Is the COVID-19 global pandemic affecting Nigeria’s economy?
In a big way! The pandemic has been a major impediment to the growth of our economy since its emergence. The coronavirus pandemic worldwide saw many businesses placed under lockdown typically posing a serious concern for how much taxes government would be able to receive during the pandemic and even in the coming months after the pandemic. The economic realities of the covid-19 pandemic also witnessed many state governments granting tax cuts and holidays to cushion the effect of the global pandemic on businesses. The true nature of the coronavirus pandemic would be to expect a reduction in whatever taxable income the government hopes to charge. Except businesses on essential services during the pandemic, other businesses would see a reduction in income which means less tax for the government.
Beyond the catastrophic health risks and human implications of the COVID-19 pandemic, the economic disruptions and uncertainties to businesses that have resulted come at a significant cost to the economy of the country. The unrestrained actions that have been a consequence of the spread of COVID-19 has from across the globe, rolled into Nigeria and cut across every aspect of human existence and the economic consequences may remain past the second half of 2020. One economic consequence that would definitely linger beyond the second half of the pandemic year is taxation. As a result of the pandemic, many businesses would likely record lower income levels than what they have been witnessing prior to the covid-19 outbreak and in turn, affect whatever taxation target the government hopes to achieve. For instance, the consequence of the pandemic had a major effect on the aviation and tourism sectors – a direct result of the travel ban. For several months, these sectors were practically on lockdown and no commercial activity was recorded. Events like this would mean no income is recorded during this period and reduced taxation income for the government. Also, discretionary consumer spending was at a steady decline, several businesses and companies facing declining patronage & demand.
Nigeria is presently a country still slowly trying to deal with recovering from the economic recession in 2016, a result of the fallout of global crash of oil prices coupled with insufficient foreign exchange earnings to meet the country’s imports. The outbreak of a virus with disastrous economic effects therefore throws a blow to whatever recovery mode the country was previously in and set the country’s economy to a decline - a situation it was trying to come out from. In the spirit of a sustainable economic growth and recovery, the budget of the federal republic of Nigeria for the 2020 fiscal year was prepared with substantial & significant expectations of revenue with a possibility to realize them. The approved 2020 budget had expected revenue collections set at N8.24 Trillion, an increase of about 20% from the figures contained in the 2019 budget. This assumption for revenues were premised on the fact that global oil demand was likely to increase in addition to a stable market with oil output & oil price benchmark respectively at 2.18 Million Barrels Per Day and $57 per barrel. Additionally, non-oil revenue with taxation accounting for a significant portion were projected and used for the 2020 revenue assumption. All these projections and assumptions have been disrupted with the emergence of the global pandemic affecting how much taxation the government can actually realise. Businesses have been shut down due to the pandemic which would significantly reduce their revenue and in turn, affect government tax revenue. For instance, the Covid-19 pandemic is biting hard on businesses like Aviation, Hospitality, Cinema among others which are either left incapable of continuing operations as a result of many factors associated with the pandemic such as the prevalent lockdown & supply vulnerability.
