Nigeria rolls out additional fiscal measures to stimulate the economy in response to the impact of COVID-19 and decline in oil price
Nigeria’s Minister of Finance, Budget and National Planning on 6 April 2020, issued a press statement, to communicate a Fiscal Stimulus Package to address the economic challenges created by COVID-19 (The Pandemic) and the slump in crude oil prices. It would be recalled that the Central Bank of Nigeria (CBN), as well as other regulatory agencies, had earlier introduced various intervention measures, ranging from welfare packages to the interest rate reduction, amongst others. Please read our earlier newsletter on the existing government interventions regarding COVID-19.
According to the press statement, the Fiscal Stimulus Package is to ensure that the country’s economy, fiscal position and healthcare systems are sufficiently supported to withstand the impact of both COVID-19 and the declining oil price.
The Fiscal Stimulus Package comprises various measures as discussed below:
- N500billion COVID-19 Crisis Intervention Fund (The Fund). The Fund is intended to finance the upgrade of healthcare facilities (at both Federal and State levels), create a special works programme (to financially empower individuals who lose their jobs during the economic crisis) and to fund any additional interventions that the President may approve.
- Access to the USD90 million Regional Disease Surveillance Systems (‘REDISSE’) facility: The 36 States and the FCT, through the Nigeria Centre for Disease Control (‘NCDC’) and Federal Ministry of Health, will be able to access the REDISSE facility to expand the capacity of intensive Care Units, enhance laboratory capacity, accelerate the procurement of test kits, strengthen surveillance mechanisms as well as improve information management. The Federal Government (FG) has also requested an additional USD100million financing to meet up with COVID-19 emergency needs/medical treatment requirements across the federation.
- Availability of the sum of N102.5billion for direct interventions in the healthcare sector: This is to further demonstrate the FG’s commitment to supporting the States generally in the challenging times and particularly those states that are currently battling with the Pandemic.
- Planned release and enhancement (where necessary) of hazard allowances to Federal health workers: This is in progress and all States are encouraged to replicate same. The FG also assured frontline healthcare workers of adequate insurance, compensation and support during, and after the Pandemic.
- USD150 million intervention fund from Nigeria Sovereign Investment Authority Stabilization Fund: This is necessary to augment the Federal Account Allocation Committee (FAAC) disbursements to the Federal and State Governments, for June 2020. The FG is also exploring other options to meet up with the FAAC disbursement obligations for the rest of 2020.
- Debt and Interest Moratorium for States: There is an extended moratorium (principal and interest) for States on FG and CBN-funded loans, in order to create a fiscal buffer for the States. Additionally, for months where average FAAC receipts fall below a specific threshold, interest and capital payments by States will be suspended till monthly average FAAC receipts exceed the threshold. States governments are encouraged to explore similar arrangements for their outstanding debts to Commercial Banks.
- Restructuring of Treasury Single Account (TSA): This is important to mobilise cash donations, by individuals and corporate bodies, aimed at providing essential food items, critical medical supplies, among others. Therefore, COVID-19 Donor Accounts will be opened with five (5) selected banks. The accounts will be linked to the main TSA for ease of monitoring and reporting. Circulars and Ministerial Orders will be issued subsequently to ensure donations made by corporate bodies to support the FG’s effort in managing the Pandemic are tax-deductible, pursuant to Section 25 of the Companies Income Tax Act.
- Amendment of the 2020 Appropriation Act: The initial 2020 Budget Benchmark of US$57/barrel is revised to US$30/barrel. Also, estimates for oil production is revised downward from 2.18mbpd to 1.7mbpd. Furthermore, non-oil revenue projections (including various tax and customs receipts) and proceeds of privatisation exercises have been revised downwards.