COVID-19: AfDB Warns Africa Risk $409bn Loss
BY COBHAM NSA, ABUJA – President of African Development Bank, (AfDB) Akinwumi Adesina, says Africa must brace up to handle the challenge of losing over 409 billion US dollars to Coronavirus (COVID-19) pandemic in two years.
He also said with its economies exposed to such substantial collective hurt, the continent’s GDP also risk an estimated $236 billion loss this year.
Speaking at the First National Tax Dialogue organised by the Federal Inland Revenue Services (FIRS) in Abuja on Thursday, Adesina disclosed that the loss to Africa’s GDP in year 2020 was about N173 billion.
According to the AfDB President, “Before the pandemic, six of the 10 fastest growing economies in the world were in Africa. With the pandemic shock, growth plummeted. Africa’s GDP growth declined by 2.1 per cent last year, the worst in two decades.
“As economies went into lockdowns, people’s incomes declined, millions lost their jobs, trade volumes fell, and demand for goods and services declined. Cumulative loss to Africa’s GDP is estimated at $173 to $236 billion for 2020 and 2021, respectively.”
He though Nigeria has not been spared the economic vicissitudes, the country’s efforts, including private sector partnership, at containing the pandemic at all levels deserve huge commendation.
The AfDB chief noted that Nigeria’s economy shrunk by three per cent in 2020 due to dipping oil prices and adverse effects of economic activities’ lockdown.
Adesina, who explained that COVID-19 has squeezed budgetary balances and increased debt burdens, said Nigeria’s Debt-to-GDP ratio is expected to push debt service payments beyond more than 60 per cent of federally collected revenues, adding that debt service payments by the country presents utmost threat with contraction in oil revenues.
On paper, the estimate is that Africa needs between 125 to 154 billion US dollars in extra funding by 2021 ending to tackle the COVID-19 crisis.
Commenting on Africa’s rising debt profile, Akinwumi lamented that the Debt-to-GDP, which hitherto stabilised at 60 per cent, has now moved up to between 70 and 75 per cent of GDP, adding; “The bulk of the debt has been for private bond issuances on the global capital markets, Eurobonds.
“As countries’ currencies devalued and external reserves plummeted, in the face of declined economic activity, many African countries face risks of debt distress.”
He said of the 38 African countries with available statistics on Debt Sustainability ratings, 14 face high risk of debt distress, with six others currently neck-deep in the crisis.
“To put a human face on the pandemic effects, we estimate that 28 to 40 million people in Africa fall into extreme poverty, and 30 million jobs would be lost due to the pandemic”, Adesina said
However, maintaining that the institution has been responsive in supporting Africa, Adesina said; “The AfDB launched a $10 billion Crisis Response Facility to support African countries to meet the fiscal and economic challenges posed by the pandemic.
“The Bank provided $288 million in budget support to Nigeria to cope with the fiscal challenges posed by the pandemic.”
The AfDB boss, who gave kudos to President Buhari, State governors and the private sector for their efforts in containing COVID-19, expressed confidence that Nigeria and Africa will overcome the pandemic.
Urging that governments at all levels should not be deterred, Adesina said; “African economies are projected to recover this year. The African Development Bank projects that GDP growth will recover to 3.4 per cent for Africa, as economies open up, commodity prices recover, tourism bounces back, and global value chains recover their manufacturing capacities.
“We project that Nigeria’s economy is poised to recover to growth of 1.5 per cent in 2021 and 2.9 per cent in 2022, according to the African Development Bank’s soon to be released African Economic Outlook.”
But admitting that economic rebuilding will entail huge resources, the AfDB President said with taxes being a major part of government income, “It is crucial to ensure the tax base expands.
“Given that over 60 per cent of Nigerians are in the informal sector, priority should be to support measures to move a large part of this from informal to formal sectors. Making tax codes simpler and reducing administrative burdens and formalities are important to move from informality to formality.”
He said with individuals and corporate bodies better evaluating their tax obligations, digitalisation of tax collection and tax administration are also critical to ensure greater transparency of the tax system; widening of the tax base; mitigating compliance risks; and encouraging voluntary tax compliance.
For Adesina, the time has come for government to focus more on corporate taxes, and ensure full compliance, even as he cautioned that such taxes should however not discourage investments in key economic sectors.
“Nigeria can learn from the case of Estonia, which taxes corporate incomes, but based on distributed profits. This allows corporations to re-invest their profits in expanding their businesses”, the AfDB president said
