COVID-19: Uncertainties weigh over fiscal, monetary palliatives efficacy

By Omobayo Azeez

The fiscal and monetary response of the federal government of Nigeria to cushion the adverse effect of Coronavirus pandemic in Nigeria may end up with ineffective, analysts at Vetiva Capital Management Limited has said.

Since the deadly disease broke out to cripple the economy, the Nigerian government have been designing ways to reduce the impacts and accelerate a rebound of the economy and survival of its people via fiscal and monetary palliatives.

However, the analysts have predicted have said that uncertainty over how severe the impact may become questions the expected efficiency of the palliatives.

“This brings into question the potential efficacy of these palliative measures as the persistence of the virus will continue to undermine any fiscal or monetary stimulus package that is rolled out by the authorities,” they said.

They noted that in light of the current economic realities and its potential adverse impact on the Nigerian economy, both the fiscal and monetary authorities have coordinated policy tools to limit the human and economic impact of the COVID- 19 pandemic.

The Central Bank of Nigeria’s (CBN) stimulus response is largely business-centric, including a loan rate cut and a one-year repayment moratorium, the proposed economic stimulus bill by the government tends to cater for the security and welfare of individual citizens through tax relief for corporates who retain their employees and pay promptly, as well as mortgage moratorium for displaced Nigerians to enable them keep their homes without accumulating penalties.

This indicates that the priority of Nigeria’s authorities for now is to help households and companies in the most vulnerable sectors to weather the pandemic by preserving jobs and capacity so the economy can quickly rebound.

“Uncertainty over how severe the impact may become brings into question the potential efficacy of these palliative measures as the persistence of the virus will continue to undermine any fiscal or monetary stimulus package that is rolled out by the authorities,” the analysts stated.

They, therefore, urged that the policy responses need to be matched with a responsive public health system to manage and rein in the COVID-19 pandemic.

“That said, the above stated stimulus packages, effective or not, largely cater to just the formal employment sectors, leaving Nigeria’s informal sector, estimated at 65 pervious of economy, to deal with the fallouts of the pandemic without government stimulus.