‘Buhari must make urgent economic policies to address inefficiencies’

With the re-election of President Muhammadu Buhari for another term in office, rating agency, Augusto & Co, has asked the President to adopt a private sector growth approach, and improve efficiencies in the system, as there are limits to government’s efforts in stimulating growth and creating jobs.
     
The firm, in a report titled: ‘Buhari Version II (2019—2023): Economic Perspectives,’ said Nigeria cannot sidestep reforms without severe consequences that could last an entire generation, hence the need for politically unpopular but inevitable choices.
   
Specifically, the report urged the Buhari administration to improve efficiencies in the economy by concessioning key infrastructure, and eliminate monopolies of state-owned enterprises (SOEs) in key sectors such as aviation (airport ownership and management), railway, and electricity transmission by opening up these sectors to private sector investments.

According to Agusto & Co, Buhari in his second term would have to work to raise revenue, while also restructuring government spending, which would require politically unpopular “but inevitable choices.For instance, the report pointed out that Nigeria’s current fuel subsidy regime indicates the country may have readopted opaque practises of the past that not only create a huge fiscal hole but a morass as well.
 
“With subsidy payments probably in the range of N1.2 – N1.3 trillion annually, the country is obviously haemorrhaging especially amidst the steep opportunity costs.“Buhari will not only have to stop this fiscal haemorrhage, but also muster the political will to deregulate the downstream petroleum industry once and for all times,” it added.
 
It recalled that Buhari’s victory of 2015, was largely greeted with euphoria by a business community expectant of badly needed macro reforms. However, long-term watchers of the President were quite dismissive of his inclinations towards macro-reforms, it stated.It noted that, “middle of the ground analysts buoyed by some of the bold pro-market reforms in the Economic Recovery Growth Plan (ERGP), had hoped for some form of Damascene moment for the president that would get him to expend some of his political capital on tough and politically unpopular macro reforms.
 
“The 68 per cent rise in the pump price of petrol to N145 in May 2016, from N86.50 and the feeble response from the oft anti-reformist labour unions, had given a bit of hope to these middle of the ground analysts that Buhari did intend to expend some of his political capital to pursue unpopular reforms.“However, Buhari’s rhetoric on exchange rate policies, which may have driven the Central Bank into adopting a demand management stance on the currency, cleared doubts about the President’s statist economic ideologies. “Without a doubt, the effects of the currency crisis did send Nigeria into its first recession in 25 years,” the report added.
 
It noted that the calls for adjustment of exchange rates, electricity tariffs, and petrol prices, to reflect market fundamentals, were largely ignored by the President, which left the country with a burgeoning fiscal deficit.“The second argument to demonstrate the statist stance of this administration would be the abortion of its own reform programmes.

“For instance, the planned concession of the major international airports in Lagos, Kano, Port Harcourt, and Abuja by this administration and the cold trail of the process buttress this argument.”Continuing, the report stated: “The reform-lite approach of the Buhari administration in the first term implies that it has an extensive to-do list in the second and final term.

“Some of the big issues that will make or mar Buhari’s economic records will be the management of subsidies and other cost unreflective tariffs being stifled by price controls.“These reforms will require the removal of subsidies on the pump price of petrol, allow market forces to determine the domestic price of natural gas, allow electricity tariffs that enable operators earn margins on their costs and also ensure exchange rates reflect fundamentals.

“These reforms could help stimulate investments across board and unlock economic growth. The Buhari administration will also need to adopt a private sector growth approach.“Overall, we believe that Nigeria cannot sidestep reforms without severe consequences that could last an entire generation. History beckons on Buhari to prove the naysayers wrong.”