Seun Anikulapo Kuti had a viral video on the 26th of March, where he complained about the Nigerian government’s response to COVID 19 and its wholesale adoption of western policies on the issue i.e. lockdowns and social distancing and the lack of imagination in creating idiosyncratic solutions to deal with its impact (Afro-centric solutions he called this).
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What I found interesting were the responses in the comment section of the video, with people asking him to offer the “afro-centric” solutions that he passionately canvassed for.
Seun responded by saying, he is not employed by the government, hence he is not responsible for developing solutions to its problems (touché).
Since the Covid-19 pandemic is not going to cease now, here is an attempt to proffer some suggestions for the very short term specific to the country that may help mitigate the unprecedented situation; however when you consider that only a third of Africans have access to clean water then the policy of washing hands frequently being advocated in capitals like London ring hollow.
Before the exogenous shock of the virus, the Nigerian economy was slowly dragging along with a GDP growth rate of 2.55% in the fourth quarter of 2019, an unemployment rate of 23.1% and under employment of 16.6%, external reserves around $35 billion (no real money here considering all the components), a draw down on the excess crude oil account had seen it decline to $71.81 Million dollars, inflation at around 12.20%, a 10.33 Trillion naira budget with a deficit of 2.8 Trillion and debt servicing charge of 2.4 Trillion and also not minding the wild projections of 8.18 Trillion revenue based on $57 dollar oil which stands at $31.48 when I was writing this.
All of this is to say the country was in a precarious state even before the virus thereby limiting its ability to respond in comparison to other countries.
Once the virus hit, we saw a massive decline in all the components of productivity i.e. reduction in net exports because of oversupply of the oil around the globe, reduced investments because of foreign investors flight to safety, decline in consumer spending because of lockdowns and restriction on economic activity and finally decline in government spending because of the steep decline in oil prices which our budget is predicated on.
Government Response
The Nigerian government has instituted the lockdown of three states i.e. Ogun, Lagos and Abuja with other states voluntarily locking down their states including the closures of schools, borders, airports, markets and public gatherings.
The economic response has largely followed what most developed countries are doing; on the fiscal side the government has proposed a stimulus of 500 billion naira (0.4% of GDP), a budget cut of 1.5 Trillion in the 2020 budget, removal of fuel subsidy (this happened naturally because of the fall in oil price) and cash transfers to 3.6 million homes. On the Monetary side the CBN has injected 3.6 Trillion naira of liquidity into the banking system (even though they just debited the same banks of 1.47 Trillion naira for failing cash reserves regulatory targets), reduction in interest rate of CBN interventions from 9% – 5% and a moratorium on CBN intervention interest payments for 1 year.
My Criticism
Growing up in Lagos in the 90s and early 2000s an imported act of “faking it till you make it” gradually found its way into Nigerian culture and the term became localised as “All Na Packaging”, it is one that supports the “end justifies the means” mantra now consuming a lot the country’s young people.
Nigeria is a very poor country, the title of poverty capital of the world is well earned at this point , this fact is one that I believe needs to be drummed into the minds of every citizen so we can stop our delusions of grandeur, see reality for what it is and drive public policy accordingly.
I make the point above because the “All Na Packaging” behaviour is now evident in our public policy, the responses to the crisis that I have highlighted paint a picture of a developed country that can manage an economic fallout by using dynamic and sophisticated systems such as its banking system as a transmission mechanism to get help to its citizen.
Let me use the Central Bank’s action to expand on this point: as highlighted, they have injected 3.6 Trillion naira in the Banking system to support businesses in order to provide a bridge for them until the economy can be re-opened safely.
The problem here is twofold.
A world bank report in 2017 indicated that 60% of Nigerian adults do not have bank accounts as compared to 1.8% in the U.K, which means that using banks as a mechanism for public policy that impacts households is probably not the best way to go especially if economic stimulation is the objective.
The business models of Nigerian banks has largely focused on investments in government treasuries, loans to a few large corporates and account charges, most small businesses in the country do not have access to credit facilities from commercial banks so one wonders who is getting the liquidity the central bank is injecting into these institutions, certainly not a catering business in Kaduna or mechanic workshop in Enugu or local farmer in Osun.
Nigeria’s policy response must focus on the reality of the country i.e. a broke one with a lot of poor people, (I don’t write this with any glee but with a lot of sadness and pain), its policy response must focus on getting help to its citizens using even unconventional methods where they can be made to work. We cannot pretend or package ourselves out of this situation, we need to be honest, compassionate and pragmatic.
It is obvious that we cannot maintain a lockdown for the same period as in the developed world, so we need to get creative.
How long the lockdown should last or whether we should be doing it at all, is a debate I will not be dwelling on here as I feel articles like one written by Prof. Chukwuma Soludo has covered and that I agree with in principle.
Some Suggestions
Government palliatives (I hate this word) must be focused on helping families and households; the components of household consumption with the highest percentages in Nigeria are Food, Housing and Healthcare, these components are what the government should focus on, we are in a race to survive.
Food: The number of acutely hungry people in Africa could double as a fallout of this pandemic.
The government should therefore re-direct a significant amount of liquidity being injected into the banking system into the purchase of strategic food reserves across the globe and also provide funding to local food producers (the mechanism for this funding must be direct transfers for speed and effectiveness).
There should be a national effort to co-ordinate the food reserves from the federal level, buffer stock programmes in individual states and farm storage facilities in local governments. Staple foods such as rice, cassava, beans and yam should be sourced globally, preference would be to start with west African countries.
Food redistribution has to be quickly re-imagined, this is an opportunity to leverage existing innovative technologies such as data driven logistics championed by Jumia, local GIS software technology such cmapIT to improve the effectiveness of the process in addition to current distribution knowledge available in the government in agencies like NEMA and PHCN.
Housing: Most Nigerians build their homes outside of the mortgage market so a moratorium on mortgage payments will only help in the margins, the government using its state of emergency powers should declare a moratorium on rent payments for the next three months, this will be controversial but survival is the objective here and it will be only be for a fixed period. The impact of this would be to improve household balance sheets by temporarily removing rental expenditure and it would mostly impact the 51.96% of Nigerians live who live in urban areas majority of whom are tenants, the vast majority of rural dwelling Nigerians live in homes they own.
Implementation of this will be difficult but the Federal government should instruct all security forces not to execute tenancy eviction notices for the period in question and the Justice minister should do the same with the Judiciary.
There will not be uniformity in the impact of this because most rent payments made by poor Nigerians are mostly bi-annual or quarterly so it will be dependent on the individual payment cycles but in aggregate terms the effect will be helpful to most households.
Healthcare: The response in dealing with the virus scientifically I leave to healthcare professionals and epidemiologist however, I believe this moment requires everyone working together hence why I would propose that all private hospitals be sequestered into the control of state governments for public use, compassion and empathy must rule the day but this should be done as a partnership where state governments backed with Federal guarantees agree to cover a significant portion of the running costs of the private hospitals, there is already precedence for this in Australia.
Direct Cash Transfers: I am a big critic of the current SIP Programme because of its lack of transparency and accountability, nonetheless this is what really needs to expand but the mechanism needs to change; Telecommunication companies need to be brought into the picture to create quick innovative solutions for payments and transfers that can reach a larger subset of the country’s vulnerable population, the CBN needs to get out of the way in terms of regulation here and revisit the requirements in its guidelines for Payment Service Banks; minimum capital requirement of 5 Billion naira is an obstacle to the kind of natural innovation that will be required to quickly build solutions that can be deployed in order to transform the speed and breadth of the direct cash transfers.
A second piece of the direct transfers should be to target small businesses considering most do not have access to credit products in the mainstream commercial banks; the government should use data from its tax collection agencies i.e. Federal, state and local government to estimate monthly run costs for small businesses and then initiate a process to make transfers of 50% of the monthly run estimates to the businesses for 3 months with an agreement it is used mainly to support staff retainment.
Government Cuts: The Nigerian government has always been a structure of waste, this isn’t the time to undergo mass layoff of civil servants because we need to improve consumer spending even with the absurdity of 27% of the budget being spent on salaries and wages for only 400,000 Nigerians.
Federal and state government must reverse the newly implemented minimum wage to get savings which in addition to the finance ministry’s announced cut of 1.5 Trillion naira will provide funds needed in essential and frontline areas managing the impact of the virus.
Civil servants in non-essential ministries and agencies need to be redeployed based on the personnel requirements needed to support this fight, this should be the beginning of a journey to create a more agile, focused and nimble civil service. Statutory transfers in the 2020 budget stand at 560 billion naira with no clear transparency on how it is being utilised, with the exception of salaries to workers in the legislative (not the politicians) most of this should be cut at least for the next 3 months and re-directed to support food, housing and health interventions.
The suggestions I have highlighted will require a great deal of funding, hence why the caveat here is the hope that the Nigerian government is able to secure some of the funding it has requested from various international organisations and also get forbearance on some of its debt to ease the strain on public finances so the nation can respond in much improved fashion.
I conclude that these solutions will not be sufficient in dealing with the impact of the crisis, but the larger point I hope I have made is that the focus should be the survival of the Nigerian household especially its poorest ones and a dissociation from a superficial need to pretend to be a country we are not.
Gabriel O. Osho (Management Consultant).
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