Roadmap to Rebooting Nigeria's Economy from COVID-19


Tuesday, April 21, 2020 / 1:02 PM / By Soji Apampa With Inputs from Funsho Sobande


How do we keep Nigerians from despair and from taking precipitate action whilst saving Nigeria's economy from the ravages of COVID-19? What would be adequate, effective and efficient way(s) to respond to the social and economic fallout of the virus? The timing of its spread in Nigeria, just before planting season also raises alarms that if farmers are unable to plant with the advent of the rains, the repercussions of the virus on famine, food security, etc could ring for another couple of years if care is not taken. Can we survive if we allow the potentially grave social upheaval starting to raise its ugly head to also linger for that long? Nigeria is in dire need of a roadmap to social and economic recovery from the raging coronavirus.

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These questions assume that we have made up our minds regarding two other issues:


  1. Approach to defeating COVID-19: Is the adoption of the first-world strategies of social distancing, self-isolation, testing, contact tracing, quarantine, and lockdowns right for our local communities here in Nigeria?
  2. Approach to social and economic survival and recovery: Should we adopt without modification the twin strategies of providing palliatives (pain relief) and economic stimulus (which according to Investopedia involves attempts by governments to financially stimulate an economy using monetary and/or fiscal policy to kick-start growth during a recession)?


To the first question it is clear that in our slums and crowded communities, where access to the basics of clean water, sanitation and hygiene are a challenge, handwashing, social distancing and so on become impossible strategies under lockdown conditions and that a lockdown is in fact more likely to allow the virus to spread rapidly and unhindered in community mode than to prevent it. To the second question, in a country where corruption is endemic, pervasive and systemic, what do we expect is likely to happen to the better part of funds gathered to be expended in haste, under pressure and under less direct supervision than usual?


The fact that there would be a higher than usual risk of corruption and fraud does not mean an intervention is not required, it means that public policy would have to be conducted differently if it is to have any chance of making the desperately needed impact. This article will consider the prognosis for effective social and economic survival and resurgence from now into the next 3-5 years.


We should also remember that Nigeria's economy had pre-existing health challenges before it was plunged into worsening illness by the COVID-19 pandemic. As we know, oil prices have tanked (benchmark budget oil price revised from US$57-US$30 per barrel but it is currently trading below US$20 per barrel), inter-bank lending rates have crashed, our sovereign credit rating has been reduced to 'junk' status, very little production is going on, with consequent loss of revenues across many sectors, our ports have ground to a halt and trade has all but stopped. Nigeria's poor and the teeming unemployed, particularly amongst the youth seem to be responding to the lockdowns, social distancing, self-isolation and quarantine interventions, with rising anger and frustration which transmits a sense of urgency and need for effectiveness in any strategies adopted.


  1. Coordinating Policy Formulation & Execution

The first step is policy coherence and leadership which is sadly lacking at the moment.

An economic stimulus requires coordinated efforts to boost economic growth. At the moment, beyond the Presidential Taskforce on COVID-19, there is the Humanitarian Committee, the Private Sector Coalition against COVID-19 (CACOVID) in collaboration with the Central Bank of Nigeria (CBN), the informal committee of the National Assembly Leadership (Senate President, Deputy Senate President, Speaker, Deputy Speaker), the inter-Ministerial Committee on “Nigerian Economy Functioning with COVID-19,” the Presidential Economic Council and Economic Sustainability Committee, Committee on COVID-19 and 2020 Farming Season & Food Security, the committees set up by the national and regional governors forums and so on.  Constitutionally, this is a role that should be driven the President himself or his Vice as Incident Commander (like Babajide Sanwoolu is doing commendably in Lagos or the Governor of Ney York State in the USA) to underscore the importance and level of leadership required at a time like this. All other committees should be sub-ordinated to a coordinating mechanism headed by them if we allow reason and not politics to dictate our COVID-19 response. Similarly, the confusion over Nigeria's monetary and fiscal policy needs to be cleared up. The CBN seems to have reached beyond monetary policy management and dabbles in fiscal matters in ways which perhaps may be sub optimal. According to experts, an economic stimulus cannot work in Nigeria without improving policy coordination for inflation, forex and interest rates. As the CBN has often said, we cannot continue to rely on imports, we have to ramp up local production.  Where people often differ with the CBN is over how this should be achieved and the sorts of regulatory actions it embarks upon to 'encourage' actors in the directions it has chosen. We need to hear more from the Minister of Trade and Industry who needs to outline a trade policy for the country that will strengthen the impetus for local production and consumption, lower forex demand and promote export of production surpluses in the short-medium term. We also need to hear additional fiscal measures for the Micro, Small and Medium Enterprises (MSMEs) which make up 96% of Nigeria's private sector.

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  1. Stimulating the financial Sector


The second step involves ensuring an orientation of stimulating the financial sector with any spending done in this period.

With rumours of a number of financial institutions on the borderline of distress, raising money to finance palliatives and an economic stimulus largely from within governmental sources as has been done, might not appear to be the most efficient way to position Nigeria for economic recovery post COVID-19. There is the argument that those in distress would most likely have been unhealthy anyway but with the level of expected default on un-serviced  loans and debts arising as a result of COVID-19 disruption, stimulating the financial sector should be seen as a catalyst to restarting Nigeria's economy which is slowly going comatose. The CBN is providing a moratorium of 1 year on its own facilities and the banks are required to cascade this down but this will not happen without some inducement. Without the financial sector (all manner of banks and financial institutions) being catalysed and encouraged to restructure loans and act as distribution channels for distribution of government support, the private sector, mostly made up of Micro, Small and Medium businesses will also remain stalled. Non-bank financial institutions should also be included in such a plan. The CBN claims to be spending some N3.5 trillion, MoF N500 billion, Private Sector so far raised N26 billion, etc. where none of it is being used to stimulate the financial system in ways that catalyse economic activity, then we may be missing an opportunity to stimulate the economy. Some experts might argue that bad management and insider dealing in our financial institutions has led to toxic assets and right from 'Failed Banks' in the days of Abacha, Banking Consolidation in the days of Prof. Soludo or his successor Mohammed Sanusi as CBN Governor, we have been bailing banks out at the expense of Nigerians. How do we ensure this money doesn't go down the same drain? Will we not be throwing good money after bad? The answer is that there are measures of governance such as the Corporate Governance Rating System (CGRS) in use at the Nigeria Stock Exchange. Any institution not passing CGRS should not even be considered for participating in any economic stimulus programme.


  1. Establishing a COVID-19 Recovery Fund

The third step involves establishing a fresh N5 trillion COVID-19 Recovery Fund.

What size should a COVID-19 recovery fund be and how should it be raised?  In December 2019, a Member of the Monetary Policy Committee (MPC) alleged Nigeria has a N3.4 trillion fiscal hole. In January 2020, other sources suggested the fiscal hole was as large as N4.62 trillion. For ease of reference let's call it N5 trillion. Nigeria's GDP is some US$400bn per annum so a lock down for 1 month could so far have cost the country anything between US$20 – US$30 billion of the $33bn we produce per month. If we are to take a midpoint of US$25 billion, N10 trillion represents what we could have lost in the lockdown. Factoring in the decline in budget benchmark oil price from US$57 to US$30/barrel (or for this analysis US$20 which is the current price level) the 2020 budget of US$35 billion has lost some 65% or US$23 billion off the top N9.66 trillion or again for the ease of computation, another N10 trillion. So far, we have identified about N25 trillion which may be needed. Some experts have speculated that what Nigeria now needs is in the region of US$50 to US$60 billion (about N25 trillion) which we may have to raise in a combination of ways: approaching institutions such as the IMF; relying on Foreign aid, going for concessionary World Bank loans, more local production, more trade, more local debt etc. - just to name a few of the instruments at our disposal.


The purpose of an economic stimulus cannot be to replace all that has been lost but to catalyse rapid restarting and upscaling of productive activity, stimulating local trade and necessary infrastructural refurbishment across the country whilst alleviating the immediate pains caused by the disruptions to daily economic activity done by COVID-19 and the government's chosen policy responses. Whilst the major sums are being raised by the government through the IMF and such, we can consider raising 20% of the N25 trillion that may be needed, differently. For starters, the government should use the services of private sector, professional fund managers to administer and coordinate the fund.


Nigeria could immediately float a special COVID-19 Treasury Certificate with a 36mth tenor and coupon rate of 15% per annum (or something similarly attractive at par with or slightly above the current inflation rate of 13.3%) to immediately create a recovery fund through which to finance both social and economic palliatives in addition but differently to what the government is already doing. This should awaken the financial sector and activate domestic investors with an instrument to hedge for the next 3 years (minimum timeframe to identify the new normal post-COVID-19) at a time when there are few instruments to absorb idle funds in banks. Some may argue that we need to raise foreign currency denominated funds in order to bolster our reserves and support the naira. As it is still uncertain what shape international trade will take post COVID-19 and what interest foreign investors from far flung countries may have in Nigeria's economy then beyond those whose monies are currently trapped in Nigerian Treasury Bills and want to get out now, we need to focus on what it takes to get the economy moving again as a matter of priority.


Of the N5 trillion sum, N2 trillion could be earmarked for MSME interventions for production (as they typically account for 40% of GDP in emerging economies), N1.7 trillion for budget support to the Federal Government (as approved prior to current disruptions with which to pay off enough of its domestic debt to infrastructure contractors, and stimulate infrastructure renewals in crucial sectors such as healthcare and to ensure mass lay-off of workers are minimized for the next 9-12 months) and the balance of N1.3 trillion could go towards social palliatives. How this could be done in order to achieve the desired impacts whilst minimizing the fraud and corruption historically associated with these sorts of government spending is what we should now turn our attention to.

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  1. Spend N2tr from COVID-19 Recovery Fund to Stimulate Production through MSMEs

The fourth step involves allowing Professionals meeting standards of governance and internal controls standards and the group of MSMEs they are incubating to apply for productivity loans under this arrangement.

Economic production the world over is dominated by micro, small and medium enterprises. According to the World Bank, SMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development. They represent about 90% of businesses and more than 50% of employment worldwide. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included [micro enterprises]. In Nigeria, we have not done very well working through or strengthening MSMEs. The major problem experts will have with this suggestion is that MSMEs have challenges way beyond access to finance including but not limited to structural, regulatory and governance challenges, which will require MSME incubators and we do not have the time or bandwidth to put them together now at the required scale.


N2 trillion (40%) of the funds raised could be loaned to MSMEs through bank and non-bank financial institutions but the Sovereign should bear the risk. Minimum MSME Standards for Governance & Internal Controls must be in place and a minimum of 60% of sums applied for should go into production, processing and distribution activities. Half of the money should go into agriculture and agribusiness whilst the balance should be split with 30% in light manufacturing and remaining 20% in ancillary services. As was done in the Agricultural Credit Scheme (ACGS) the financial institutions handling such funds must adhere to whatever criteria is handed to them otherwise they will be debited by CBN and penalised. The primary purpose of any application should be to stimulate food and agricultural production and ancillary services (ranging from grading, packaging, storage, transportation, marketing, strategic development of technology and so on), to be aggregated on a massive scale across Nigeria to international export standards (though consumption will necessarily be domestically focused for the next 3 years). To ensure the governance and controls are in place and effective, professionals (who are themselves suffering from the same economic depression) could be invited to lead applications as mini anchors, responsible for 20-30 MSMEs that they will help incubate and support through achieving governance, controls and productivity standards. The federal government has run anchor borrowers' programmes for many years with a company or state government as anchor, borrowing as much as N2 billion on behalf of thousands of smallholder farmers. Unlike the government anchor borrower programme where details of beneficiaries and impact are almost impossible to verify by citizens at the moment, credible Civil Society Organisations (CSOs) who meet similar governance and internal controls standards as other participants are required to have can be deployed to monitor this programme and certify compliance. The Hon. Minister for Humanitarian Affairs, Disaster Management and Social Development is on right track with such measures recently introduced to screen CSOs but, as stated here, this needs to cover governance and internal controls as well. In Kaduna State for instance, CSOs are leveraging technology to monitor the distribution of relief materials to vulnerable groups by the State Government. The professional will act as a point of accountability for the group being liable for any misuse of the funds. As the professionals need the MSMEs for their own survival too, a success bonus can be tied to impact achieved making the professional care about overall impact of the borrowing. Selection and processing should be done during lockdown so that rapid take-off is possible post COVID-19 lockdown. This initiative will stimulate the real sectors as well as create business opportunities for professionals reeling from the pains of covid-19 depression.


The three-year practise on producing to international export standards would be dress rehearsal for years 4 and 5 when Nigeria needs to have perfected this to ramp up exports. According to the CBN Governor, “In 2017, Indonesia earned US$12.6 billion from its oil and gas sector but US$18.4 billion from palm oil.”


  1. Make Special Effort to target Youth & Women-Run Enterprises

The fifth step involves giving priority to professionals partnering with youth or women run enterprises to ensure the effectiveness of spending, especially where larger companies are ready to incorporate them into their supply chains.

The programme utilizing professionals as anchors should deliberately provide opportunity to Women and Youth-Run Enterprises to perfect processes like produce grading, packaging, storage, transportation, marketing, leveraging technology etc. to international standards. The same professional anchor incubation system is proposed and larger companies incorporating products or services with at least 50% youth sweat or women input, into the supply or value chains should be able to access support through this economic stimulus package. The opportunity for larger companies to get support from the economic stimulus package when they incorporate women or youth-run enterprises and MSMEs in their supply chains should stimulate off-take for the produce coming from these incubated companies and help the professional anchor meet their target too. This sets up positive reinforcement of win-win scenarios that could help accelerate the programme where larger companies seek smaller ones, professionals seek markets for the women and youth and small companies in their care and they all do it because they all win giving a recipe for continuing it beyond the stimulus. This granular approach could help Nigeria build an MSME support network that covers the entire country rapidly. After 3 years of building domestic productivity and trade, Nigeria's attention should be turned to export to earn the foreign exchange needed to rebuild reserves and reconstruct after the damage that will be done by inflation through the various stimulus packages.

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  1. Spend N1.7 trillion from COVID-19 Recovery Fund as FGN Budget Support

The sixth step is to pay some debt owed to infrastructure contractors and large employers of labour to safeguard jobs and stimulate infrastructural renewal where possible and issue new contracts to urgently refurbish critical infrastructure.

This is a special budgetary support aimed at paying infrastructure contractors owed by government and other contractors needed to stimulate infrastructural renewal urgently. Instead of pushing this money after old debts alone making the spending unproductive, the federal government should renegotiate the debts to pay off a portion, but issue new contracts backed by this money to get vital renewal of infrastructure done urgently. The new work should keep workers paid at the same time as getting things done. Those who meet the targets in the new contracts can get the added bonus of more of their existing debts being prioritised thereafter. Debts owed to employers of large numbers of workers should also be looked at again to ensure that fewer workers lose their jobs over the next 9-12 months while mobilizing more work to revamp our existing healthcare facilities for instance, across the country. Yes, experts may argue that not all domestic debt is credible, but there is a need to urgently ensure workers jobs (and their families) are protected. However, job number one (immediate priority) remains to keep Nigerians, in Nigeria, productive with the raw materials we do have. The purpose of these payments must be to build our resilience against escalation of the disease and avoidable resurgence of the virus after lifting of the lockdowns.


  1. Spend N1.3 trillion from COVID-19 Recovery Fund as Social Stimulus

The seventh step, which is really a parallel step to steps 1-6, involves urgently registering all Nigerians over the next 100 days by deploying agents full kitted in Personal Protective Equipment.

Items 1-5 pre-suppose that Nigeria is doing the right sorts of things to battle the Coronavirus. We have imported the first world solution of lockdowns, testing, quarantine and contact tracing without the resources or capacity to do any of the items at the scale or effectiveness required. It is uncertain for how long COVID-19 will be on the prowl and just how far it will manage to spread therefore it is inevitable that the government will have to keep extending its chosen measures in ways that may not be easy to predict. On the other hand, it is also uncertain whether Nigerians can continue to remain calm and patient all through the period necessary to flatten the curve, and to delay and limit the spread of COVID-19 while new vistas like Kano are opening to possible community transmission of the virus. Sadly, for the daily paid, especially and those having to eke out a living on a daily basis (and that is at least the case for 70% of Nigerians), daily sustenance has to come from somewhere in the interim. The arguments in favour of coming to the aid of the poor and vulnerable are clear, the challenge has been in the suspected levels of fraud and corruption that government-controlled grant and subsidy schemes have allowed in the past. A case in point is the fuel subsidy programme and the debates now emerging around the conditional cash transfers and palliative distribution done by the Ministry of Humanitarian Affairs, Disaster Management and Social Development. There is an argument that every avenue possible should be explored to reach the poor with real palliatives and the services of the states and local governments has to be deployed as well as that of the National Orientation Agency (which has at least one graduate in each of Nigeria's 774 local government areas). This period where most beneficiaries are home and our land borders locked is when home-to-home registration of citizens is best facilitated by persons in Personal Protective Equipment (PPE). If one such agent is able to register 100 persons a day, 10,000 of them across Nigeria can register 100million Nigerians in 100 days. If we have the protocols and PPE in place to double the number of agents, we can achieve in 100 days what we have not achieved since 1999. There is no shortcut to this, and it should become the primary assignment of the government. We would then be in a position to deploy our National Identity Number, BVN, Sim Registration data and all other sources to quickly identify the vulnerable and come to their aid and make the process largely transparent and fraud free (since third-party verification would be facilitated).


The steps outlined above are admittedly only a plausible set of things to consider as a start. How Nigeria responds, will ultimately be a political question that can be answered only by those at the helm of affairs. What do you think?


About the Authors

Soji Apampa is a co-founder of the Integrity Organisation Ltd. Gte.

Funso Sobande is a commentator on economic and financial issues.


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