The Nigeria Economic Sustainability Plan 2020was produced by a presidential committee led by Vice President Yemi Osinbajo in response to the health and economic challenges foisted on the country by the novel coronavirus.
Read the executive summary of the report here, and download the document in full below.
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
(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
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
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
(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)
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 behaviour, 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 be 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 lockdown 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.
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BY HANYTA OGBE