By Francis Ogwo
Details from the Economic Sustainability Committee (ESC) plan in response to COVID-19 has indicated that the Central Bank of Nigeria (CBN) will provide the major funding for the Federal Government’s planned stimulus package of N2.3 trillion.
The report of the committee which was established on March 2020 by President Muhammadu Buhari in the wake of the COVID-19, noted that owing to the country’s low level of revenues and the importance of monetary stability, “we settled for a stimulus package of N2.3 trillion, which raises the question: How will this be funded?
“This amount will be funded by N500 billion from Special Accounts, N1.11 trillion of CBN structured lending and N302.9 billion from other funding sources.”
According to the committee, the time-tested approach to fighting a recession is a stimulus package, and the sizes of the stimulus package are determinants of the intensity of the recession.
It stated that the National Bureau of Statistics was asked to give a model of what the macro implications of four scenarios would be if the committee had the good fortune for oil prices to average at $30 per barrel in 2020.
“Scenario 1 is with no stimulus, i.e., if we simply stick to our budget the economy will decline by -4.40% at best.
Scenario 2: With a stimulus of just N500 billion, the economy will decline by -1.94%.
Scenario 3: With a stimulus of N2.3 trillion, the economic decline will be lower at -0.59%.
Scenario 4. With a stimulus of N3.6 trillion there will still be negative growth but only of -0.42%,” it stated.
The first comprises of Real Sector Measures and comprises a mix of project and policy approaches, which focus on the creation of jobs across the fields of agriculture and agro-processing, food security, housing construction, renewable energy, infrastructure, manufacturing and the digital economy.
The objective is to safeguard existing micro, small and medium scale businesses while ramping up local productive capacity by encouraging opportunities for innovation in the various sectors.
The second, Fiscal and Monetary Measures, outlines steps that will be taken to maximize government revenue, optimize expenditure and enshrine a regime of prudence with an emphasis on achieving value for money.
Top on the priority is to keep the economy active through carefully calibrated regulatory interventions designed to de-risk the environment for local production and enterprise, galvanize external sources of funding, rationalize existing debt obligations and boost investments in strategic sectors affected by the COVID-19 pandemic while supporting the financial viability of State Governments.
The third pillar, according to the report, is implementation. This is the key to the success of the plan. Each Minister will be responsible for supervising the implementation of plans situated in their Ministry through a ministerial implementation committee chaired by the Minister.
The Ministerial Committee will be responsible for ensuring synergy between stakeholders, especially the public and private sector. The committees shall also drive the execution of specific projects, coordinate the entire sectorial value chain and ensure resolution of bottlenecks impeding implementation.
The Economic Sustainability Committee, an inter-Ministerial Committee, will be responsible for general oversight of implementation and will report to the President. Expenditure will be monitored through the National M&E Framework and the Budget Office of the Federation.
