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FGN finally admits severe strain on economy likely because of COVID19, but doubt persists on how much the FG can do given its impact on oil

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THUR, MARCH 12 2020-theG&BJournal- ‘’There is no doubt that the combination of crude oil price crash and coronavirus will put severe strain on our budget revenue, forex and many sectors.’’  That is how the Minister of Finance, Budget and National Planning Mrs Zainab Ahmed summed up Nigeria’s view on the coronavirus that has been threatening global economy since its outbreak in December 2019.

‘’We need to put our hands together to weather the storm. We need to work together to take the opportunities provided by this very harsh reality,” Zainab said while speaking at the Central Bank of Nigeria’s (CBN) Consultative Roundtable with the CBN Governor Godwin Emefiele in Abuja Wednesday.

The statement collaborates for the first time views expressed by economists and members of the organised private sector in the country since global economists began reversing downwards global growth forecast and warning of the dire consequences if countries don’t take drastic measures to address the possible negative impact.

She however, gave an overview of what the federal government is doing to mitigate any impact.

‘’We are drastically reviewing the budget as well as redoubling our effort to raise revenue and plug the leakages and intensifying engagement and support of sub-national entities and the private sector in our economic recovery and growth programs.’’

She said that her Ministry has reached out to the private sector and formed a committee to fashion out a National Savings Policy.

‘’Government’s effort will infuse into the Capital Market various instruments to suit several investors’ need, this will include long term instruments that will be suitable for investor groups that have capital such as Pension Funds.’’

She also highlighted the presidential initiatives on the 10 Agri-value chains and sustaining the momentum on infrastructure investments and major capital projects for which the country is in the process of accessing external concessionary loans.

Meanwhile, economists are still doubtful there is much the Federal Government can do to handle the outcome of the coronavirus given its impact on global oil markets.

“We think there’s little that the government can do to handle the impact of coronavirus given that the latter is hitting oil prices. This is especially the case, that lower oil prices would strain already tight fiscal balances, hence not leaving much room for the government to counter that with increasing spending,’’ Mohamed Abou Basha, Head of Macroeconomic Analysis at EFG Hermes said in a note to theG&BJournal

‘’We, therefore, think the best the government can do at this stage is to push for structural reforms given that buffers are much lower than in 2008. Adjustment to the currency, fiscal reforms and ways to enhance business are key to enable the economy to deal with this extreme shock to oil prices. The economy needs a comprehensive reform plan,” Abou Basha said.

One economist who spoke to the slow reaction of the FG on the issue said, ‘’COVID-19 is merely a trigger to accelerate decline with nowhere else to hide.’’

COVID-19 has already destabilized global economic operations from reduced production in China to reduced demand for crude oil and disruption of supply chains. All of these have direct impact on Nigeria’s fiscal receipts and foreign exchange funding.

‘’In the domestic market, insecurity has adversely impacted agriculture and the COVID-19 epidemic further threatens other economic activities across all sectors – commerce, transportation, hospitality and possibly education. The far reaching consequences of all of the above are better imagined.’’ Clem Ofuani, Chartered Accountant and banker, told to theG&BJournal.

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