Battle against recession: Challenges and prospects
This is no time for doubts. We are already in recession as economic indicators have already shown. If we keep waiting for the long period of official release of the figures, we might be engulfed and the condition might be worse. This is the time to. It is time for real change actions.
With these sentiments captured in the above words, a financial expert, who also is in the current political realm also warned that economic planning is not done in a vacuum. It is preferably done within the overarching context of coherence, clear timelines, targets, indicators of success and measurable goals.
“This is a policy position that will cut across all the sectors of the economy and integrate activities into a programme of action with necessary linkages, for instance, between education and industry, agriculture and manufacturing. The administration lacks a policy framework but needs to devise one as quickly as possible,” a fiscal governance expert and Lead Director of the Centre for Social Justice, Eze Onyekpere, said.
The economy is in steady decline and already at its lowest point ever in recent history. The GDP grew negatively by -0.36 per cent in the first quarter of 2016 and there are indications that the second quarter may be negative.
For example, unemployment is high at the official rate of 12.1percent; exports dipped by 34.6%, while imports dipped by 7.8 per cent in first quarter of 2016. The headline inflation index for the month of June 2016 stands at 16.5%, the fifth consecutive month of increase- 15.58 per cent in May; 13.72 per cent in April; 12.77 per cent in March; and 11.38 per cent in February 2016.
Meanwhile, the monthly economic survey of the Central Bank of Nigeria (CBN) just released on Monday has retained a negative outcome for the country’s production level, new orders, employment level and raw material inventories.
The President of Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, succinctly puts it this way: “There are pockets of problems associated with every segment of our national life. It is left for us as a people to implement what we believe will help us as a country and economy.
“We are still where we are, talking about export promotion and import substitution nearly 60 years after independence. This is why we are still exposed to foreign exchange crisis and vulnerable to global shocks, yet relying so much on our reserves to survive as a people”.
There seems to be a debilitating fixation with monetary policy and what happens to the value of the naira with all eyes on CBN and its Monetary Policy Committee. Of course, while monetary policy is important, it will not achieve the desired results if it is not complemented by fiscal policy.
Expectations and promise of reflating the economy with a stimulus package would have matched the monetary policy positions of the CBN, but it is still possible that we not have seen exactly all there is with Nigeria in recession.
For now, there is unusual delay in implementing the budget, may be, due to paucity of resources, which raises issues around budget planning and revenue forecasting for the 2016 federal budget. The full implementation of the capital components of the 2016 federal budget is imperative, but shrouded in uncertainty.“Recently, the Federal Government has been granting bailout funds to states while CBN has a plethora of special intervention funds running into trillions of naira. Unfortunately, none of these funds seems to be backed by law or done under any special or particular legal authority.
“We are not aware that the National Assembly appropriated the bailout funds in the 2016 federal budget or under any supplementary appropriation. Under what authority is the executive negotiating and disbursing this bailout funds? Where is the money coming from at a time when the Federal Government cannot implement its capital budget due to paucity of funds.
“Pray, that this is not just seigniorage or that the CBN is creating money not backed by any value. Just like in the United States when the Obama administration came on board, bailout and special intervention funds were backed by law, which regulated the criteria for qualification to access the funds, the procedures, repayment. We cannot afford lawlessness in the name of bailouts and special intervention funds,” Onyekpere said.
The country can start somewhere. The full implementation of the automobile policy which encourages local manufacture and assembly of vehicles is imperative in this regard. Nigerian manufacturers need to be supported to export their products and this calls for the reinstatement of the Export Expansion Grant, which was stopped due to abuses. But the loopholes for corruption need to be plugged.
Building the capacity of the tax authorities like the Federal Inland Revenue Service to understand the technicalities of illicit flows and how to plug them, will get more money into the Federation Account for the three tiers of government to share.Expanding the tax base in terms of numbers of companies and individuals who pay tax, which FIRS has already started needs to be deepened. There are lots of Nigerians and companies out there who are yet to get into the tax net. But the corollary is that governments at all levels need to be more accountable and transparent in the use of public resources.
“Despite the mantra of diversification of the economy, present and previous attempts at diversifying the economy, the uncharted petroleum industry still holds a lot of promise for Nigeria’s economy. “The country has not expounded the frontiers and benefits of the full value chain of the petroleum industry. Whilst we need to diversify the economy, investments in the petroleum industry in terms of refineries, petrochemical complexes, fertilizer plants, gas gathering, processing and distribution, etc have not been fully explored.
“Thus, these are low hanging fruits that can give the economy a short to medium term shot in the arm and boost economic activities. They will save foreign exchange used in importation; create new sources of foreign exchange earnings when we have excess capacity that can be exported, bring new jobs to Nigerians and new sources of corporate and personal income tax to government,” the Programme Officer, Good Governenace, Centre for Social Justice, Victor Emejuoiwe, said.
Besides the logjam in making headway with the Petroleum Industry, the country has treated and approached petroleum refining as a “rocket science”. Combining this with our colonial mentality, a simple process of fractional distillation has been complexified to ensure that locals do not derive livelihood support from the industry.
“Every day, we see the security agencies destroy ‘illegal refineries’ reminiscent of the colonials calling our local gin ‘illicit’ so as to create a market for their imported alcoholic beverages. Is it not time we improve the technology used by these locals and legalise what we call illegal?“Get the experts in the departments of chemical, petroleum and allied sciences and engineering in the universities/polytechnics and their colleagues in the various fabrication sciences to see how they can improve what we call crude and illegal refineries. This will build an autochthonous local refining capacity not dependent on the foreign imported technology, improve environmental conservation, create jobs.
There is also the need to extend the concept of local content beyond the few sectors like petroleum and cabotage to other sectors of the economy including electricity, telecommunications. “This will not only guarantee Nigerians jobs, but will increase the retention capacity of our economy in terms of preventing capital flight out of the economy. It will be recalled that the bulk of the capital expenditure of our budget, especially in construction are captured by foreign firms,” the Programme Officer, Public Finance Management/Knowledge Institution, Onyejegbu Fidelis, said.
We must energise the agriculture value chain beyond slogans and mere mantras. It is a practical thing that we convert idle arable land into cultivated or used land- produce plants and animal varieties to feed the nation; produce raw materials for industry; and products for export. This involves processing these materials into finished products for local use or export. The products of Nigerian universities of agriculture and the various agriculture faculties in our universities are enough manpower to be used in the agriculture revolution. But can we put them to good use?
“The previous and current administrations have proposed the value chain approach and this needs to be deepened. There is also need to introduce new farming techniques, improved varieties of seeds and seedlings, soil diagnosis as a basis to introduce appropriate fertilizers or encourage organic agriculture. On no account should this be a basis for legalizing or approving of genetically modified plants and animals,” Fidelis added.
Again, the CIBN chief said: “Everybody has a role. I don’t know the number of Nigerians that can lay claim on sleeping well today. From the government quarters, the responsibility of providing the enabling environment through well thought policy direction is sacrosanct. But it must ensure that the apparatus for faithful implementation is put in place.
“Each sector of the economy has a role- being transparent in the way and manner businesses are conducted and ensure that Nigeria as a country is in the picture in whatever they do. As individuals, we must tame our consumption habits and move a step back, to embrace what is ours- “Made-In-Nigeria” commodities.
“For those saddled with the responsibilities of making policies, they must not take advantage of the loopholes, but help plug it. We all must key into the Nigerian project and know that only when the country is at peace- socially, economically and politically, that everyone of us will be at peace too.
“Nigeria is a body, if the head is aching, the rest of the body cannot be well. The truth is that so many parts of the economy are aching today and that is why we cannot lay claim on peace.”Of course, the current position where savings and deposits in banks attract little single digit interest rates while lending rates shoot over the roof in double digits of 20s make no sense at all. It is a great disincentive to saving. When one receives an interest rate that is less than the inflation rate, he is punished for saving money in the bank.
It is time to untie the chord between savings and lending rates because it discourages savings, which is needed to build up investible funds in the economy. The Central Bank may consider a corridor of between 400-500 basis points between the deposit and lending rates to spur savings and investment.
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