Ade Olabode
In an increasingly contiguous world, no nation is insulated from the ripples of globalised phenomena. If there is any critical domino effect for Nigeria from the prolonged pandemic, it is how the long-standing structural defects of our economy have been laid bare. Being an oil resource-dependent economy with over 70% of our revenue drawn from crude oil sales, we are prone to global oil price volatility. It is also undeniable that we are more consumptive and profligate than productive and prudent as a nation. Thus, our economy has seen the worst of the disruptive impact of Covid-19 that upset global economies since last year.
Indeed, Nigeria’s GDP as well as per capita income took a drastic hit. But beyond the GDP disruptions with implications for persisting high budget deficits, the inadequacy or ineffectiveness of government response has not been encouraging. Today, the economy is still pummeled from various pressures. The government is facing protracted cash crunch at the federal, state and local levels. Budget deficit continues to be a recurring decimal, as the FG now resorts to endless borrowings from the outside world to patch things up.
Inflation has been a worrisome factor. The depreciation of the Naira gets worse every week, if not every day. Lots of jobs have been lost, while many private sector businesses are struggling to survive. Due to the global pandemic, there have been sharp declines of economic activity in some key sectors in Nigeria. According to statistics, the transportation sector declined by 49%, the construction industry declined by 40%, the hospitality sector fell to 40%, the education sector degenerated by 24%, the real estate industry declined by 22%, and trade declined by 17% , among others.
Today, Nigeria is said to have left the pandemic-induced economic recession. But has there been any tangible improvement in our economic indices and conditions? As the government intensifies the campaign for mass vaccination of Nigerians against Covid-19, how are we also saving businesses and livelihoods? Recently, Vice President Yemi Osinbajo disclosed that the introduction of N2.3 trillion Covid-19 stimulus packages under the Economic Sustainability Plan has been impactful in saving and creating over 2 million jobs in Nigeria. How true is this claim in an environment where unemployment rates and business failures are visibly rampant and the government often flaunts figures that do not reflect reality?
In September this year, there came out a report that the National Bureau of Statistics and the United Nations Development Programme, in assessing the economic impact of the pandemic, jointly surveyed almost 3,000 businesses in the formal and informal sectors in Nigeria. It was reported that around 20% of workers in the country have lost their jobs as a result of the pandemic. Also, the World Bank has recently claimed that the Covid-19 impact is expected to push over 11 million Nigerians into poverty by 2022, taking the total number of people classified as poor in the country to over 100 million. So, is the FGs Economic Sustainability Plan really working now or are statistics contradicting one another?
Meanwhile, private sector businesses continue to bear the brunt of our dire economic straits, even as multiple taxations take their toll. From Corporate Income Tax, Withholding Tax, Capital Gains Tax, to Education Tax, Value Added Tax and Personal Income Tax, entrepreneurs in diverse sectors are panting for survival amidst dwindling revenues and increasing costs of doing business. As the governments at all levels are desperately looking for more revenue to meet their obligations, they are invariably using excessive taxations to kill small-medium scale businesses that are expected to be the engine rooms of economic development and jobs creation.
What makes the situation more confounding is that, despite the avalanche of revenues being raked in from multiple taxations, there is no much to show in terms of infrastructure development or enabling conditions that help businesses to thrive. And in spite of revenues from multiple sources such as crude oil sales, repatriated loots from abroad, customs/ports remittances and other sundry sources aside taxes, the government still keeps taking external loans. By and large, a huge chunk of our revenues will keep going into servicing debts and defraying recurrent expenditures while leaving little for infrastructure development that would help businesses.
Without equivocating, the truth must be told that the government cannot keep handling the economy like this and expect Nigeria to get better. Something has to give. If the private sector is being pressured into sacrificing for national development via excessive taxations, what sacrifices is the government also making? For so long, many stakeholders have been calling for a sweeping cut in the costs of governance. Ours is rated as one of the most expensive and wasteful governance systems in the world. From the Presidency, National Assembly to State Governments, hundreds of billions of Naira could be saved from our annual budgets of trillions of Naira if certain unnecessary expenditures are slashed off.
For instance, in the N16.39 trillion 2022 budget just presented to the National Assembly by President Muhammadu Buhari, there are some provisions that should be yanked off or cut down. For a budget with a deficit of N6.26 trillion and debt servicing put at N3.61 trillion, we can slash such wasteful allocations as the N27.7 billion for renovation of the National Assembly complex, N12.5 billion provision for maintenance of the Presidential Air Fleet, and N100 billion for lawmakers constituency projects which are rarely executed, among many other bloated but non-critical allocations embedded in the budget.
Expensive, wasteful and corrupt public sector governance has negative impact on the economy and generates economic distress. So, the way forward to stop the economic decline, save businesses, reduce jobs loss and alleviate poverty calls for concentrated doses of economic vaccination. The doses include drastically cutting down the cost of governance across board as already mentioned above; ensuring prudence, transparency and accountability in the management of public resources; blocking systemic corruption channels; creating enabling conditions and incentives for private sector businesses to thrive; and of course, pursuing an aggressive diversification of the economy away from overdependence on crude oil resource.
Olabode, Chairman of Media Specialties Group, wrote in from Lagos.
