COVID-19: Economic, tax and other fiscal stimulus measures in Nigeria

The global outbreak of the Coronavirus (COVID-19) pandemic continues to cause significant health challenges with a devasting impact on world economies. Most countries have implemented some level of lockdown to curtail the spread of the disease. This is having a knock-on effect on businesses.

Most industries particularly, airline, retail, hospitality, oil and gas, and other service-related industries, have been adversely impacted. For mono commodity countries that are primarily dependent on the oil and gas sector, a downward turn in demand is likely to create a severe recession and a decrease in GDP. The Organization of the Petroleum Exporting Countries (OPEC) is concerned about the low demand for oil due to the global lockdown and the potential downward trend of oil prices below $30. As a major oil-producing country, Nigeria is not going to be insulated from the impact of COVID-19 on oil demand.

Statements by the Government of Nigeria indicates there will be a revision of the 2020 Budget to accommodate changes in the benchmark crude oil price, which has dropped down to $30 per barrel from the $57 per barrel estimate. There is also an indication that the daily production of crude oil may be revised downward to 1.7mbpd from the original 2.1mbpd.

With the expected reduction in government revenues and an unprecedented rise in investments needed to upgrade HealthCare in the country to respond to the COVID-19 crisis, the Federal Government will have to make trade-offs on other infrastructure commitments earmarked in the 2020 Budget. Managing the economy, addressing unemployment, and keeping commitments to local and foreign creditors will be a key priority. It is encouraging to see that multi-lateral agencies like the IMF and the World Bank have started conversations on debt relief for emerging economies, which will somewhat cushion the impact of the projected recession.

Nigeria’s Federal Government has set-up a Presidential Task Force on Coronavirus to coordinate the country’s efforts in dealing with the pandemic. An Emergency Economic Stimulus Bill has been submitted for consideration by the National Assembly. The Fiscal Stimulus Package which comprises of various measures in response to the COVID-19 pandemic and collapse of oil price has been announced. Relevant agencies of government at Federal and State levels have also announced various measures.

This newsletter examines some of the critical economic, tax and other fiscal measures in Nigeria targeted at alleviating the economic impact of the COVID-19 pandemic.