The popular Chinese billionaire and business magnet, investor, politician, Jack Ma, Co founder of Alibaba has learnt his voice on the ravaging pandemic that has impacted the global economy negatively.
He said in a dire situation like we find ourselves today, its just left for Government,Businesses and individuals to embark on a quest to survive year 2020 and forget about making giant strides, substantial progress and marginal profit as expected of every institution/enitity yearly.
The above commentary from a global citizen and a reknown business tycoon,loudly, goes a long way to establish how masively the novel virus had distorted the world economy and order. It literarily means,globally, things can no longer be the same now and post Covid.
Coming home, if we domesticate the unpleasant impact on our nation, Nigeria, we should expect to be worst hit because we operate an age long mono-economy, driven by petro-dollar as a mainstay. The scenario is best imagined, when our petrol product- main source of income, becomes an outcast and no country buys from us because of the pandemic effects.
The price of oil crashed in the international market to an unimaginable ebb of zero. This invariably means our budgetary process and economy as a nation is destabilised, owing to the kind of federalism we practice, the federating units(States) automatically, will be neck deep in financial crisis. That’s the resort of our inability to practice true federating system and also our age long neglect for diversification.
Mineral revenues (Oil and gas specific flows which include Royalty,petroleum profit tax, sales of crude oil) and Non- mineral revenues ( VAT, WHT, custom/excise duties) forms the usual receipt into the Federation account. As at today, the mineral revenue forms the larger percentage of remittance available for sharing to the vertical arrangement of FG, states and LG monthly. Therefore, it’s obvious, the nosedived price of crude oil is a direct reduction in amount available to be shared to the tiers of Government monthly,until the economy rebounds after the pandemic era.
To further relax our high expectations from Governments at all levels and businesses in this pandemic era, let me oblige you with this realistic facts.
~There is a great link between the health sector and world economy. That means any impact on the health of the people will have direct effect on businesses,both private and public.
~ Because the pandemic is global,many businesses or companies in Nigeria and outside has been battered because importation,exportation and operations had been impossible in the face of current challenges.
~The banking institutions are also worst hit amidst the pandemic because cash Inflows has experienced a downward low. This has resulted to workers sack and many hard decisions taken.
~ Since the international oil price has crashed, so also, our earnings from oil,which is our strength financially, has also reduced. This means our economy cant operate optimally this period.
~ Revenue from crude oil sales forms the larger percentage of monthly FAAC allocation shared between FG,States and LG. This means there is less to share in this pandemic period.
~ Other source of revenue that falls under Non-Mineral is also slightly affected. Customs revenue will reduce because number of ships coming in had reduced, Taxes collection had to be relaxed under this hard situation. etc
~Since the oil earnings to the FAAC account has receded,it means the shares to states and LG will reduce with consequences of been unable to meet up capital and recurrent needs of states like salary payment, overheads and project funding.
~The FG Budget had to be reviewed and revised because it’s no longer feasible comparing the benchmark used and the present Economic realities. I know states like Kogi and Akwa ibom has also slashed their budgetary allocation for year 2020 considerably.
~ In the FG Budget, oil prices is now expected to average $20 per barrel, as against the benchmark of $57 per barrel. And a further impact of the outbreak will worsen the challenges as it were.
~ Estimated net oil & gas revenue available for Federation Account Allocation Committee (FAAC) distribution is now forecasted 80.0% lower at N1.1 trillion (vs. N5.5 trillion previously), despite a N649 billion reduction in allowable fiscal deductions by NNPC for federally funded projects/expenditures.
~Customs revenue is now projected at N1.2 trillion in 2020 as against the earlier N1.5 trillion projected.
~ Amount accruable to federation account now projected at N3.9 trillion (vs. N8.6 trillion previously) presently because of the pandemic impact.
~ Projected federal government receipt from FAAC for 2020 is now put at N2.4 trillion compared to N4.8 trillion estimated previously
~States and Local governments are now likely to obtain N2.1 trillion and 1.5 trillion, apiece, from FAAC compared to N3.3 trillion and N2.5 trillion, respectively in the previous estimate.
The following highlights of fact is highly imperative to help us get a grasp of what we are contending with and it huge negative effect on the nations economy and our fiscal document. It’s also to open our eyes and that government that there is pertinent need to diversify our economy,away from the petro-dollar we solely rely upon, which has plunged the nation into deep crisis at a time like this.
More importantly, the highlights above is coined in a layman’s language for easy understanding of the situation and the consequential implications on states economy vis-a-vis their inability to meet up with governance demands. There will be slow in projects, Programmes and payment of full salary to workers might become a very demanding task in the present 2020 fiscal year. This is a period where hard decision must be taken.
In this dire situation, our expectations must be realistic. We must think along with Government this period and understand that the challenges is a global phenomenon with a penetrating effect down the rank. The economy is on a downward spiral.
Government committedly desire to discharge their duties but the challenging situation at hand forms the limitation to meet up.
It’s a case of you can’t give what you don’t have.
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