THE ROLE OF LAWS AND POLICIES IN CUSHIONING THE NEGATIVE ECONOMIC EFFECT OF GLOBAL EMERGENCIES
*Winning Entry (2nd Place) for the 2020 Legal Pages Essay Competition for Law Undergraduates, sponsored by Primus Grace LP.
History has proven time and again that it is pivotal to always prepare for what is to come. Countries around the globe are currently at war with the novel coronavirus disease christened COVID-19. The disease which was firstly identified in Wuhan city, China is speedily ravaging the global economy and public health with an estimated number of 6,804,044 confirmed cases and 362,678 deaths worldwide as of 6 June 2020!
The World Health Organization (WHO) declared the disease to be a Public Health Emergency of International Concern (PHEIC) on 3 January 2020 and subsequently recognized it as a pandemic on 11 March 2020. Ever since, governments have taken to proven public health measures such as the stay-at-home orders, social distancing, travel bans and lockdowns. Consequently this has severed the flow of goods, services and people and stalled the economy.
The WHO defined a global emergency as an extraordinary event which is determined to constitute a public health risk to other States through the international spread of disease and to potentially require a coordinated international response. According to WHO, only 5 emergencies have been declared as global health emergencies in the past decade.
These global emergencies have a variety of things in common; a trajectory in public health and an attendant economic malady.
2. NEGATIVE ECONOMIC EFFECTS OF GLOBAL EMERGENCIES
It is no gain saying that not all countries especially developing countries can withstand the heat of a global emergency. This segment will be using Nigeria and the coronavirus pandemic as a case study. Nigeria operates largely a mono-product economy solely dependent on its oil and gas sector. With the low demand for oil since the crisis, Nigeria cut down its crude oil production by up to 10% in a bid to stabilize the global market. The international oil market is such that when the prices of oil collapses, everything else collapses. With these indicators, the Nigerian 2020 budget remains unachievable and running at a deficit. On 28 April 2020, the International Monetary Fund (IMF) approved Nigeria’s request of US$ 3.4 Billion. According to Mitsuhiro Furusawa, ‘The COVID-19 outbreak, magnified by the sharp fall in international oil prices and reduced global demand for oil products is severely impacting economic activity in Nigeria. These shocks have created large external and financing needs for 2020. Additional declines in oil prices and more protracted containment measures would seriously affect the real and financial sectors and strain the country’s financing…”
3. LAWS AND POLICIES REVELANT IN CUSHIONING THE NEGATIVE ECONOMIC EFFECT OF GLOBAL EMERGENCIES
Laws, policies and economics enjoy influence over one another and thus cannot be discussed in isolation. While economics studies the allocation of scarce resources in the society, laws and policies are concerned with creating a regulatory framework for human activities. This segment will thus be examining the role of relevant laws and policies in cushioning the effect of global emergencies on economic activities.
3.1. IMPLENTATION OF EMERGENCY FINANCING POLICIES
First of all, to successfully navigate through the treacherous waters of a global emergency, the government has to put in place policies addressing the challenges at hand. The Central Bank of Nigeria (CBN) under the governance of Godwin Emefiele, announced some measures to douse the impact of the COVID-19 on the nation’s economy. Some of these measures include, the extension of moratorium on principal loans by an additional year effective from 1st of March, 2020. A reduction of interest rates on loans from 95% to 5% on all the bank’s existing intervention programmes for the next one year. The bank placed 50 billion naira to support households and Small and Medium Enterprises (SMES) affected by the pandemic. The governor of the CBN said that it is expected that through these interventions, about 3.5 trillion naira would be injected as stimulus to support the Nigerian economy during this trying time. These proactive measures taken by the Central Bank of Nigeria can be said to be highly commendable.
3.2. THE EXPANSIONARY FISCAL POLICY
In the face of a global emergency, there are economic uncertainties and fall in demand which may be self-induced. With economic activities slowed down or at a halt, countries bear a risk of the economy relapsing into recession. The effects of a global emergency may linger long after its disappearance. However, with the appropriate fiscal policies in place, economic growth remains positive. Fiscal policies involves the use of government spending and taxation to improve the economy. An expansionary fiscal policy is such that, the government intends to invest money into the economy by boosting businesses investment and consumer spending either through direct government deficit spending, increased lending to businesses and consumers or tax cuts. In doing so, economic downturn that may arise as a result of a global emergency is prevented or moderated. The benefits of expansionary policies most times are meant to deal with the challenges at hand and sustaining the economy. In 2001, the United States experienced a recession that lasted it eight-months. In June 2001, President George W. Bush, introduced the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) which gave tax reliefs to families and enabled taxpayers to keep more of their money through tax cuts. In the fourth quarter of 2001, the economy returned to growth. In Nigeria, the House of Representatives on the 24th of March, 2020, passed the Emergency Economic Stimulus Bill 2020 which proposed palliative measures to cushion the impact of the economic disruptions caused by the coronavirus pandemic. The stimulus may be an indication of the government towards an expansionary fiscal policy.
3.3. BUDGET ADJUSTMENTS
Global emergencies necessarily alters a nation’s budget. With its upturns, there is less generation of revenue, yet a large quota is directed towards the health sector and palliative measures. It is thus a necessity for a nation to resize its budget to now reflect its present economic realities. The Nigeria Appropriation Bill was signed into law by the President in December, 2019 and the Finance Bill assented in January 2020. The budgets and policies by the Appropriation Act and Finance Act were set in accordance with the nation’s reality then. However, with the advent of the coronavirus pandemic, adjustments have been made. The projected oil benchmark price has been reviewed from $57 to $30 and reduction of the 2020 budget by 1.5 trillion Naira. Mrs. Zainab Ahmed, Minister of Finance, Budget and National Planning said, capital expenditures of the 2020 budget will be cut by 20% and recurrent expenditures by 25% in the revised budget. According to her, “the reduction in crude oil price from $57 per barrel to $30 means that we are going to get so much less revenue, almost 45 percent loss as we planned. And because of that, we have to amend a number of projections in the budget as well as in the MTEF to reflect our current reality”. This is one way to ensure that the economy is sustained rather than incurring losses amidst a global crisis.
3.4. A COLLABORATIVE ECONOMY
When global emergencies strike, initial reaction of the world is looking inwards. They fail to realize the issue at hand is a global one and thus needs collaborative measures in its containment. When the coronavirus pandemic struck, nations took to the nationalistic approach, however, it dawned on them that there is a need for collectivism. The US drug maker, Gilead Sciences Inc. gave royalty-free licenses to some companies to make the antiviral drug remdesivir for 127 middle and low income countries.
In the collaborative economy consumers rely on one another to meet their wants and needs. Given, the coronavirus pandemic, businesses have taken to collaborative efforts in converting their production line to make medical equipment and other essentials. Entrepreneurs are evolving their businesses to meet the present demand and maintain the flow of money in the economy. The need for the collaboration of the public sector and the private sector has been realized. In March 2020, the Nigerian private sector announced the formation of the Coalition Against Coronavirus Disease (CACOVID). According to Mr. Aliko Dangote in a statement to the news Agency of Nigeria (NAN), “COVID-19 affects us all and threatens our collective health – economic, social, psychological and physical wellbeing; hence, the urgent need to work together to beat this common enemy. The task ahead is daunting and bigger than any one organisation. To win this battle, it is critical we all come together as one”.
The relevance of laws and policies to our society cannot be overstated. And so does it play a critical role in reevaluating economies in a global emergency. Global emergencies has for ages been ravaging public health and global economy. Often times it leaves behind fragments of its horrors. Necessity has thus placed on us the onus to guarantee the survival of our economies and ensure it thrives even after a global emergency. This work is thus an attempt to x-ray the roles of relevant laws and policies in cushioning the negative economic effect of global emergencies.
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Abiola Ayoola Ayodele is a third year law student at the University of Abuja. She is a purpose-driven and goal-oriented individual who is very particular about capacity development, leadership and influencing others. A blend of these factors and her ability to serve has earned her membership in different platforms and leadership positions in various capacities. She is interested in research and opportunities for capacity development.