CLRNNCast: CLRNN in conversation with ....
CLRNNCast: CLRNN in conversation with ....
CLRNN in conversation with Dr Josh Bamfo
In this episode, CLRNN discusses the impact of the Covid-19 pandemic and oil crisis on the Nigerian economy with Dr Josh Bamfo, economist; Partner & Head of the Transfer Pricing (TP) Services practice at Andersen Tax, Nigeria. Josh discusses the state of the Nigerian economy in the lead up to 2020 and outlines the impact of both health and oil crises on the economy; including some unexpected surprises. He evaluates the palliatives provided by the government and suggests policy direction for the recovery phase.
Hello, and welcome to the very first episode of CLRNN cast, the podcast series for the commercial law Research Network Nigeria. On today's episode, we focus on the impact of the COVID-19 pandemic and oil crisis on the Nigerian economy. Our guest is Dr. Josh Bamfo and he joins us from Lagos, Nigeria.
Bolanle Adebola :Josh is an economist, as well as a partner and head of the transfer pricing services practice at Anderson tax in Nigeria. He has several years of experience specialising in transfer pricing while working for Big Four firms in the US, South Africa, Nigeria and Ghana.
Bolanle Adebola :Prior to commencing his transfer pricing career, Josh was a visiting assistant professor of economics at his alma mater University of Delaware.
Bolanle Adebola :Josh is an ardent speaker at various economics and transfer pricing workshops and seminars. He's also an author of numerous transfer pricing articles.
Bolanle Adebola :Hello Josh, and welcome to CLRNN cast. Today we're going to be talking about the state of the Nigerian economy and the prognosis for the future. Could you please describe the state of health of the Nigerian economy in the lead up to 2020?
Josh Bamfo :Definitely, thank you Bolanle. First of, I think it's very important that we have a better sense of how the Nigerian economy has been performing prior to 2020. And to do justice to that we have to go as far back as 2014 when the economy was doing very well. As of 2014, the Nigerian economy was averaging around 6% GDP growth.
Josh Bamfo :Then we had the oil price shocks where those significant supply of oil, due to shale production. And that led to significant drop in the price of oil, and that significant drop in the price of oil as well as some militant challenges in the Niger Delta area led to a reduction in oil production.
Josh Bamfo :And the combination of those two factors adversely impacted the economy. So as of 2015, the GDP growth rate started declining. I think it drew down from around 6.3% to 2.7%. By 2016, we had entered into a recession, which is the first of its kind since 1991.
Josh Bamfo :So we had a recession through 2016. By second quarter 2017, we were able to get out of that recession.
Josh Bamfo :As of 2019, the GDP growth rate on the average was around 2.27. So the economy was finally rebounding, but it was still pretty fragile, because our hope was to get back to the 2014 era where the economy was growing on the average around 6%. So that was the outlook going into 2020. In fact, if you look at the quarter for 2019 results, if you look at the year on year GDP growth rate, it was actually 2.55. So we were pretty optimistic, entering into 2020, hoping that we were going to ride on the momentum to kind of try to continue to grow and get back to the good old days, such as the 2014 era.
Bolanle Adebola :So Nigeria had a very strong growth trajectory. And 2014 was rather pivotal for us, because that was the year that our economy was rebased. And we became the largest economy in Africa. So we were very proud of our economy. Yes. So what has been the impact of the recent crisis on the driving forces of our economy?
Josh Bamfo :For you to look at the impact on the economy, you need to look at the sources of these shocks. As I said, the previous recession, the shock was predominantly external. So we call it exogenous shocks in economic parlance. So basically everything was external, most of it was external just a few internal challenges.
Josh Bamfo :But when you look at the challenge we are facing today, it's multifaceted. Obviously, it's a health crisis that emanated from China, that is the COVID-19 pandemic. So when it started in January, China was the hardest hit country and China is a major trading partner in terms of crude oil and other products. So from January, we were already seeing the adverse impact of China's economy grinding to a halt on crude oil prices because demand has dropped significantly. So that's a familiar story, because once the prices started dropping because OPEC countries couldn't come together to kind of manage supply in order to maintain a decent price, we saw prices drop as low as below $30 per barrel, which actually means that some countries were not even meeting their cost of production. So, that was one major source.
Josh Bamfo :And remember the reason why any oil price should adversely impact the Nigerian economy is impaired because, our tax revenue is highly dependent on the oil sector, we generate about 70% from the oil sector. In addition, our forex source of forex we have 90% being generated from export of crude oil. So whenever we have a big shock from the oil sector, it has significant impact in terms of our budget, that is tax revenue, as well as in terms of forex. And whenever you have the Forex being unstable, it has an adverse impact on the trade sector as well as the manufacturing sector, which are highly dependent on imports of either raw materials, plant and equipment or finished product.
Josh Bamfo :So we could already see the adverse impact as far back as January on these sectors, which is trade as well as manufacturing. The other source of shock was the supply chain disruption. A lot of our imports do come from major trading partners such as China, Europe, and the US, these are our major trading partners. So by February, March the epicentre had moved from China to Europe, then later to the US. So these are our major trading partners. So there was significant supply chain and disruptions. That means if you're a trader, and you were importing either from China or Europe or the US, such supply chains will be disrupted. If you are a manufacturer where you import raw materials or your planting equipment from any of these sources, your business was going to be disrupted. So these were having adverse impact on some of these sectors.
Josh Bamfo :Then we realised that, most of these COVID cases were being imported into Nigeria. So what did we do? We had to come up with some containment measures. The first was to close our borders to international flights. By closing our borders, some sectors were highly impacted, including aviation, then we needed to have some strict, containment measures, especially to deal with community spread of COVID. The strictest form was the lockdown in Lagos State, Ogun State and Abuja. That meant that economic activity internally also started grinding to a halt, which affected different sectors, especially hospitality sector, manufacturing, and so on and so forth.
Josh Bamfo :Now, there are a few sectors that weren't hurt. Obviously, telecommunication wasn't hurt because we needed data, even when we were locked down. A lot of work was done remotely. We also saw the health sector, bumping up a bit, and we also saw the financial service sector, doing pretty well because we all needed some kind of loans or bailouts from the sector. So clearly, if you look at the sources of impact, you can see which of the sectors have been hard hit and which of them have been doing pretty well.
Bolanle Adebola :That's really interesting. Well, you've talked about, all the other sectors around oil and gas, I wonder, you might want to look a bit more into the oil and gas sector so that we have an understanding of what's going on in that sector.
Josh Bamfo :What we found interesting this year was that for Q1 2020, we didn't know whether you were going to have a contraction, of the economy as early as Q1, or is it going to be Q2, because the impact of Covid actually, aspect of it started in January, but most of it started post March into April. The result we got was a Q1 year on year growth rate of, I think 1.87, and that came as a bit of a surprise. But what was even more interesting was that this positive growth rate was mainly driven by the oil and gas sector. In fact, for Q1, the oil and gas sector actually grew by 5.06% year on year, which meant that irrespective of the fact that the price of oil dropped during that period, if you take it for the three month period, we actually had a growth, so it wasn't that bad. If you look at its contribution to GDP, the oil sector has not been a major contributor to GDP, it usually averages around nine to 10%. So the oil sector contribution to GDP was around 9.5% for Q1 2020. So the critical aspect that oil sector plays for Nigeria, is its major contribution to tax revenue, as well as forex.
Josh Bamfo :So what we've seen is that the foreign exchange market has been highly unstable during this period. The only good news is that the demand for forex has not been as much because they've been supply chain disruptions and in quotations coming from trading partners have not been as high. But at the same time because of the decrease in oil prices. We've had a situation whereby the supply of forex into the Forex market has also gone down. So that instability in the Forex market usually can have adverse impact on the trade sector as well as the manufacturing sector and any other sector that actually is dependent on inputs. So the oil sector, although was a bit hurt interestingly was a driver of the economy in helping us actually achieve a positive you know, GDP growth rate for Q1 of 2020. What we are yet to see will be the impact for Q2 2020, which we are yet to get this result.
Bolanle Adebola :That's really interesting. It goes against a lot of what we have been reading in our papers. Thank you for sharing that with us. But one of the curiosities has been, the response of the Federal Government and the State Government in Nigeria in reducing The economic impact of the crisis. We know that, different states have different approaches that they have taken to this, but the Federal Government has had a major central role in introducing these palliatives. What have these policies been? And how effective would you say that they have been?
Josh Bamfo :In terms of actually impacting the economy, I think the palliatives that came from the Central Bank of Nigeria, for me are the most significant ones, in terms of targeting specific sectors that they know are very vulnerable and then need to be stimulated. So starting from the CBN's palliatives, they started by first and foremost reducing the interest rate on concessional loans that, businesses and households had with them. They reduced it from 9% to 5%, which is very low because the monetary policy rate is actually much higher, than that, I think its around 12.5. So that was a first. Then they added a one year moratorium period, to give, borrowers enough room for them to recover before they start making those payments. So that was very, very important. Then they started with this targeted credit facilities. So they have a 50 billion Naira credit facility targeted at household sectors, as well as small and medium sized enterprises. And that is very critical, because this is one sector that is highly vulnerable during this period. So it was very important that CBN targeted this particular sector to make sure that this small medium sized businesses that really employ a lot of people, do stay afloat during this critical period, so that was very important.
Josh Bamfo :Another facility that they made available was 100 billion Naira facility for the health sector. And that is very obvious because, we know this pandemic actually hit the health sector really hard. And we all know that for most developing countries, the health sectors weren’t up to par. So there was a need for us to inject more funds into these sectors to be able to cope with a pandemic, and also cushion the fallout on businesses.
Josh Bamfo :The third one, which I think is the largest and the most important is the 1 trillion Naira facility geared towards the manufacturing sector. The manufacturing sector is a very critical sector in this economy. The reason why it is, is that what you realise if you go as far back as 2014, when the Nigerian economy was growing on the average of 6%, the manufacturing sector was growing at double digits, in some cases 15%, 12%. It was one of the hottest sectors during the recession. And since the recessionary period, it has not fully recovered. So it was very important that they target that sector. It is a sector that really creates a lot of jobs for different people with different skill sets. So if you have a manufacturing company that gets to hire the most skilled people, the unskilled people and intermediately skilled people, it has a way of catering for all people with diverse backgrounds, it's a very critical sector, it was very important that they invest in that sector. Another reason why it's critical is that one of the things that this government had tried to learn from the previous recession was to diversify away from the over dependence on oil, which meant that we needed to try to, manufacture our own products, one for local consumption, and two for potential export. So there was a big focus on backward integration, which means that for most of this manufacturing companies if they console their inputs or raw materials locally, then that would be great. It puts less pressure on foreign exchange demand, and therefore we can have a more stable foreign exchange rate. So this is very critical that they made that kind of investment by making this facility available to them below. So those are some of the things that the CBN did.
Josh Bamfo :Now, on the government side, we've seen that they've made some funds available to actually curb the spread of COVID-19 and that is very critical, because the economy can only bounce back, if we're able to contain this pandemic or the spread of this disease so that economic activities can go back to the levels it used to be. Without the containment of the spread of COVID-19, the economy can never get back to its previous level and we can never get back to our potential.
Josh Bamfo :So whether we like it or not, the necessary condition for us to get back to where we used to be, is to actually deal with the spread of the COVID-19. And I think both the federal level and state level have actually made a lot of injections in that particular vein. There’s also an economic stimulus bill in Congress that was supposed to actually help households, especially in the case of employers, giving them some 50% rebate in terms of personal income tax rebate, so that they don't lay off workers. So for example, as a partner of my firm, we have an incentive not to layoff workers because we'd want to enjoy that 50% rebate on the personal income taxes we pay on behalf of our employees. So the more we keep people employed, the better for the economy, and they've also helped in terms of mortgages, if you have a mortgage with the National Housing fund, they were going to give you some moratorium period. So these are some of the palliatives that have come from either the federal government on Congress or the state level, as well as CBN to help cushion the fallout of the economy, due to the extreme containment measures we've had to implement to contain the spread of COVID-19.
Bolanle Adebola :Thank you very much, Josh. The second part of my question was how effective or how adequate would you say these monetary and fiscal measures have been in cushioning the effect on COVID-19 and the oil crisis on our economy?
Josh Bamfo :Clearly, I think it's always a good start to have a policy geared towards cushioning fall out of the economy, but the most important thing is the execution itself. So one thing has been very clear was how clear the modalities for targeted sectors to actually access some of these credit facilities or these funds. The last time I checked when CBN had their monetary policy committee meeting latter part of last month.
Josh Bamfo :Now, out of the 50 billion Naira facility geared towards the household sector and the SMEs, less than 10% have actually taken advantage of it, it was around 4.5 billion out of 50 billion in their facility. So really, it's a nice palliative but, its success is going to be highly dependent on whether the right people do get it. We've already been hearing, about the US where there's debate as to whether some of this, significant 2 trillion fiscal policy stimulus actually went to the kind of business that were supposed to have enjoyed. So it's one thing to have a policy, it's another thing to look at whether it was implemented or executed effectively, so for me, that is going to be the biggest challenge.
Josh Bamfo :So the adequacy is in two parts, we have to really look at whether did we have enough palliative? And I think in general, the argument is yes, to some extent. It's not as huge as what we've seen in some of the advanced economies, where there's more injection of real funds into the economy because they can afford it, but at least CBN has done its bit in targeting some key sectors to help out. But what is going to be more important with the second bit is the effectiveness of executing palliatives, and that's something we need to look at.
Josh Bamfo :In the same vein, the feedback we got for the health sector out of the hundred billion, less than 10% had actually been taken advantage of. And I think it's incumbent on CBN to educate the public more about how they can access these facilities, so that people are well informed and know that these facilities are there for them to actually enjoy and help them stay afloat, and therefore they can access them, because the key is to have more and more businesses stay afloat. So that once you're done with the pandemic they can actually take off and help the economy grow back to where it used to be prior to the recession of 2016/2017.
Bolanle Adebola :Thank you very much, Josh. for that. I guess, implementation and execution have always been key challenges that we've had in Nigeria. How would you say that we have fared in comparison to other large economies across Africa; Algeria, Morocco, Egypt, or our closest competitor South Africa?
Josh Bamfo :Alright, I would have a two part answer to this question a little bit of bias because of where I come from, I'm Ghanian. But the truth of the matter is, we do have the largest economies obviously in Nigeria, South Africa, Egypt, Morocco, Algeria. These are the largest economies and interestingly out of these, like I previously mentioned prior to his COVID impact, it’s only a job that has been experiencing a relatively high economic growth rate. Egypt for 2019 had a GDP growth rate of 5.6%, we know that Nigeria for 2019 was 2.27, South Africa was a mere 0.2%, Algeria 0.7 Morocco. 2.2. So apart from Egypt, that is growing at a relatively high rate in recent times, I think the previous year 2018 too was around 5.5. Nigeria, interestingly, is even doing better than the rest of the others, so that is very interesting. Now for Nigeria and Algeria that is understandable because they are highly dependent on oil. And Algeria also had the same impact in terms of the oil price shocks of 2015, so that is understandable. You go to South Africa, South Africa's economy has been anaemic for a pretty long time. Part of it can be attributed to that previous government, which some people have argued wasn't a great leader. But it's interesting that being the most industrialised economy in Africa, they've not really taken advantage of the fact that they don't have a lot of infrastructure deficit that we do have in Nigeria and other developing countries. But they've been struggling lately. So Nigeria has been doing fairly well, compared to the other big economies, because most of them are also struggling. What is going to be interesting is how they all overcome the COVID and therefore come out either stronger or weaker.
Josh Bamfo :Now, there's another group of African countries that I want you to be mindful of, I call them the African tigers. They are like the Asian tigers, which grew at the high economic growth for a long time and caught up with the others. The most important of them, which most people have not been talking about is Ethiopia, Ethiopia for the past decades, if I may say so. For the past eight years have been growing not less than 8% consistently. Ethiopia should be the model country for most African countries. They highly diversified, even if you talk about the Ethiopian airlines we just had recently, that’s the South African Airways was struggling to stay afloat. At some point Ethiopia Airlines was willing to even go bail out South African Airways, it tells you the strength of the country and that particular airline. So Ethiopian economy has been very fantastic, highly diversified, and they are doing a very good job.
Josh Bamfo :Another country we all know of Rwanda, we know what Kagame has done with Kigali, that the capital, has been structured as a source of, business tourism. In other words, when there are conferences, people actually go to Kigali to have those conferences, that is how radically they've been able to transform that economy. And interestingly, Rwanda grew at 1% last year, so that is another country you need to look at.
Josh Bamfo :Ghana is another country you need to look at for the past three years, they've been averaging around 6.8 GDP growth rate under the new government, Nana Addo’s government. Côte d’Ivoire has also been growing above 6% consistently in recent years and Kenya, around 5.5%. So there are a number of smaller size economies that have done so well in the past few years, that if care is not taken they may catch up with the very large ones we just talked about. And what it's going to be interesting is how each of these countries contain the pandemic because without containing the pandemic, you cannot open your economy.
Josh Bamfo :Unfortunately, most of the large economies are the ones that are really suffering the highest based on the data we see today. We know that across Africa, the most hardest hit country is South Africa. South Africa has over 50,000 reported cases of Covid, although they've tested highest; over a million tests, but they have the highest case of Covid and they have the highest number of deaths. Egypt follows number two, Nigeria has not tested as many, they are yet to test 100,000, but there are already around 15,000 cases. Ghana has tested twice the number of Nigeria over 200,000 but there are around 11 or 12,000 cases and lesser number of deaths. So, the way a country actually contains this pandemic will determine how they quickly open up and how they quickly take off before the others catch up. So COVID-19 is actually a massive disrupter. And it may affect some countries, more adversely than others.
Bolanle Adebola :That's really food for thought. And thank you so much for the insights that you have given to us. We turn now to thoughts about the future. Over the weekend, we found out that the OECD report tells us that the biggest economies across the world are struggling right now I reside in England and we heard that England or the United Kingdom is built to struggle the most across Europe with GDP shrinkage of 20%, its really cause for concern. And when we turn our eyes back to Nigeria, we see that the GDP was projected to rise by about 2.9% in 2020, and then up to 3.3% by 2021. The IMF now estimates that our economy is billed to shrink by -3.4%, while our own Nigerian economic summit group (NESG) has stated that GDP will decline by 4.1% in 2020. Where really do you think, our economy is going? And what types of challenges do we expect for the future?
Josh Bamfo :Thank you very much. The truth of the matter is, we all don't really know. All these financial institutions and other organisations are doing is to come up with what we call reasonable assumptions to make reasonable forecasts. So I think the essence of these studies by IMF and others is to then look at how your economy is working in comparison with some of these assumptions, so that can then inform you whether you're going to do better or worse than the forecast that they've given to you. So for example, in the IMF case, we had made a pragmatic assumption that the Nigerian economy will open up by the second half of the year, which is from July. And hopefully by that time, other trading partners would also have opened up their economies. So if those two set of assumptions are true, that means that there'll be enough economic activities in Nigeria, both domestically and cross border, and that should help. So that was where they came up with that 3% contraction.
Josh Bamfo :Now, the other aspect will be how successful will this palliatives work but we all don't know. As I said, some of these palliatives have not fully been taken advantage of. So we need to know that to see its success in terms of translation into numbers, you know how the economy is really impacted. So there are so many unknowns, but what I can say to this is that when the MPC of the Central Bank of Nigeria met, one of the things they argued (obviously they were marking their own scripts) they believe that the palliatives were going to be a success. So based on that assumption, if we take the assumption to be true, what they expected was that Q2, there's going to be a contraction, obviously because that's when we had, the most stringent containment measures, Q3 likely to be another contraction. If there’s a contraction, by its definition a recession can be defined to be successive contractions, quarterly contractions. So if you have two quarters of contraction, that becomes a recession. So if you have Q2 and Q3 contracting, that would have been in a recession.
Josh Bamfo :However, they believe that definitely by Q4, we would have come back to a positive growth rate. So even if there's a recession, they believe it's going to be V shaped, that means we just get down and we come out, so that is one expectation. If we're able to do a good job with Q3 and we don't have a negative growth rate, then we never entered into a recession. So that'll be a case whereby we didn't enter into a recession because we only had only one quarter of a negative growth rate. So those are pretty optimistic views, and hopefully we're able to achieve them. But as I keep saying, it's all going to be dependent on how we contain the spread of the disease.
Josh Bamfo :Today, if you come to Lagos, there's been a lifting of the partial lock down, businesses can go back to work, but a number of businesses have decided to continue to work from home, because when they look at the numbers of new cases, and the number of new debts, they are not encouraging. So as much as government has open up for business to continue, if you look at the numbers, and they are not encouraging, you can’t actually make an individual decision as a business, not to actually go for full throttle right now, which means that the economy cannot bounce back quickly. So all these assumptions are good, they serve as benchmarks for us to then compare whether these palliatives are really working and if we are really containing the spread of the COVID-19, then maybe we can do better than what IMF has projected, or NESG has projected. But if we do worse than these assumptions, the good news is oil prices are going back up, it’s getting closer to, $14 per barrel. When these things too start working in our favour, then maybe you might do better than those benchmarks. I see them as benchmarks just for guidance, they are scenario analysis, we just need to look at assumptions and check whether we are doing better than the assumptions. If we are doing better, they we might do better than the forecast. If we are doing worse, then we might end up doing worse than the forecast. So I'm just praying we do better than those assumptions.
Bolanle Adebola :Thank you very much for taking that on. I wonder if I could push a little and take you a bit further. Nigeria has not so far, according to the reports kept up with the promises cuts to oil production, and I wonder if you think or what your thoughts are about the OPEC plus deal in the event that countries do not comply with the already agreed cuts and the further cuts that might be agreed. Do you think that the agreement might fall apart? And if it does fall apart, what would the implications be for our own economy?
Josh Bamfo :We all know that part of the reason why the price actually plummeted to below $30 per barrel wasn't only because the demand went down, but because there couldn’t be a clear agreement amongst OPEC countries as to how to regulate the supply of oil. And it was that lack of agreement that led to the price actually falling further than it was supposed to. Now, thank God, finally got some agreement, and it's important that these countries that are part of this cartel really agree to execute what has been agreed on amongst themselves, because whereas the other countries did not execute based on the agreement, there's going to be mistrust and most likely others might also not follow what has been agreed and once they all decide to supply more. Because at the end of the day, your revenue is made up of two components; the quantity supplied and the price. So if price is already down, the only way you can increase your revenue is to continue to increase production or supply. And if you all supply too much with less demand, the price will continue to drop. So it's important and it's imperative that the members of OPEC actually do what has been agreed, so that they can actually control the supply of crude oil and therefore maintain a reasonable price for it. Because if they all decide to oversupply, then prices will crash again. And some businesses or some countries may really find it very tough to stay afloat, because they might be supplying at a price which is lower than production costs, and some business will have to get out of business. So I think it's imperative, especially for the Nigerian economy that we all comply or agree to do what they have agreed to do or else it will have some very significant adverse consequences.
Bolanle Adebola :We are set to round up now, I wonder if you had any thoughts, any final thoughts about, the next steps that the CBN or the federal government could take to help our economy as we go through a period of recovery from the effect of the Crisis
Josh Bamfo :Clearly there are a lot that the government can do. I know that we had this economic recovery growth plan that was supposed to have helped us achieve around 6%, 7% growth at this point, but we are nowhere near that. Another plan has come up, I'm yet to take a very deep dive into it to understand the direction. But clearly, there are some things that are consistent from an economic point of view, we’ve always said this, we need to diversify the economy. And anytime there's a big shock, and there's adversity, we say okay, this is an opportune time for us to actually think outside the box and have a highly diversified economy. But it's one thing to say something, it's another thing to actually implement it. I think this back to back oil price shocks should tell us that an economy cannot really have a sustained high economic growth, if you are highly dependent on one commodity, it's not even a processed product, it's a commodity, that means you sell it, they get processed, and you buy it back. So you cannot actually have sustained high economic growth, when you're highly dependent on a commodity such as crude oil. We've seen other countries, Saudi Arabia, that are way wealthier even trying to diversify the economy. So that is something we have to do that and we don't have to pay lip service to it. So the government has to be really serious about it.
Josh Bamfo :Now, if you're going to diversify your economy and you are going to make industrialization, a part of it because remember, we are trying to go to this African Free Trade Zone, that means that we're going to have a much larger market for our products. So almost every country within this particular free trade zone is going to try to position itself as an exporter of some finished product. And Nigeria, having the largest population size has the largest market among this particular time and trading bloc, they have more to gain, if they do well in industrialization. They have more to lose if others do a better job of industrialization and tap into their market. It's very important that they diversify the economy, and you cannot do that without your power sector being vibrant. This has been a problem that has been in Nigeria for about seventy eight years. Every day we talk about it power, power, power, and power is a problem. What is going to happen is that if I'm going to set up a business where I know that there is a big market, and I can have cheap power, cheap cost of production, let's say in Ghana, it might make sense for me to go and set up in Ghana and then tap into the Nigerian market in terms of demand for my product, and that will not be good for Nigeria. So some things have to do and it has to do with infrastructure development, power, roads, transportation in form of railways, all those key things that would really lead to sustained high economic growth.
Josh Bamfo :On the monetary policy side, in the short term, we’ve seen Central Bank of Nigeria, try to reduce the cost of borrowing. So the MPR was reduced from 13.5 to 12.5 to signal to investors that we think that businesses need to spend more, and when businesses spend, they spend on investment, and when you invest, you can then grow your business. Individuals in the household sector can borrow more, and if they spend more, that demand will then spread and companies will then produce more and therefore lead to higher economic growth. So clearly, that's indication from the central bank in terms of monetary policy saying our focus is economic growth, economic recovery, so we are making the cost of borrowing cheaper from government site. We know that the budget has been hard hit because of Covid. We've gotten some support from IMF 3.4 billion dollars to help with pandemic effect on the economy. We know that we have some support coming from African Development Bank and there's always been some support from World bank, around 190 million and facility available to them. So all these can really cushion the shortfall because of COVID that has impacted our tax revenue generation and make sure that we make investments in the right areas that can actually push sustained economic growth is a period of reckoning, but I think they can take an advantage of a very bad situation, make corrections so that we come out stronger than before.
Bolanle Adebola :Thank you so much Josh for your insights, helping us understand the period before the crisis, our experience of the crisis, Comparison with fellow African countries and the steps that we should take to get out of this stronger and better. Our guest today on CLRNN cast has been Dr. Joshua Bamfo partner and head transfer pricing at Andersen tax.
Bolanle Adebola :Tune in next week for the next episode of CLRNN casts. For more on CLRNN check out our website at CLRNN.net