COVID-19 : ECONOMIC RECOVERY HINGES ON THE UNKNOWN AS FAAC AND KGIRS DROPS IN REVENUE

By Dr. Tom Ohikere 
It is no longer news that the current challenges of low income occasioned by the COVID-19 pandemic that has so far claimed thousands of lives and crippled economic activities around the world has eaten deep into our economic reserves as countries have taken strict measures to impose lockdown designed to contain the pandemic. Albeit, some of these restrictions are now being eased, recovering from such crippling of the economy is hinged on the unknown. Closest to infer is the Federal Government which has, last week, cut down the 2020 budget by over N320 billion and thus proposed a new budget of N10.27 trillion against the N10.59 trillion passed by the National Assembly.
For Kogi State, the gross statutory revenue income for the month of April stands at N2,860,933,186.62 compared to N4,078,691,569.91 for the month of March.The 21 Local Government Areas in the state received a net statutory allocation of N1,517,706,851.32, and the Value Added Tax (VAT) and Exchange Gains for the month of April stood at N642,963,989.13 and N140,146,959.74 respectively. Hence, the local government areas gross statutory revenue lands at N2,300,817,800.19.Recall that the internal Revenue Generation (IGR) of the State has plummeted since the outbreak of the pandemic in the country, forcing the State to pay salaries in percentages for the month of April.
In line with this economic reality, many of the 36 State Governments are now planning to reduce their 2020 budgets, while others have suspended every on-going capital projects as part of measures to mitigate the economic impact of the COVID-19 pandemic.
In Kogi State, the Commissioner for Finance, Budget and Economic Planning, Asiwaju Idris, observed that the fact that the federal allocation released on March 23 fell short of the Government’s expectations, and thus pointed to the urgent need to put new fiscal measures in place. In his words said that “the State has swiftly reviewed the 2020 budget with a view to stimulating growth by prioritising key projects, protecting pro-poor expenditures and ensuring adequate provision for health and education”. Idris noted that the drop in the federal allocation was instrumental to the delay in the payment of January and February salaries, and that the government is looking inward to boosting internally generated revenues to enable it meet its salary obligations and as well take care of other needs. Similarly, Niger State Government said it had started working on a number of measures to mitigate the effect that the COVID-19 pandemic may have had on the economy of the State.
The fears among the workers were heightened by the April allocation which was lesser than what was received in April and further caused their salaries to come in percentages.
Meanwhile, revenues from the FAAC allocation accruing to the State for the month of April stood at N1,736,231,350.68, the Value Added Tax (VAT) component of N938,018,569.93 and Exchange Gains of N186,683,266.69 respectively.    The lockdown directives have led to the shutdown of many businesses, especially those that cannot be performed from homes. Only businesses proffering essential services have been exempted from the lockdown directive, hence, the State’s economy becomes adversely affected.
For example, the Real Estate and Construction is experiencing drops in income and increased loss of jobs. A very little interest in acquiring houses are being shown by property buyers. Also, the movement restrictions and social distancing adversely affect construction activities nationwide with organizations and individuals trying to apply safety measures.
Trade has also been negatively impacted, owing to the shutdown of factories, reduced access to raw materials and commodities due to supply chain challenges. Billions of naira worth of trade for both imports and exports are lost due to the lockdown, seaports and border closure. Given that China is crucial to the global trade with its current integration in the global value chain and being the main supplier and buyer of intermediate inputs, the disruptions it is dealing with due to the disease has significantly affected all trade flows. 
Another area affected by the Coronavirus is the Manufacturing sector. The pandemic  impacts negatively on the manufacturing sector as production lines and factories are shut down like the Dangote Cement and others due to the lockdown and low consumer purchases, hence shortening the IGR of the State.
Start-ups and Small businesses are invariably affected. Entrepreneurs are forced to take drastic steps in order to remain in business. The preventive measures taken by the government have left startups as one of the most vulnerable.Consultants and services providers will be negatively affected, too, as the drop in revenue by companies and even government institutions will invariably the patronage of their services. 
It is also no secret that the hospitality industry is one of the sectors that has been hit the hardest by the COVID-19 pandemic, with many of the employees either out of work or losing hours due to travel restrictions, the shutdown of businesses, and social distancing. The hotels have been experiencing very low patronage.Restaurant Owners and Managers are grappling with the brutal math that underpins their industry. Margins are razor thin, forcing eateries and bars to pack in customers every night, and especially on the weekends in order to stay afloat. In the toughest markets, that means multiple waves of guests, and tables that are pushed together as closely as possible. It’s simply a business model that is not compatible with social distancing.  Forestry revenue has also been affected as a result of the Lockdown directive, and this is another vibrant source of the Kogi State Revenue. 
However, if this lockdown persists, the future is glaringly bleak. As part of the immediate task of Kogi Vision to prospect for the future of the State, it is my humble opinion that the lockdown be lifted so that people can return to normal businesses, and the government should fashion a modality to empower small businesses to regain their feet and subsequently boost the economy. 
In Conclusion, the economic reality of the moment is a call to task ourselves and create ambience cogwheeled  to smoothen the takeoff of private businesses to boost the State’s IGR, and thus stabilise the economy, as some businesses’ cash flows are already being devastated and the revenue evaporating. Review in detailed cash flows for the next three months, and identifying what mitigating actions can be taken to preserve cash in the short/medium term becomes imperative to cushion the impacts of the pandemic, hopeful recovery of the economy. In achieving this, Kogi state must move from the stage of its full potentials to realities of development in the nearest future.