This amount will be funded by N500bn from Special Accounts, N1.11 trillion of CBN structured lending and N302.9bn from other funding sources.
The second issue is the strategy. We decided that the best way to beat the triple problem of very low foreign exchange, huge unemployment and negative growth is by focusing on Mr. President’s mantra to produce what we eat and eat what we produce.
This meant focusing on agriculture, increasing the acreage under cultivation and engaging thousands of young people in farming and agro-allied jobs, with a scheme for guaranteeing off-take of farm produce. This ensures that farmers are assured of an income. Other signature programmes include mass social housing, using local materials, installing solar power in 5 million homes, and providing assistance to daily-paid and self-employed workers – petty traders, artisans like bricklayers, vulcanisers, and electricians as well as commercial drivers and barrow-pushers.
Many businesses have suffered severe losses due to the lockdowns and have had to decide on laying off staff, we have developed a strategy to ensure that as many as possible do not collapse and are able to retain their staff. For other businesses – aviation, hotels , private schools, restaurants, finding it difficult to continue making loan repayments to banks, we have developed a scheme for the restructuring of their loans. For the extremely poor and vulnerable, we have increased support available under the Social Investment Programme.
General Objectives of the Plan:
(i) To stimulate the economy by preventing business collapse and ensuring liquidity;
(ii) Retain or create jobs using labour intensive methods in key areas like agriculture, facility maintenance, housing and direct labour interventions;
(iii) Undertake growth enhancing and job creating infrastructural investments in roads, bridges, solar power, and communications technologies;
(iv) Promote manufacturing and local production at all levels and advocate the use of Made in Nigeria goods and services, as a way of creating job opportunities, achieving self-sufficiency in critical sectors of our economy and curbing unnecessary demand for foreign exchange which might put pressure on the exchange rate; and
(v) Extend protection to the very poor and other vulnerable groups – including women and persons living with disabilities – through pro-poor spending.
This plan is based on three pillars:
The first pillar consists of “Real Sector Measures”, and comprises a mix of project and policy approaches, which focus on the creation of jobs across the fields of agriculture and agro- processing, food security, housing construction, renewable energy, infrastructure, manufacturing and the digital economy. The aim is to safeguard existing micro, small and medium scale businesses while ramping up local productive capacity by encouraging opportunities for innovation in the various sectors.
The second, “Fiscal and Monetary Measures”, outlines steps that will be taken to maximise government revenue, optimise expenditure and enshrine a regime of prudence with an emphasis on achieving value for money. The overriding objective is to keep the economy active through carefully calibrated regulatory interventions designed to de-risk the environment for local production and enterprise, galvanise external sources of funding, rationalise existing debt obligations and boost investments in strategic sectors affected by the COVID-19 pandemic, while supporting the financial viability of State Governments.
The “third pillar is Implementation”. This is the key to the success of the plan. Each Minister will be responsible for supervising the implementation of plans situated in their Ministry through a ministerial implementation Committee chaired by the Minister. The Ministerial Committee will be responsible for ensuring synergy between stakeholders, especially the public and private sector. The Committees shall also drive the execution of specific projects, coordinate the entire sectorial value chain and ensure resolution of bottlenecks impeding implementation. The Economic Sustainability Committee, which is an inter-Ministerial Committee, will be responsible for general oversight of implementation and will report to the President. Expenditure will be monitored through the National M&E Framework and the Budget Office of the Federation.
Proposed Key Projects: Key projects put forward by relevant Ministries to sustain economic activity, boost production, create the maximum number of jobs possible and save foreign exchange include –
(i) A Mass Agricultural Programme: This is expected to bring between 20,000 and 100,000 hectares of new farmland under cultivation in every State of the Federation. The aim is to create millions of job opportunities, directly and indirectly, over a 12-month period. A significant number of Nigerians will be incentivised to engage in farming and agro-processing, as that is a field in which Nigeria has comparative advantage. The Hon Minister of Agriculture and the CBN Governor have agreed a detailed plan of action in this regard.
(ii) Extensive Public Works and Road Construction Programme (focusing on both major and rural roads) As the country cannot afford to continue with the importation of bitumen for road construction, emphasis will now be on the use of locally available materials like limestone, cement and granite. Options have been explored for using these materials in major Federal highways. Similarly, a significant number of workers can be engaged in the construction of rural roads using stones and other materials available locally. The Hon. Minister of Works and Housing is developing the engineering concept and template for this approach in order to assist the Ministry of Agriculture and Rural Development, which is responsible for rural roads.
(iii) Mass Housing Programme: This programme is expected to deliver up to 300,000 homes annually, engaging young professionals and artisans who form themselves into small and medium scale businesses within the construction industry. Such enterprises will use indigenous labour and materials working on dedicated housing sites. For instance doors, windows and other materials will be produced, finished or assembled at mass housing construction sites. Also, home designs can be standardised and costed with economies of scale in mind to ensure their affordability. Bouncing Back: Nigeria Economic Sustainability Plan 13 For the construction of houses to continue uninterrupted across the country, the Federal Ministry of Works and Housing, CBN and the Family Homes Fund (under the Ministry of Finance) are making arrangements for purchase through cooperatives and for warehousing of completed houses, which will then be mortgaged or let out on rent-to-own basis.
(iv) Installation of Solar Home Systems: The proposed Solar Home Systems Project will cover up to 5 million households, serving about 25 million individual Nigerians who are currently not connected to the National Grid. In view of the scale of materials required, solar equipment manufacturers will be required to set up production facilities in Nigeria, thereby offering additional job opportunities to Nigerians. In addition, installation, servicing and payment collections are expected to provide thousands of other jobs.
(v) Strengthening the Social Safety Net: This will be achieved through an increase in the number cash transfer beneficiaries, N-Power volunteers and sundry traders enjoying small and micro loans through the MarketMoni and TraderMoni schemes. The preexisting conditional cash transfer will be extended to cover mostly the rural poor. However, on account of the current lockdown, most of the urban poor, artisans, labourers, petty traders, street vendors, cart pushers, have become further impoverished.
(vi) Support for Micro, Small & Medium Enterprises: Implementation of a scheme to support business activities of MSMEs through guaranteed off take of items like personal protective equipment, face shields, face masks, hand sanitizers, shoe covers, soaps, etc. In this regard, we expect to catalyse massive investments in light manufacturing, which will ensure that many common articles of everyday use are made in Nigeria to acceptable standard.
(vii) Reduction in NAFDAC registration fees: Practical support has also been initiated for MSMEs as an immediate response to support resilience. In this regard, the National Agency for Food and Drug Administration and Control (NAFDAC) has implemented an 80% reduction of its product registration charges and total waiver of administrative charges for product license renewals.
(viii) Survival Fund: This is to give payroll support to small and medium-sized enterprises so that they can keep their employees and help maintain jobs.
(ix) Promotion of Domestic Gas Utilisation: To take advantage of Nigeria’s abundant gas resources, which is also cheaper and more friendly to the environment, this project will promote indigenous manufacture of gas cylinders, building of gas filling stations and conversion of cars to promote the wide use of compressed natural gas in the domestic market.
(x) Digital Technology: To foster a culture of innovation and create a wide variety of technology and ICT jobs, special attention will be paid to the promotion of technology hubs, call-centres for business process outsourcing and digitisation of processes, both in Government and within the private sector. Experience thus far indicates that, if well harnessed, this is a sector that can create jobs on a large scale and earn foreign exchange for the country.
It is further envisaged that a range of measures must be necessarily taken to undergird the implementation of the Plan, enhance service delivery and build resilience in the post- COVID-19 economy. These measures include:
(i) Digital identification of every Nigerian, this will help improve the provision of cash transfers and other benefits;
(ii) Broadband connectivity to help school children access digital education across the entire country;
(iii) Local production of all that we can: shoes, steel fabrication, ceramics, plastics, furniture and building materials;
(iv) Promoting strategic investment in the local manufacture of generic medicines to reduce importation of expensive drugs;
(v) To establish a national research fund for medicine and pharmaceuticals funded by contributions from TETFUND and Corporate Social Responsibility expenditure of private companies;
(vi) To promote the uptake of the FGN Savings Bond to encourage all Nigerians to save a portion of their income no matter how small.
To read the full report, click here: Nigeria Economic Sustainability Report 2020