As the coronavirus (COVID-19) pandemic continues with new cases daily, governments and emergency services are focusing on immediate needs: boosting capacity in hospitals, addressing hunger, and protecting firms and families from eviction and bankruptcy. The majority of the funds flowing so far from the World Bank, the IMF, other regional development banks, or central banks seek to provide funds for protective gear at hospitals, stabilize financial institutions, pay companies to provide goods and services to essential workers, or provide direct cash support to households.
In parallel, preliminary work has started in some countries on what the next phase of recovery will look like and the role of strong public action in boosting demand, providing replacement income, and facilitating new investments. We made the point that the recovery phase can help build prosperity and resilience, by contributing to the long-term potential and sustainability of a country’s development pathway. There are encouraging signs from some advance countries that are looking at green elements as part of their recovery.
The choices that government make to restart their economic engine, including the long-term social, economic, and environmental co-benefits they seek to achieve through their stimulus investments, will be extraordinarily consequential in ensuring that they can build back stronger and better.
Adage say ‘during the war, people prepare for peace’ implying during this crisis Nigeria government have to join others to plans decision in place for post-COVID stimulus packages, that can restart economic recovery and how to keeps recovery momentum sustainable that may lead to growth potential in future.
The AmehNews recall, the Central Bank of Nigeria has kick-started with 4 key sectors in plans to finance post Covid19.
The post-COVID-19 era is expected to be filled with a lot of uncertainties and challenges especially in developing countries like Nigeria.
In preparation for post events, the apex Bank, has warned of the need for the country to act faster so as to enable faster economic recovery.
In order to achieve this, the CBN has taken some proactive measures aimed at four strategic sectors that would support mass employment and wealth creation in the country.
The four areas of focus by the CBN are:
Provision of affordable housing: Here the CBN will create an intervention fund which will target housing construction by developers who provide proof of profiled off-takers with the capacity to repay the loan. The BVN will be used to verify the information given by the off-takers before the developers can access the facility. The CBN will also assist the mortgage finance sub-sector, assist land administration agencies at the states to build capacity for prompt processing and issuance of land titles.
Renewable energy: The CBN, over the next three years will be providing financial support to environmentally friendly energy production, as this has tangential long term health benefits.
Cutting edge research: Also, the bank will be providing funding and encouraging effort aimed at driving innovation and research in every sector through our universities, research institutions, creative industry initiatives and so on.
Light manufacturing: In order to pursue substantial economic renewal, the CBN intends to close the funding gap needed for the replacement of machinery and equipment in order to enhance local production. The apex bank plans to set up an N500 billion intervention fund over a medium and targeted at manufacturing firms for the procurement of state of the art machinery and equipment and automated manufacturing models that would fast track local production. It will also help increase the patronage of locally processed products.
But tapping into part of World Bank and International Monetary Fund contributions to the ongoing discussions on sustainable recovery pathways should be seen as complementary guidance.
According to the post-COVID stimulus plans which covers two timescales: 1, short-term needs to deliver as many jobs, income, and economic demand as quickly as possible, and 2, the longer-term need to deliver sustainable growth and prosperity.
Starting from the short term: there are three main considerations:
- Job creation, looking at the number of jobs created per dollar invested, but also the types of jobs created and who benefits from them and the match between the skills needed and those available in the local workforce.
- Boost to economic activity, focusing on the economic multiplier each intervention can deliver the ability of a project to directly replace missing demand, and its impact on import levels or the national trade balance.
- Timeliness and risk, assessing whether the project generates stimulus and employment benefits over the very short term and whether they are durable even in the face of possible re-imposition of local quarantine measures.
While from the longer term, a project must also support countries on three different dimensions:
- Long-term growth potential, looking at its impact on human, natural, and physical capital. For instance, some projects do better at improving human capital, by building the future skills and health of the population, especially if air and water pollution can be reduced, or access to improved drinking water is improved. Others may promote the use of more efficient technologies, provide important public goods like modern energy or sanitation, or address market failures, such as distortive subsidies that are obstacles to long-term growth.
- Resilience to future shocks, with interventions to build capacity for societies and economies to cope with and recover from external shocks, like COVID-19 today, but also other forms of natural disasters and future climate change impacts.
- Decarbonization and sustainable growth trajectory, with actions to support and disseminate green technologies, like grid investments that facilitate the use of renewable energy and electric vehicles, or low-tech options like afforestation and landscape and watershed restoration and management. It will be particularly important to ensure that investments from stimulus packages do not impose large stranded asset costs on the economy in coming decades, for instance because they bet on declining technologies or place projects in high-risk flood zones.
Guiding Policymakers for the Recovery
Governments seeking to apply this framework may wish to use it in two phases.
First, it can be used as a quick cut, “yes-no-maybe” assessment identifying the “worst offenders.” The goal is to ensure that governments don’t invest in projects that are attractive for their stimulus characteristics but detrimental over the long term.
In a second phase, the proposed indicators can help decision makers prioritize among any remaining projects, identifying “best in class” projects that deliver multiple benefits to society.
Policymakers have a lot on their plate right now, and economic recovery plans cannot move faster than efforts addressing the current health crisis. But as governments shift their focus to recovery, the choices that countries make will define what tomorrow looks like and whether we are better able to manage future global crises. This checklist will hopefully make these decisions a bit easier.
