As the economy faces another round of recession, the Federal Government has expressed confidence in its ability to tackle the menace through aggressive implementation of the Economic Sustainability Plan (ESP).
Describing the ESP as the pathway to restore the economy, it said given various interventions already at work, performance in the 4th quarter could take the economy into positive territory.
Making the declaration in Abuja yesterday at the 26th edition of the Nigerian Economic Summit Group (NESG) with the theme: “Building Partnerships for Resilience”, the Vice President, Prof. Yemi Osinbajo, said measures were already in place to contain and rein in the recession in record time. Osinbajo represented President Muhammadu Buhari at the event.
This would be Federal Government’s first official reaction since last week when the National Bureau of Statistics (NBS) announced that Nigeria’s Gross Domestic Product (GDP) in real terms declined by -3.62 per cent (year-onyear) in the third quarter of 2020, thus birthing recession.
According to Osinbajo, “It is no longer news, of course, that the economy officially entered into recession with the release of the third quarter figures on GDP by the NBS, which showed a decline in growth by -3.62 per cent in that quarter. “We must bear in mind that this decline was after 12 successive quarters of positive growth and it came about as a result of the severity of the global downturn caused by COVID- 19, including lockdowns, disruption in global supply chains, business failures and rising unemployment.
“We can all recall, of course, 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 -6.1 per cent, the performance in the fourth quarter could take us into positive territory. “It was to mitigate this impact that the Federal Government introduced the Economic Sustainability Plan,” he said.
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 to mention just a few of the sectors.
“To take the example of agriculture, with the support of the banking sector, the Federal Government is working to organise finance for farmers and we are also guaranteeing uptake of produce. On its part, the private sector is responsible for the desired local production, provision of services and associated logistics across the agricultural value chain.
“We expect that the larger companies and firms operating in all sectors of the economy will also build on this spirit of partnership by supporting small businesses, especially by including them in value chains as suppliers, distributors, contract manufacturers and service providers amongst other things,” he said.
He recapped government’s efforts towards mitigating the impact of COVID-19 on businesses and households, saying government provided COVID- 19 payroll support to over 16,000 businesses with 101,000 of their employees getting between N30,000 and N50,000 over a three-month period in the initial phase.
“Up to 500,000 employees will be covered in this way in addition to the support being extended to artisans and road transport workers. In addition to the positive interventions in the ESP, the Federal Government is also sending the 2020 Finance Bill to further boost economic activity.
“Some of its provisions include reduction in duties on tractors, motor vehicles for the transportation of goods and persons, exemption of small companies from payment of education tax under the Tertiary Education Trust Fund (TETFUND) – companies with less than N25 million turnover are eligible; a 50 per cent reduction in minimum tax; from 0.5 per cent to 0.25 per cent for gross turnover for financial years ending between January 1, 2020 and December 31, 2021; granting of tax relief to companies that donated to tID- 19 relief he COVfund under the private sector coalition (CACOVID) and exemption of minimum wage earners from personal 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 fulfillment of promises made to take steps to help reduce the cost of transportation and the impact of inflation on ordinary Nigerians.
“The point of the reduction in levies on motor vehicles, commercial vehicles for transportation is to reduce the cost of transportation by reducing the cost of vehicles. “With subsidy removal and the increase in fuel price and the pass through to food prices, transportation costs had to be reduced
Now the automotive policy is directed at localising production of vehicles. So the logic was, increase the duty and levies so that local production becomes more competitive. “But the annual demand for vehicles is about 720,000 vehicles per year. Actual local production is 14,000 vehicles a year.
So the problem is that at current rate of production, we will not meet the serious national needs and this will just mean higher prices of vehicles and greater strain on other sectors of the economy that depend on transportation. “But we are not giving up on the auto industry.
Two important things to note; the first is that we still have relatively high duty at 35 per cent, so there is still a disincentive for importation.
Second is that we are promoting policy that government must buy only locally manufactured cars,” he said. The government also spoke on its plans to create a N15 trillion Infrastructure Company Fund to accelerate the development of infrastructures in the country.
The President also disclosed that the proposed 2020 Finance Bill will exempt minimum wage earners from tax. He gave insights to the collaboration between the 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.
“I am pleased to inform you in this regard that we are working actively with the Central Bank, Nigerian Sovereign Investment Authority (NSIA) and state governments under the auspices of the National Economic Council (NEC) 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. The President added that the exemption of Personal Income Tax for minimum wage earners, coupled with other economic policies in the 2020 Finance Bill, will also ensure the resilience of the Nigerian economy to exogenous shocks.
Earlier in a remark, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the administration was fully aware of the current situation and is working round the clock to reverse the trend and restore the economy on the path of sustainable inclusive growth.
“Let me remind you that before the impact of COVID- 19 the Nigerian economy was experiencing sustained growth which has been improving quarter by quarter for three years until the 2nd quarter of 2020 when the impact of the COVID-19 was felt. “Despite the recession, Nigeria has outperformed many economies in terms of economic growth.
“Though the economy has entered into a recession in the third quarter, a trend of the growth suggests that this will be a short-lived recession and, indeed, by the fourth quarter or at worst by the first quarter of 2021, the country will exit recession,” the minister said.
The minister listed government’s policy to cushion effect of COVID-19 to include retaining and creating jobs through support to labour intensive sectors such as agriculture and direct labour interventions; undertake growth enhancing and job creating infrastructural investments in roads, rails, bridges, solar power, and communications technologies and promote manufacturing and local production at all levels.
On his part, Chairman of the NESG, Mr. Asue Ighodalo, said the summit was about building partnerships as sectors could no longer succeed independently.