Only one strange pill can get Nigeria’s economy out of the shithole the Coronavirus pandemic has edged it to sink – massive spending, the All Progressives Congress stalwart and former Governor of Lagos State Asiwaju Bola Ahmed Tinubu prescribed yesterday.
He challenged the Federal Government to be bold in administering the pill on the nation in order to prevent the collapse of the economy and businesses whose wellbeing are already threatened by the dreaded disease.
It was the second time Tinubu would be intervening with prescriptive initiatives on how the Federal Government could prevent a total economic meltdown and protect the people and the economy. In his first effort, the APC stalwart had prescribed huge economic intervention calling on government to print fresh funds to salvage the economy.
Asiwaju Bola Ahmed Tinubu’s prescription was contained in a statement titled: Economic Policy- Coronavirus Economic Stimulus Programme, issued in Lagos on Wednesday.
He said to get out of the woods, which the Coronavirus has sunk the nation’s economy, the government must spend. Massively.
He also said this must be urgently done to save citizens and salvage businesses.
To achiueve this, Tinubu called for the immediate suspension of the five per cent deficit limit of the Fiscal Responsibility Law, which places a lid on the spending capacity of the Federal Government. For him, only the Federal Government could mass up the huge spending required to mitigate the disaster ahead.
He said: “In normal times, the provision constitutes a handcuff on the Federal Government’s ability to stimulate economic growth. In the current situation, the provision is a mean straitjacket, blocking the Federal Government from taking the steps required to salvage the economy at a time when only the Federal Government can do so.”
He pointed out that the best step opened to government “would be to suspend the five per cent budgetary limit for this fiscal year. Alternatively, the limit should be raised to 25-30 per cent to allow the Federal Government more room to make the minimum expenditures necessary to save the economy and the people.”
“Our goal must be that the people live neither with disease nor in hunger. This situation presents a historic chance to establish a more beneficial social contract between government and the governed. If we so utilise this moment, it will be recorded as a pivotal one in our national history. If we allow this moment to slip, history will not be obliged to treat us with great mercy.”
He said the Fiscal Responsibility Act which prohibits fiscal deficit of more than five per cent of GDP, “while perhaps well-intentioned, is to say the least, inapt for a nation in our economic situation.” He said any inflationary fears being harboured as a result of increased government’s expenditure will be minimal and nothing to be compared with the impending recession.
The former Lagos governor said recessionary forces which depict the current state of the nation’s economy “outweigh inflationary ones at this time. A government deficit serves to enrich the private sector. A deficit means government spends more than it takes in. That extra amount goes to the private sector. As such, national government deficits boost private sector growth and activity. The only legitimate concern with deficit spending is inflation. However, in the present case, the threat we face is more recessionary than inflationary. A bit of inflation is the cost we should be prepared to pay to avert severe contraction.”
According to him, “the agricultural sector as well as the service and manufacturing sectors have been greatly weakened and employment severely battered.”
He warned that “the economy will continue to suffer palpable contractions unless government enacts countervailing measures,” saying in other climes where fiscal laws are enacted, they’ve not really been adhered to.
He said when the lid on budgetary limit is lifted, government can render emergency sustenance relief to most Nigerian households, especially the recently unemployed, via cash payments, saying this would blunt hunger, maintain aggregate demand in the domestic economy and help sustain private-sector markets to the extent possible. Tinubu said this line of expenditure should be used to procure local produce, “not to import”, saying this will help mute inflation.
He said different strategies can be adopted to ensure equitable distribution, adding that government could render some form of payroll support to companies and businesses that seek to retain workers. The stipend could help companies stay in operation while maintaining workers on their payroll. He said by maintaining workers, the company can more swiftly return to full operation when normalcy returns.
He said: “Payment of these stipends will require hiring additional government workers to augment the existing bureaucracies to implement this programme. This administrative requirement will help boost employment and aggregate consumer demand,”
For him, payments can be effected using the Bank Verification Numbers (BVNs) of prospective recipients, a process he argued will bring millions of people into formal banking, encourage savings and prevent escalation of violence and crimes that might follow physical cash transfers.
The APC leader also called for the return of Agricultural Market and Commodity Boards, which are suitable “to maintain adequate supply of food and ensure price stability.” He said these boards will specify a guaranteed minimum-maximum price range for these crops in order to maintain and stabilise farm incomes and consumer prices.
Tinubu said efforts must be made to discourage all forms of imports, except for medicine, essential raw materials and petroleum products, saying all other forms of imports where permitted, should attract higher tariffs. “At this time, imports generally hurt the economy because they siphon much-needed hard currency. It is imperative that we drive down our level of imports.”
He said the school feeding programme and the Trader Moni should not only be retained, but expanded The programme must move beyond its pilot status by expanding it to as many schools in as many states as we can, consistent with applicable public health measures.
Expanding this programme, in his view; will “help feed our most vulnerable children while creating extra jobs and bolstering food production and farm incomes.”
While these policies are being pursued, he said African Finance and Foreign Ministers should join a coordinated effort for debt forgiveness, or in the alternative, the World Bank and other Development Finance Institutions (DFIs) should agree to a wholesale rollover of the debt of African nations by reducing the interest rate burden of African nations by at least one half.
Tinubu urged the Central Bank of Nigeria (CBN), to take the initiative of lowering interest rates to single digits, adding that the CBN should equally assist large businesses maintain operations and their payrolls, by granting conditional interest- free loans.
He praised the Federal Government for the proactive steps it took at the onset of the COVID-19 pandemic, saying the action helped to save lives.
Given the lethality of the disease, the public health measures taken have been prudential. If such action were not taken, the toll of this pandemic might rivaled others were millions passed away. “The Nigerian government acted wisely to suppress the virus,” he stated.