OPINION: How Nigeria can avert economic recession in 2020

recession

A renowned economist and Nigeria’s first Professor of capital markets, Prof. Uche Joseph Uwaleke, has said most countries of the World are at risk of economic recession occasioned by COVID-19. He however expressed optimism that Nigeria would get a better deal.

Speaking with The Daily Times an exclusive interview, Prof. Uwaleke explained that the International Monetary Fund (IMF) projects that the World Economy will shrink by over four per cent in 2020, while it will be over five per cent for Nigeria as recession looms.

According to him, “any economic contraction for Nigeria may not be as severe as the IMF has forecasted especially if the N2.3 trillion stimulus packages and the raft of CBN interventions in critical sectors of the economy are well implemented. The lifting of the movement restrictions and resumption in-flight operation will help stimulate economic activities.

“The N2.3 trillion stimulus packages represent about 3 per cent of the country’s GDP. That may look small but if well applied, can go a long way in averting economic recession.

“Don’t forget that the level of monetary interventions is a function of revenue and the capacity of the government to borrow. To increase the size of the interventions would mean more loans against the backdrop of dwindling oil revenue.” 

He said further: “So, it is about ensuring the effective use of the intervention funds which calls for proper accountability and disclosure. In this regard, it is important to publish the names of companies that got government and CBN interventions for proper monitoring of the use of the funds”, he explained.

Speaking on the nation’s growing debt burden, he said that it should worry every well-meaning Nigerian, because this burden clearly manifests in the debt service to revenue ratio which is becoming unsustainable.

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“This is because a rising debt service ratio crowds out capital expenditure and constrains the ability of the government to meet its welfare obligations to the citizens. The case of the 2020 budget where debt service provision of about N3 trillion by far exceeds total capital expenditure of about N2.2 trillion really calls for concern.”

He, however, added that without a doubt, the increase in borrowing witnessed in 2020 has been necessitated by the need to contain the health and welfare impact of the COVID-19 pandemic.

“The cheering news is that government borrowing plans appear to have been reduced in 2021 to 2023 Medium Term Expenditure Framework & Fiscal Strategy Paper which has just been submitted to the National Assembly. 

“The debt service ratio can be reduced by having less of commercial debts such as Eurobonds and more of multilateral and concessional loans in the country’s external debt portfolio. It will also go down if the bulk of domestic debts are tied to self-liquidating projects.

“It goes without saying that increasing government revenue especially from predictable non-oil sources will reduce the burden of debt service. I think Nigeria can seize the opportunity presented by COVID-19 to seek debt relief, especially from multilateral and bilateral creditors.”

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Olamide Francis

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