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A crisis not to be wasted

The confluence of COVID-19 and an oil market collapse means that our oil boom is well and truly over. We have no public sector savings, approximately $85bn (20 percent of GDP) that we have difficulty servicing, unemployment closer to 40 percent than the official 6 percent when adjusted for COVID-19, under-employment and under-reporting.
Nigeria is also hobbled by a seemingly endless war in the Northeast, climate change and decades of gas flaring devastating the South-East and Niger Delta, industrial output below 40 percent, daily public electricity averaging less than 5,000 megawatts, augmented by an alternative power market that delivers over 30,000MW at an estimated daily fuel cost of over N1.5 billion. We are indeed up the proverbial creek without a paddle. And the boat is leaking. To crown it all, President Muhammadu Buhari is without his trusted chief of staff. economic recovery
We can no longer await a post-COVID-19 economic recovery. Nigeria’s leaders must either deliver sterling leadership in a time of crisis or lead us to drown swiftly in the slough of despond. Apprehensive though we are about the coming socio-economic upheaval, BusinessDay believes that this may be the long-awaited tonic that compels a comprehensive change in the political economic management of the country. Absent public sector funding, the private sector becomes the engine of regeneration and subsequent growth, as ought to have been the case for long. Economic recovery must benefit the middle class and establish a sustainable platform for moving more Nigerians upwards into the middle class. Policy and law in the coming months, therefore, must encourage private sector investment into ICT, infrastructure, agriculture, manufacturing and, COVID-19 permitting, the services sector. The bedrock of all this is urgent investment in physical (roads, land, sea and air transport, energy transmission) and social (healthcare and education) infrastructure.
BusinessDay recognises that Nigeria’s infrastructure growth is challenged by the stifling grip held by the Federal Government over every infrastructure asset or opportunity, and not by access to project finance. Ports, pipelines, railways and electricity transmission lines are owned by and cannot be built or operated without negotiating exemptions from some federal MDA or the other. Existing assets, almost all poorly maintained and inadequate, cannot be devolved to the private sector except via a procurement process, run by the ICRC, so tortuous and prolonged that it defeats the purpose of starting the transaction in the first place.
Tracking COVID-19 in Nigeria
Total Coronavirus Cases, Apr 23
Total Coronavirus Deaths, Apr 23
Year-to-Date change in NSE ASI
Balance in Excess Crude Account, Dec 2019 (million)
Brent Crude ($ per barrel)
The federal and state public sectors must come up with a mechanism for developing viable projects around these brownfield infrastructures and finance them with domestic capital. Only then will foreign investment materialise. This is the most effective and fastest route to Nigeria’s economic revival. Fortuitously, the National Economic Council, comprising state governors, the minister of finance, the CBN governor, and chaired by Vice-President Yemi Osinbajo, has spent the last six months working on two major initiatives that could, if properly and firmly implemented, take Nigeria out of the woods and into a new era of sustained socio-economic development.
The first, on leveraging pension and other domestic funds into infrastructure investments, is focused on working out the fastest means for getting assets into corporate project vehicles. These would be developed quickly into viable investment opportunities with private sector partners. The second initiative is a comprehensive inquiry into the electricity sector that emerged with three key recommendations – first, the need to get the electricity sector back to abiding by contractual and regulatory rules that ensure the steady supply of energy to the DisCos in exchange for cash; second, undertake a mechanism for recapitalising the DisCos, by devolution of equity to the states and to the private sector; third, reinforce governance, especially in the DisCos at board level and in public sector policy-making and regulation.
These two initiatives are prescient. Nigerian pension funds manage N10 trillion-plus and accrue N110bn monthly in capital contributions. If implemented urgently and immediately with monetary and fiscal stimulus initiatives by the CBN and Federal Ministry of Finance, both initiatives will create opportunities for pension and other private investment desperately needed in the infrastructure space. In turn, further opportunities in education, healthcare, manufacturing, ICT and services will be created, saving Nigeria and Nigerians an avoidable economic depression.
Furthermore, the imminent massive cut in the flow of free money from the monthly FAAC ritual in Abuja compels the 36 governments to earn revenues from productive taxable activity, again by the private sector. With very few states having invested consistently in education and healthcare or acted to encourage large-scale private sector activity in manufacturing, mining and agriculture – three areas in which all the states can do very well – this will be a difficult journey. At this point, they and the Federal Government must work together to hand over assets to capable private-sector players as quickly as possible and work to safeguard the investments that will follow.
It is unbelievable that by 2008, Nigeria had over $20bn in its Excess Crude Account, monies which if transferred to and invested by the Nigeria Sovereign Investment Authority would have been available to launch our recovery from the massive shocks the country is now going through. Conventional economic wisdom says that countries need to spend 10 percent of GDP over at least 12 months consistently to survive COVID-19. Ironically, with a GDP of $410 billion today, Nigeria would have easily generated the $40bn now required, if only we had listened to wise counsel and invested rather than fritter away our Excess Crude Account. Once again, regrettably, we have no choice but to borrow and plead for debt relief to create fiscal space for social welfare and investment initiatives.
This is the time for President Buhari, Vice-President Osinbajo and their team to galvanise a whole-nation approach and bring together Nigeria’s deep technocratic and private-sector resources in the national interest, without regard to politics or parochialism. There is not a moment to lose.
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