Inaction on fiscal policies heightens investment risks
•Operators worried as govt delays appointment of heads of parastatals one year after
Stakeholders and operators in the private sector have expressed worry about the continued inaction of the Federal Government in the area of fiscal policies initiation and execution.
They have also raised concern over the prolonged failure to appoint substantive chief executives for critical agencies of government, one year after their boards were dissolved.
According to the operators, the extended leave of President Muhammadu Buhari could further erode confidence in his administration, already under pressure from investors, adding that the Nigerian economic environment is with riddled with uncertainty and several agency heads operating in acting capacity.
The President had announced the dissolution of Governing Boards of Federal parastatals, agencies and institutions on July 16, 2015 and the removal of CEOs/managing directors of 26 federal agencies, about eight months after assuming office, placing them under acting capacity.
While the economy’s structural defect of being heavily import-dependent cannot be fixed in the short term, stakeholders noted that the major challenge facing the Nigerian economy at this time is the inability to regain the confidence of investors, both local and foreign, even as instability and inconsistency in the foreign exchange management policy complicate matters.
According to analysts, the weak currency, which looks set to get even weaker, will likely scare new investors away, while current investors will be increasingly likely to pull their money out of the country, a position that may see the country’s growth slow down without the investment dollars.
Specifically, they noted that while fiscal policy measures are better suited to address sectoral imbalances than monetary policy, the Federal Government had been using the latter to address concerns in the former.
Professor of Political Economy, Pat Utomi, has warned that it is foolhardy to think that monetary policy will solve the country’s economic woes, leaving the fiscal component perpetually inactive.
“It does not work like that. The argument on the poverty of the nations, particularly in Africa, has shown that poverty is the outcome of wrong policy choices by leaders. You make good policies, but allow weak institutions to destroy it. This has put Nigeria in recursive mode.
“We need a political class that understands that leading a people is about being visionary and thinking about tomorrow’s problem before they come. Here, the leaders only stumble on issues and don’t think about the implications of their actions and inactions on the economy,” he said.
The Executive Director of Centre for Human Rights and Conflict Resolution, Idris Miliki, said there are more consequences for the economy than the rumours about the state of health of the President.
For him, any decision on the economy now must be taken cautiously, because the truth about the head of government is shrouded in uncertainty and that is a risk for investment.
“Development issues are now put on hold. Granted, we have the acting President, but we are all aware of Nigeria’s political landscape. He still has a limit to what he can do. But mostly, fiscal policy decisions are as good as stagnant. Unfortunately, the country’s economic rebound is hinged on the performance of the fiscal activities,” he said.
Speaking on the challenges by telecommunications operators are facing as a result of the economic situation in the country, the President of the Association of Telecommunications Companies of Nigeria (ATCON), Olusola Teniola, said the steep devaluation of Naira versus the dollar is serious.
According to him, it is impacting negatively on the Capital Expenditure programme of many operators in the telecommunications industry.He added that the the threat of further taxes being imposed on the industry in the form of Communications Services Tax (CST) and other problems, including reduced Foreign Direct Investment into the telecommunications sector and then the contraction of revenue accrued to the industry versus previous years’ astronomical growth are instances that should be avoided in 2017.
The ATCON President said the last quarter in 2016, was fueled by the realisation that predatory pricing has crept into the industry and the Nigerian Communications Commission needed to deal with this in terms of wholesale price determination interventionary measures.
Speaking to The Guardian, Head of Operations at the Association of Licenced Telecommunications Operators of Nigeria (ALTON) Gbolahan Awonuga said the current economic situation is drawing back investments from the sector.
According to him, government must act fast to put the economy back to functioning, “if this continues, it will discourage investors. We are already making efforts to woo investors from Qatar and France to the sector, but they are skeptical about bringing in their money because of the snail speed development that has greeted the economy.
Some of these investors are also aware of the issue of multiple taxations in the sector; this alone is enough to discourage investments. I think government must act fast. They must return confidence back to the economy.”