By Bala Ibrahim
In his book, Overload, which is a novel concerning the chaotic and drastically dropping electricity production in California, where some customers were marked for emergency restoration, because they depend on electric power for survival, such as iron lung users and certain disabled persons on electric wheelchair or portable respirator, Arthur Hailey warned everyone on the grid, thus, “SWITCH OFF EVERYTHING YOU DON’T NEED TO SURVIVE, there is an overload”.
The world today is faced by health-related adversity called the COVID-19, and Nigeria’s economy is on the queue, in the inevitable journey to the intensive care, where there is an overload, that would surely lead to a scramble for life support wires. In such a situation, the natural instinct of any rationally minded government is to think of survival first, before the economy.
A few days back, in his opinion on the Washington Post, Fareed Zakaria wrote on the impact of Covid19 on the global economy, with special reference to the crisis awaiting countries that are mainly dependent on oil, and Nigeria featured prominently.
“Even as we are just beginning to confront the magnitude of the shock caused by the COVID-19 pandemic, we need to wrap our minds around a painful truth. We are in the early stages of what is going to become a series of cascading crises, reverberating throughout the world. And we will not be able to get back to anything resembling a normal life unless the major powers can find some way to cooperate and manage these problems together. There is the issue of explosions in the developing world. So far, the numbers of infected have been low in countries such as India, Brazil, Nigeria and Indonesia. The likely reason is that those countries are less linked by trade and travel than the advanced world. These countries have also tested very few people, which is keeping their numbers artificially low. But unless we get lucky, and it turns out that heat does temper the virus, these countries will all get hit — and hard. All of them are cash-strapped, and the loss of tax revenue, combined with the need for large new subsidies, could easily tip them into their own versions of the Great Depression. Even if the quarrel between Saudi Arabia and Russia gets resolved, at this point, demand for oil has collapsed and will not soon recover. An industry insider told me his firm is forecasting that oil will likely drop to $10 per barrel and stay there. Consider what this means for countries such as Libya, Nigeria, Iran, Iraq or Venezuela, where oil revenue makes up the vast majority of government revenue”.
If we juxtapose Fareed’s economic postulations with the factors of production in economics, we would agree with the fact that, all over the world, economic growth is affected by certain fundamental factors, the biggest of which being natural resources. The abundance or availability of such natural resources can boost the economic growth of a nation, because their increase, increases the country’s production capacity.
For Nigeria, oil is the dependent natural resource and simply the cash cow of the economy. And the sale of that oil is tremendously threatened today, while our propensity to consume is not lowering down. So we either trim the tree, or the leaves would be lost, because the economy is in a state of overload.
According to the Minister of Finance, Hajiya Zainab Mohammed, Nigeria wants to raise N500 billion Coronavirus fund to help support the country’s health care infrastructure. She said the crisis intervention fund is to be utilized in upgrading healthcare facilities. However, she warned, the money and effort may not be enough to rescue the economy when the threat of the virus is eventually contained. It will take significantly more to calm the second storm. So we either trim the tree or loose the leaves, I think.
The minister’s warning is akin to the warning of Arthur Hailey in his book, Overload. There is danger ahead. We have to switch off everything we don’t need to survive, or else the system would collapse.
Nothing signals the cash collapse of the system like what happened yesterday, where PMB gave the approval for Nigeria to touch the Stabilization Fund of the Nigeria Sovereign Investment Authority (NSIA), to augment the June allocation of the Federation Account Allocation Committee (FAAC), due to the dwindling accruals into the Federation Account.
According to minister Zainab, $150 million would be drawn from that fund, because of the cash crunch. If we don’t trim the tree, we would loose the leaves, I believe.
No sooner than that announcement was made, a friend with an exceptional entrepreneurial mindset, called me to register his fright. He said Nigeria is fast-moving towards an economic catastrophe. There is no doubt the country is broke, and I think this is the right time for PMB to take advantage of the situation and reorganize the system.
The President should bring back the Orosonye report and reduce Federal agencies, focus more on social infrastructure like health, education and demand better productivity from civil servants.
New solutions to the power sector must be found if we want to revive manufacturing. Do away with fuel subsidy and introduce targeted subsidy based on IT and biometrics, for the identification of the most needy, and permit them to improve themselves. Give them e-vouchers to buy foodstuff instead of cash. Nigeria should avoid unnecessary expenditure.
Our problem is not only that of income, but unnecessary expenditure that can be avoided. The Government should reevaluate its spending pattern and cut off all the wastes. That attitude of 50 cars in the convoy of executives should be stopped. We should stop taking money from investment to fund consumption.
Impliedly, and economically speaking, Nigeria’s economy is face to face with danger. If we fail to do the needful, we should expect to see the dreadful. The right thing to do, is to trim down the tree NOW.
Bala Ibrahim, a Media Advisor writes from Kano