Buhari opens up on real cause of another recession in 5 years



Buhari

President Muhammadu Buhari has said Nigeria’s second recession in five years was a consequence of the severity of the global economic downturn  caused by the COVID-19 pandemic.

He also said a N15trillion Infraco Fund to be independently managed would be utilised to see Nigeria out of the recession.

In the same vein, the president announced that the Finance Bill 2020makes provisions for the exemption of minimum wage earners from the Personal Income Tax.

The president spoke Monday at the opening session of the 26th Nigerian Economic Summit Group Conference themed: “Building Partnerships for Resilience.”

Represented virtually by Vice President Yemi Osinbajo, the president said the exemption of the minimum wage earners from the personal income tax would reduce the impact of inflation on Nigerians.

“We are proposing in the new Finance Act that those who earn minimum wage should be exempted from paying income tax. These provisions which complement the tax breaks given to small businesses last year will not only further stimulate the economy, but are also a fulfilment of promises made to take steps to help reduce the cost of transportation and the impact of inflation on ordinary Nigerians,” he said.

The president said: “The private sector has a key role to play in our efforts to build a more resilient and competitive economy as expressed in the Economic Recovery and Growth Plan.

“Private companies in design, construction, logistics and finance are very much engaged in our infrastructural projects in power and rail as well as road and bridges and the installation of broadband infrastructure which is an essential requirement if Nigeria is to participate actively and benefit from the 4th Industrial Revolution.

“It is clear that we must diversify the economy away from dependence on crude oil exports, speed up human capital development and improve on infrastructure. Above all, our economy must be made more resilient to exogenous shocks. It is important for the private sector to play a key role as we work together to identify national priorities and try to influence our future national trajectory.”

The president also gave insights to the collaboration among the Central Bank of Nigeria (CBN), the Nigerian Sovereign Wealth Investment Authority (NSIA) and other stakeholders in the creation of an Infrastructure Company (Infraco) Fund to address some of the nation’s critical infrastructure needs.

“It goes without saying that partnerships remain essential to attract the resources for building a solid national infrastructural base.

“I am pleased to inform you in this regard that we are working actively with the Central Bank, Nigerian Sovereign Investment Authority and State Governments under the auspices of the National Economic Council to design and put in place a N15 trillion Infraco Fund which will be independently managed.

“The Infraco Fund will help to close the national infrastructural gap and provide a firm basis for increasing national economic productivity and growth,” he said.

Restating the commitment of his administration to sustaining collaborations with the private sector in addressing challenges, the president said: “Of there is one single lesson to be learnt from the COVID-19 pandemic, it is that partnerships are essential for credible responses with lasting effects.

“Our national journey to economic prosperity is a long one, so we must all certainly work together. As we saw, partnerships were essential when we were faced with the serious challenge of combating COVID-19.

“We saw the key role that partnerships played in our national effort to combat the COVID-19 crisis. While Federal and State Governments worked together to manage the health response and ensure the establishment of isolation centres and availability of test kits, personal protective equipment, and medicines, the private sector also played an active role as individual entities, and also worked together in groups like the Coalition Against COVID-19.”

 On how the pandemic weakened the nation’s economy, he  said the downturn caused by the global setback included lockdowns, disruption in global supply chains, business failures and rising unemployment.

Buhari said: “We can all recall that during the lockdown, farming did not take place, businesses were closed; schools were closed as were hotels and restaurants. Also, airlines stopped flying, while inter-state commerce was disrupted.

“The economy only began to recover when these activities resumed and if we are able to sustain the nearly three percentage point increase from the second quarter decline of minus 6.1 per cent, the performance in the fourth quarter could take us into positive territory.”

Buhari said it was to mitigate such impact that the federal government introduced the Economic Sustainability Plan (ESP).

He said all the programmes in the ESP were reliant on the private sector playing a key role in creating and conserving jobs and the production and delivery of services in agriculture, housing, solar power and digital technologies.

“Of course, an improvement in global economic conditions, including the restoration of global supply chains and resumption of exports and remittances, should enable a V-shaped recovery.

“We expect, in the same spirit of partnership, that the private sector will complement these efforts by making maximum use of the provisions of the ESP and the Finance Bill when it is passed by the National Assembly and also by retaining and creating jobs so as to keep people at work.

“In a similar spirit of partnership, private sector enterprises should also pay their due taxes,” the president said.

On the summit’s theme, the president said   partnerships remained essential to attract the resources for building a solid national infrastructural base.

NESG chair

Also speaking, NESG Chairman Asue Ighodalo said the summit’s difference lied in its emphasis on the execution of endless dialogues.

“We come to the table each year with clear and defined obstacles in search of solutions. The NESG and the private sector must do more to address policy needs.

“Let this 26th summit be the one where we collectively resolve to shun greed, nepotism and corruption. It is time that we are brave with facing our realities with strength, sense of purpose, and integrity.

“Our reflections would be incomplete if we did not also examine many more policy recommendations that have not been acted upon over the years and acknowledge those that have been actioned,” he said.

W/Bank

In his remarks at the event, World Bank’s Country Director for Nigeria Shubham  Chaudhuri   said Nigeria’s per capital income could fall to its lowest level in 40 years this year.

He said the decline in crude oil prices had dramatically impacted government finances, the balance of payments and remittances from Nigerians living abroad.

Chaudhuri further said the country was still recovering from the last oil price shock of 2014-2016 before the COVID-19 crisis hit the economy.

“The fact of the matter is [that] recovery was there but it was slow; it was only gathering pace,” he said.

The World Bank chief also said  between 2015 and 2019, of the 15 million young Nigerians of working age,  only about four million  found the kinds of jobs and opportunities they wanted.

 “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’

“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capital income could be around what it was in 1980 – four decades ago,” Chadhuri said.

Nigeria’s per capital income, which stood at$2,229.9 in 2019, was around $847.40 in 1980, according to data from the World Bank. It hit a record high of $3,222.69 in 2014 but fell to $1,968.56 in 2017.

Per capital income is a measure of the amount of money earned per person in a nation or geographic region, and is calculated by dividing the country’s national income by its population.

“This is absolutely a critical juncture and I am very hopeful that given what the government has done, that this crisis will also provide an opportunity for that national consensus,” Chaudhuri further added.

 Moghalu faults FG

Meanwhile, a former deputy governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, has said only an intellectual and competent leader can truly transform Nigeria as the country slid into its second recession in five years.

He said the recession report was not surprising, adding that the government’s excuse that the recession was occasioned by the COVID-19 pandemic was untenable.

The former CBN chief on his Twitter handle Monday said “unless the problem of leadership selection and constitution structure is addressed, Nigeria’s economy cannot create wealth for its citizens except for those with political connections.”

Moghalu urged the President Muhammadu Buhari’s administration to fix the economy so that Nigeria can quickly come out of the recession.

He wrote: “No surprise Nigeria is entering yet another recession. Until Nigeria is led by an intellectually competent leader, with visionary politics backed by sound economic thinking and knowledge, economic transformation will remain a dream. It is for citizens to do the needful.

“COVID-19 contributed to our current recession, but is no excuse. Nigeria’s economy has been weak for several years. Was the 2016 recession caused by COVID-19 too? The deeper problems of economic management led to our weak response to the COVID-19 crisis.

“South Africa’s budgetary fiscal stimulus response to the crisis was $26 billion. Ours was a budgetary provision of N500 billion ($1.3 billion) and a @cenbank intervention of N1 trillion ($3 billion). And only a fraction of our desperately poor households received the 20K disbursements from the money budgeted.

“Unless we address the problem of our constitutional structure and the leadership selection problem in our politics, Nigeria’s economy simply can’t create prosperity for its citizens, only for a very few with the right political connections for rent-seeking.”

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