COVID-19 and Debt Servicing

By Issa Aremu

As President Muhammadu Buhari unveils a raft of fiscal measures to compliment earlier CBN’s monetary intervention in managing the spread and containment of Coronavirus, its time for a moratorium on N2.45 trillion debt servicing as contained in the 2020 budget to enhance the stimulus plan in mitigating the negative impact of the COVID: 19 on Nigeria economy.

The maiden address of President Muhammadu Buhari on COVID- 19 pandemic was better late and better informed in terms of creative business unusual measures to contain the scourge. The President’s address tightly contains all inclusive frontal measures. It was time for a strategic not uncritical cut in public spending. The earlier proposed reduction in the size of the 2020 budget by about N1.5 trillion, announced by Finance Minister as part of the measures to address the impacts of Corona virus disease on the Nigerian economy would undermine economic recovery and employment creation. Instead, Nigeria must mull a timely idea of a moratorium and deferred payment of interests on the country’s domestic debts to free resources for critical recurrent and capital expenditure in the wake of national lock down.

The sharp drop in crude oil price from the projected $57, meant N2.45 trillion allocated to debt servicing in 2020 budget is currently unrealistic and unattainable. Debt service gulps N2.45 trillion in 2020 budget.

President Muhammadu Buhari signed the N10.59 trillion 2020 budget in December 2019, 18.8% higher than that of 2019, mostly expanded to service debt. Budgeted N2.45 trillion to service debt in 2020 is slightly below N2.78 trillion budgeted for the total capital expenditure. President Buhari is right to say in the “ fight against COVID-19, there is no such thing as an overreaction or an under reaction. It is all about the right reaction by the right agencies and trained experts”.

The President hit the nail on the head to declare the pandemic a matter of “life and death” that require drastic solutions. In any case, the President had commendably directed “a three month repayment moratorium for all TraderMoni, MarketMoni and FarmerMoni loans” with “with immediate effect” with “similar moratorium” on “all Federal Government funded loans issued by the Bank of Industry, Bank of Agriculture and the Nigeria Export Import Bank”.

It is commendable that the Governor of CBN, Godwin Emefiele initiated proactive 6-point new measures to ameliorate the impact of the disease on the economy that include: Cuts rates from 9 to 5 percent per annum for one year effective March 1, 2020, Grants extension of moratorium on all CBN intervention facilities effective March 1, 2020 and N50bn targeted credit facility through NIRSAL Microfinance Bank for households and small- and medium-sized enterprises (SMEs) hard hit by Covid-19. It is also significant and commendable that President Muhammadu Buhari had promptly approved a 10 billion Naira grant (about $27 million) to fight the spread of coronavirus, or COVID-19, and already released to Lagos State, which is still counting the highest number of coronavirus cases.

Post coronavirus certainly calls for sustainable prompt budget releases. The current crisis had exposed the underbelly of poor governance characterized by endemic complacency, delays, sheer indifference and unnecessary competition among government agencies.
It is great that the Federal House passed the Emergency Economic Stimulus Bill, 2020 to complement the plans of the Executive arm. We must operate collectively and make sure that Coronavirus as an opportunistic disease does not defeat us separately.

It is commendable that the members of National Assembly had parted with some of the salaries to support the relief efforts. However it was time to also review downward N125 billion statutory allocation scandalously allocated to the National Assembly of some 500 senators and legislators. Indeed the budget per capital of the National Assembly at N266,524,520.30per legislator dwarfs the national budget per capital of about N57,388.88. In fact, the total allocation to the National Assembly almost equals the total sums of N44.5 billion for the Basic Health Care Provision Fund (BHCPF) and N111.79 billion for the Universal Basic Education Commission (UBEC) expected to impact on millions of citizens.” “Nigeria” he said “needs pandemic- sensitive budget!”

The two – step approach of protection of lives as well as sustainable economic livelihoods of the citizens is well thought out. The Presidential Task Force (PTF) on workable National Response Strategy must be made inclusive of organized labour, businesses, women and the youths for effective impacts in service delivery.
I hail the Governors Forum led by Ekiti Governor Kayode Fayemi for the independent complimentary measures the state’s governors have taken to curtain the virus menace.

Once this pandemic is over, Nigeria should sustain the current robust bipartisan collaboration to also manage the existing daunting health challenges of Malaria and Lassa fever, (even though had cures but had nonetheless killed more than a Corona Virus).
Nigeria needs a radical departure from the age long unhelpful neoliberal economics of wholesale liberalization, cuts in public spending, factory closures and export orientation.
It’s time for urgent diversification, import substitution, re-Industrialization and beneficiation and creation of sustainable decent jobs.

*Comrade Aremu is a Member National Institute, Kuru Jos