*2017 Budget to focus on inclusive growth
*Udoma, Adeosun speak on way out
*Obadiah Mailafia, Bode Augustus, Ayo Teriba, Bismarck Rewane suggest stimulus package to revive economy
Nigeria can be likened to the prodigal son, who grabbed much of his rich father’s assets and went to what the Bible described as a ‘far country’ and squandered the wealth with women of easy virtue and returned home a wretched man, bemoaning his fate.
But the good thing about the prodigal son is that he quickly realised his mistake, returned to his father, who pardoned him for his recklessness and restored him with full rights to his sonship.
President Muhammadu Buhari may not be an astute or a celebrated economist like Thomas Sowell, Joseph Stiglitz or Adam Smith, to dish out theories on fiscal and monetary policies, but with experience, he knows when an economy is in serious trouble.
And it has been a baffling coincidence that while as head of state between 1984 and 1985, and now as a civilian president, Buhari has had to contend with a deflated economy, which may take a long time to rejig. To worsen matters for him and his team, the citizens are seriously upset, because they cannot readily understand why the economy, which was recently ‘rebased’ and branded as the ‘largest in Africa and only 26th globally by the previous administration, could have inexplicably nose-dived into a recession with a double-digit inflation and massive job cuts as well as firms closing shop.
Indeed, the outlook is scary, sending shockwaves across the nation and abroad, effectively dethroning Nigeria from its enviable position as the largest economy and watching in low self esteem as South Africa takes over from the ‘giant of Africa’.
But the good news is that Buhari has been humble and straightforward enough with Nigerians to admit that the economy is in a very bad shape and that it requires urgent surgical operation.
Contrived positive economic indices to show that the economy is doing very well will not work and President Buhari has reportedly rejected that. Even the suggestion in some quarters that massive imports to meet the daily needs of the people so as to be seen as ‘politically correct’ has been rejected.
Nigeria, like other major oil producing counties like Venezuela, Canada, Iran, Algeria, Ecuador, Brazil, Iraq, Russia, Libya, Azerbaijan, Kazakhstan are also in recession while others like: Qatar, Mexico, UAE, China, Angola and Saudi Arabia, according to the June/July edition of Worldatlas, Bloomberg, are at the brink of recession.
This has come about as a result of the continuous decline in oil price for close to two years. From a steady $110 per barrel before 2013, oil price has dropped to as low as $30 per barrel since 2014 but is barely moving towards $50 per barrel, leaving oil-dependent nations with little or no cash to run their economy.
Perhaps, as a practical demonstration of the political will and determination to find answers to the beleagued economy, Buhari sat down with his ministers and top government officials for most part of Thursday, September 15, 2016, to holistically examine the economy and proffer solutions that could effectively bail the nation out of recession.
The session came on a one-day retreat tagged: “Building Inter-ministerial Synergy for Effective Planning and Budgeting in Nigeria”.
Declaring open the retreat, President Muhammadu Buhari said that the nation requires what he calls ‘out-of-the-box’ thinking so as to get out of the economic doldrums.
Buhari said, “The challenges we face in the current recession require ‘out-of-the-box’ thinking, to deploy strategies that involve engaging meaningfully with the private sector, to raise the level of private sector investment in the economy as a whole.
“We are confident that the level of private investment will grow as we are determined to make it easier to do business in Nigeria by the reforms we are introducing under the auspices of the Presidential Committee on Ease of Doing Business.
“This is why we have embarked on measures and actions that will open up the opportunities we have seen in the Power, Housing, Agriculture, Mining, Trade and Investment, Information Communication Technology (ICT) Sectors, Tourism, Transport and other sectors.
“While Government is taking the lead in the task of repositioning our economy for Change, we cannot achieve this completely by ourselves. We will need, and we ask for the support and cooperation of the private sector’s domestic and foreign investors, the States and Local Governments, the National Assembly and the Judiciary as well as all well-meaning Nigerians in this important task. We are confident that working together, we shall succeed,” Buhari assured.
Budget and National Planning Minister, Senator Udoma Udo Udoma, explained that the retreat was timely as it was deliberately arranged as part of the government’s preparations for the 2017 budget, apparently to avoid the problems noticeable in the previous budgets.
Udoma said: “We want to make sure that as a cabinet, we have synergy and we look at the priorities for the government for the 2017 budget and make sure that in the light of the current economic situation that the budget is well structured to take us back on the path of growth.
The minister said that with proper synergy from the ministers and their respective agencies, it would be possible for the cabinet to speak with one voice regarding the 2017 budget.
Udoma traced the genesis of the current economic quackmire to a number of factors but gave an optimistic view that the adversity could be turned into an opportunity for growth and development.
Finance Minister, Mrs. Kemi Adeosun, expressed the government’s sympathy with Nigerians over the down turn in the economy but was quick to add that the administration was more serious in its intention and resolve to turn it around.
The minister said: “We sympathize with the people of Nigeria but what is more serious is our intentions, our resolve and plans to turn it around. We had said it before that we knew we were going to go into a very difficult period. We have not anticipated the impact of the much awaited crisis, which of course is built on our revenue which is down significantly. We have a credible plan and that plan is based on the need to invest in our infrastructure and each of the experts spoke on that, saying clearly that it was the only solution for Nigeria to take us out of this situation and we are working on that”.
The retreat latter broke into six syndicate groups with ministers and permanent secretaries divided among the groups to examine the economy and suggest the way forward. Leaders of businesses in the private sector and consultants to government were also in attendance.
Among the papers presented at the retreat were: “Weaning the Nigerian economy out of oil dependence”, by Dr Obadiah Mailafia, “Fiscal and Trade Policy options to get the economy out of recession”, by Dr Ayo Teriba.
But to effectively wean the economy out of oil dependence, Dr. Malaifa, brought forward both short and long term suggestions to be applied by the government.
Malaifa said: “As a short term measure, we need bold measures through the vehicle of a stimulus package and a people-based macroeconomic stabilization programme that will reboot growth and return the economy to the path of long term sustainable development. This is a fundamental prerequisite for any credible programme of long term diversification. We then discuss the key sectors for diversification, anchored on an agro-based mass industrialization strategy; arguing that such an ambitious strategy will not work without the concomitant accompaniment of its necessary foundations.
“These foundations are an enhanced role for the private sector as the engine and locomotive of growth; more rigorous approach to implementation of energy and infrastructure development; skills, training and human capital development and enhancement of labour and productivity; and public sector reforms in the context of a reinvented and re-imagined state that is smarter and more entrepreneurial.”
Dr Teriba said, among other things, that the government should strengthen the synopsis on Fiscal and Trade Policy options to get the economy out of recession – getting the policies right: there is a clear way forward for Nigeria.
He pointed out that although it was regrettable that inflation, devaluation and recession have dogged Nigeria’s economic news in 2016, they could have been prevented.
But to get out of the dark tunnel, Teriba said the government should apply the following strategies to bring about a new lease of life: “These were avoidable, they should never have occurred, and remain easily manageable. Indeed the silver linings are the many useable, potent but yet to be used economic policy ammunition that are readily at the disposal of government: The CBN could ease its tight policy stance to give recovery a chance . Federal Government could break its own monopoly and let foreign investment flood into all infrastructure that could provide the big-push to boost recovery and also improve Federal and States’ fiscal situation.
“It is also true that the severity of the current downturn will only spur us to pull some or all of the available policy levers, preferably based on a convincing, holistic, coherent and well-synchronized economic reform document that emphasizes supply push, rather than demand restriction or price adjustment. This is why I strongly believe 2017 may hold a sharply contrasting outlook to 2016, and most likely turn out to be a year of many green shoots for Nigeria, with numerous bright shining lights at the end of the tunnel,” he said.
Adding a voice to that, Mr. Bismarck Rewane, who spoke on “Monetary and Exchange Rate Policy options to get the economy out of recession”, maintained that the current Nigeria’s state of affairs requires a robust plan backed by a comprehensive implementation effort to turn around the economy.
Rewane said such swift action in at least three areas will help address Nigeria’s economic challenges: “In the fiscal/monetary sector, government should reduce interest rates to unlock resources tied to debt repayments that can be reinvested in capital expenditure; reduce VAT rates to lower fiscal burden on wider citizenry; and boost federal revenue capacity by improving on tax and Customs collection efficiency, selectively liquidate low priority assets, concession strategic assets, borrow at efficient prices.
Improving Social welfare and stability by improving minimum wages in response to rising cost inflation; creating social safety net to address impoverished community and addressing security issues and controlling regional conflicts.
Deepening Business Growth by launching pro-growth initiatives in under developed sectors to diversify the economy and stimulate growth in the real sector e.g. Agriculture, Mining, Manufacturing etc.); expanding credit supply from banks by reducing CRR to incentivize higher levels of lending and launching a fresh wave of sustainable asset relief programmes to improve Banking sector NPLs and unlock capital for future lending.
“For long term success, it will be critical for all actions to be supported by a strong commitment and decisiveness from the government.
Government should consider setting up dedicated teams to track targets/KPIs and ensure timely execution of key milestones. This team will also be key for managing public communication of key policies/actions and harmonizing strategies advocated by the various ministries.
“To address the risks, the government should employ a set of clear and decisive actions, along with a cohesive and consistent communication strategy for renewed and sustained confidence amongst key stakeholders. Similarly, a realistic and pragmatic mind-set must be maintained as positive results slowly emerge,” he counseled.
On his part, Mr. Bode Agusto spoke on “How to grow output and productivity in the real sector”, advising that the government should be pragmatic in choosing the best model in growing key sectors of the economy – electric power, railways and oil and gas – given the stark reality that the external sector is weak and does not generate enough USD.
Augusto reasoned that since government revenues are down with high debt service costs and the government finding it difficult to fund infrastructure spending without borrowing heavily, it should take steps to reduce debts to grow the economy.
He said: “Government must therefore jump-start the economy by increasing infrastructure spending in a manner that does not increase debt and generate USD that will be used to plug both the current account deficit and fiscal deficit. In each of these key industries, government should be minority shareholders, allow the majority t manage the industry so that she can act as an independent regulator.
Government should also encourage competition, provide fiscal and legal incentives to encourage investment and grow the tax base. Finally, as these businesses grow, they must be encouraged to list on the Nigerian Stock Exchange so that they can provide an exit for investors who want to sell and a store of wealth for those who want to buy,” Augusto said.
According to documents from the Budget Ministry, the key expectations of the 2017 budget will focus on reviving the economy and will emphasise on actions to return the country to sustainable growth, keep a cap on recurrent expenditure and focus on capital expenditure, especially infrastructure.
According to the document, the ultimate target is the attainment of strong inclusive growth.
Although Nigerians are very critical of the way the Buhari government is handling the economy, none of them can however accuse the government of not being transparent enough to admit that there is danger in the system, They have also been pragmatic in pointing the way forward.
But the citizens must erase from their minds the fallacy that any government or nation like Nigeria that does not produce and sell enough goods and services for export to earn foreign exchange can easily recover from an economic slum even if it is producing oil on a sustained basis. Nigerians seem to have missed the universally acknowledged position that oil is an unpredictable item of trade, the price of which depends on external forces outside the control of the producers.
No economy is nourished by heavy consumption of imported goods and services, without a strong manufacturing sector. Nigerians must also erase the notion that an economic team no matter how brilliant the members may be, could salvage Nigeria from its current dilemma if the different state governments do not begin to embark on provision of vital small scale industry production to engage their citizens and desist from ‘investing’ almost all their earnings on ‘security votes’.
Economic theories and advocacy are clearly different from production and selling of goods to earn cash and provide jobs. That is the way the new thinking should go!