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COVID-19 present need for shift of priority in Nigeria’s economy

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BEFORE COVID-19 there had been clarion calls from economist and others to straighten other sectors of economy so that when oil sector disappoints the nation can comfortably depend on other sectors but COVID-19 pandemic  proves that the nation is operating one sector economy.

  The resultant effects of the collapse of oil export and prices recently caused mainly by COVID-19 pandemic affected the revenue of the government. Consequently the eternal reserves fell and foreign dept mounted. In the face of rising imports, government deficits widened and created some internal problems such as inflation, unemployment and persistent balance of payment deficit.

  Although these governments are working tirelessly to cushion the after effect of the pandemic on the nation’s economy by reducing  the applicable interest rates on all CBN intervention facilities from 9 percent to 5 percent per annum, with effect from march 1, creation of N50 Billion targeted credit facility to provide support for targeted sectors of the economy particularly households and the micro, small and mediums sized Enterprises (MSME) that are particularly affected by the COVID-19 out-break. Other measures include credit support for health care industrys, regulatory forbearance, which is deposit Money Banks(DMBS) to give leave to extend the tenors of credits granted to business and households affected by the corona virus out break amongst other measures yet, there is urgent need to move away Nigeria from over dependence on oil sector to other sectors.

  According to an economist Elias A. Udeaja Ph.D, priority sector for development include agriculture, manufacturing industry, service, tourism sector, exploration and exploitation of solid minerials amongst others.

  According to Udeaja, Nigeria has a natural endowment of fertile agricultural land, rivers, stream, lakes, forest and grassland as well as a large rural population that can sustain a highly productive and profitable agricultural sector. These resources if well managed could support a vibrant agricultural sector capable of ensuring a steady supply of food  and raw material for the industrial sector as well as providing gainful employment for the teeming population and generating foreign exchange through export.

   Emphasizing further, Udeaja reminded the nation that manufacturing industry is a lucrative sector. “ Nigeria currently enjoys or could potentially achieve comparative advantage in specific manufacturing sub-sectors for example textiles and garments, food processing, leather industries, rubber and palm industries and non-traditional export industries such as petro- chemicals, glass products wood and engineering industries”

  The economist suggests “with its large domestic market and the possibility of covering the whole west African market, Nigeria could leverage domestic demand, induced foreign direct investment and technology transfer.

    Udeaja views service and tourism sector as a neglected goldmine to the nation if  government will have a rethink of making the sector viable, “the service sector which includes business services, communication, construction, related engineering distribution, educational, financial, tourism and related services, cultural and sporting services, transport and social services can play a crucial role in generating employment opportunities.

  This sector can contribute positively to economic growth as it does in south Asia and industrialized countries where the share of services value added in GDP ranges from 38 percent to 70 percent.

   Contributing Further, the economist warns that exploration and exploitation of solid minerals should not be under mined, saying “ New and existing deposits of tin, columbite, tantalite, coal, barites, gypsum, talc, lead, zinc, gemstone, iron ore, bentonite amongst others can provide economic opportunities if properly developed. This sector could enhance revenue to the government, create wealth and generate employment”

   People express fear over the effect of COVID-19 pandemic on Nigeria economy. Earlier on, finance Minister Zainab Ahmed said “collapse in oil prices will slash Nigeria’s revenue by as much as 50pc, causing a 20pc cut to the Nation’s capital budget and additional 25pc cut in annual expenditure.

     Stressing further Ahmed said “Nigerian would have to reduce the amount of federal funding, for upstream projects the reduction of the crude oil price from the $57/bl we budgeted for N30/bl means that we are going to get so much less revenue, almost 45pc less than we planned, and because of that we have to amend a lot of projections in the budget to reflect our current realities.

  Stressing, a former Economist Advisior to the common wealth, a petroleum and Mining Economist, based in UK, Ekpen Omonbude, said “the current low prices are a serious problems for oil investors in Nigeria as prices are perilously per barrel costs of production for many operators.

   According to a Lagos based chief Economist, Michael Famoroti lamented that “companies will face liquidity problems and pumping oil will become difficult. Famoroti excepts oil revenue to significantly underperform saying “the government essentially needs to provide”

  Stressing further farmoroti said “Nigerians oil and gas sector has already become less attractive following the governments revision of production sharing contracts (PSCS) to seek more  revenue from oil majors. Appetite and capacity for Nigeria projects will become even more limited as major investors and stakeholders are likely to be adversely affected by the oil price slum”

   According to economists, Nigeria is expected to face significant economic downtown as the impact of the Coronavirus ravages the entire world, Nigeria is the worst hit, as one of the largest oil producers who relies heavily on oil to drive economic growth.

  Apart from a likely recession, the fuel in oil prices is also likely to trigger multiple devaluations for the economy. Just recently the CBN devalued the currency from N307 to N360 as of march 20, naira devalued to N380/$1. The central bank rate has been adjusted to prices entirely new fiscal plan to budget, Nigeria will withstand low oil prices, but the government will be just not be able to spend much at all, and things like salaries and pensions will take a hit”

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