Nigerian Government to Inject N2 Trillion Stimulus Into the Economy

The Minister of State for Budget and National Planning, Clem Agba, said on Tuesday at a webinar held by the Finance Ministry and stakeholders, that the Federal Government is planning to inject a N2 trillion intervention fund into the economy.

The Federal Government had earlier doled out N50 billion Targeted Credit Facility fund to help businesses in Nigeria as the coronavirus pandemic wreaked havoc across sectors. But the fund appears so meager to bail out most of the businesses under the strain of COVID-19 impact. The aviation sector is among the most affected, causing one of the leading Airlines, Arik to lay off staff.

Agba said the fund will offer a lifeline to businesses mostly impacted by the pandemic, especially the aviation sector which according to him, is losing N21 billion monthly.

“All in all, when everything is put together, both government funding and the funds we are expected to get from the Central Bank of Nigeria (CBN), Banks of Industry and other multilateral agencies and grants that we are receiving, we expect to get a stimulus of about N2 trillion going into the economy.

“We are also looking at how to support the Aviation Sector. Like you know, a lot of planes are parked and this is causing almost N21 billion (loss) on a monthly basis. We are looking at how to provide some form of bailout support to ensure that the industry doesn’t die.

“Of the $2.5 billion facilities from the World Bank, about $1 billion of it will be going to the states as loans. Mr. President has already approved N850 billion loan from the domestic capital market,” he said.

The extension of “no flight” to another four weeks has aggravated the woes of the aviation sector, making the companies’ survival impossible without the government’s stimulus package.

He said that the government is focused on how to boost the economic activities to mitigate the harsh realities of the pandemic. And as a member of the Economic Planning Committee, he said that plans are underway to ease the process of national supply chain of goods and services through effective means of transportation.

The Minister added that the FG would release more funds to the Federal Roads Maintenance Agency (FERMA), to undertake urgent rehabilitation of roads across the country. And as part of the arrangement, the Committee will be working with stakeholders in the agricultural sector to implement efficient agro-industrial processing in the geo-political zones.

Explaining more about the measures the government is taking to alleviate the impacts of COVID-19 on the economy, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed said there is ongoing review of revenue projections to conform with the realities of oil price – mainly the slash of oil benchmark from $57 to $20 as the oil price keeps wobbling around $20 and $30 per barrel.

“We have had to scale down our auction volumes because globally the crude oil market is very slow and we are not able to sell as much crude like before.

“We also had to review a number of things that we had planned including scaling back on investments in the upstream sector of the Nigerian oil and gas economy, which means projects will be delayed much longer than was originally planned,” she said.

She explained that the government is reviewing the 2020-2022 Medium-Term Expenditure Framework/Fiscal Strategy Paper (MTEF/FSP) to conform to the $20 budget benchmark. This she said will be complemented by other Fiscal stimulus that is designed to spur economic activities in other sectors.

Part of it is the blanket duty waiver for the pharmaceutical and health sector, which was granted by president Buhari. She confirmed that the waiver took effect from May 1 and will ease the cost of bringing in medical equipment for the fight against COVID-19.

Mrs. Ahmed noted that the welfare of SMEs have been integrated into government’s intervention plans which aim to implement a low tax regime for small businesses.

“In the Finance Act 2019, we had reduced taxes from 30 percent to zero for small businesses that have turnover of N25 million and below, for medium enterprises that have turnover of N25 million to N100 million, we reduced their taxes to 20 percent.

“We want to make sure that those benefits are implemented, even though we increased the VAT, we had heightened the threshold for stamp duties and also expanded exemptions so that the small enterprises and Nigerians of lower means are not burdened by the increase,” she said.

The Federal Government has projected 80% decline in oil revenue as a result of COVID-19 – From N5.47 trillion to N1.12 trillion. Other means of revenue generation saw massive declines too that created projected revenue gaps. Custom revenue went from N1.5 trillion to N1.156 trillion; VAT income plunged from N60.42 billion to N2.029 trillion, putting the revenue accruable to the Federation Account to N3.890 trillion from the projected N5.72 trillion.

The Director General of Budget Office, Ben Akabueze said there is a need to revisit the 2020 Appropriation Act because it’s based mainly on assumptions that are opposed to the current economic realities.

“In this regard, the Budget Office is currently finalizing the revised 2020-2022 MTEF/FSP, as well as an Amendment to the 2020 budget, which will provide for COVID-19 crisis intervention fund as well as other adjustments,” he said.

Mrs. Ahmed has raised concern over the cost of governance which she acknowledged that it takes a large sum of the budget, and needs to be curtailed by collapsing some of the MDAs.

Akabueze said the proposed budget will cut MDAs capital expenditure by 20% as well as reduce overheads costs by 16.7%, exempting only health and security.

The proposed adjustment aims to lift the projected budget deficit from N2.175 trillion to N5.36 trillion including expenditures funded by project-tied loans.

He explained that the new projects will be financed through the privatization proceeds that amount to N126 billion, a difference of N137.63 from what was earlier projected. He said N263.63 billion will be borrowed from Federal Government’s special accounts and drawdowns on multilateral/bilateral projects-tied loans of N387.3 billion and new borrowing that will put the total figure at N4.59 trillion.

Despite the new projections that aim to cut wastage by collapsing agencies, especially those duplicating functions, it is obvious that the FG will find it difficult to realize the N2 trillion.

The government in desperate need for funds, had earlier attempted to borrow from the pension fund, a move that was fiercely opposed. However, against the backdrop of economic downturns in the face of the coronavirus crisis, the Federal Government is pushing to get the national assembly’s support to borrow not only from the pension fund, but other special accounts, including donations made for COVID-19.