An econonmic agenda: Our expectations (2)
ANOTHER avenue to economic diversification is through Foreign Direct Investments (FDI). FDI is expected to grow because of the fresh emphasis on fighting corruption; many investors would seek the high returns for which Nigeria is reputed.
The new government through the Investment Promotion Council should pursue investments that diversify our economy and have the capacity to earn us foreign currency.
However, they must be vigilant to ensure the new investors do not come in to exploit Nigeria and Nigerians. Unfavourable incentives that ferret away our just entitlements should be avoided. Seasoned negotiators should be employed whenever such deals are being arranged to ensure that Nigeria and Nigerians get our fair share of every investment.
Sovereign wealth fund
The Fund, SWF, (and its Component Funds) was amongst other objectives set up as a means to diversify foreign earnings; but the effort seems half-hearted.
One billion dollars at a time when we had over $50 billion in Foreign Reserves is grossly inadequate by every standard – Botswana has over $7 billion, Angola $5 billion. As soon as the situation permits, respectable sums of money should be released to the fund for our collective enrichment.
Excess Crude Account: Now that the Excess Crude Account is empty, there’s no better time for the Federal Government to seek the National Assembly’s approval in legalising that account. Many of the state governors who agitated for the disbursement of the Excess Crude savings cannot point to any project for which the funds were judiciously spent on.
If the money or part of it was still in the account, the Naira may have been protected its free-fall and all of us would have benefitted from that. The savings culture must be developed by Nigerians at both individual and collective levels.
Despite the low price of crude oil, there is at least $5 margin between it and the 2015 Budget Benchmark. With Nigeria producing at least two million barrels of crude per day, we have the potential to save about $60 million in that account monthly! This goes directly into increasing the value of the Naira and the attendant benefits that come with that appreciation.
Most Western countries rely heavily on taxes to fund their governments. To join this cadre of countries, we need a more efficient Tax Administration. Whilst we agree that the FIRS has improved a lot in the past 10 years, its efficiency still needs to be enhanced. Both Federal and State Boards of Internal Revenue need a more intelligent approach; they must stop harassing small businesses and be emboldened to take on High Networth Individuals (HNIs) and the medium scale businesses these HNIs own – many of these are notorious tax evaders. Tax Tribunals should be established in every state and made more effective, so that they can support the work of the tax administrators with a bite. The required legal framework must be put in place accordingly.
Due to the recent devaluation of the Naira, our purchasing power has been greatly eroded leading to an increase in inflation in March 2015. Therefore, the new government needs to encourage the local production of alternatives to imported staples; so that irrespective of what is happening outside our borders, we can continue to maintain our lifestyle with little attrition.
However, the last statement can only work if local manufacturers are indeed manufacturers and not just assembly plants. This brings to fore the issue of backward integration – the local sourcing of raw materials for manufactured goods so that the price of local alternatives can be truly free of Foreign Exchange vagaries. Of course, there are other issues that frustrate the Nigerian manufacturer but one of the major ones is the sourcing of Foreign Exchange to buy imported raw materials.
Environmental beautification at the expense of the urban poor must stop. Suitable alternatives to street trading and squatting must be provided before any demolitions and evictions are done. These evictions have only further impoverished the urban poor; humane solutions must be created to solve the problems. Adequate compensation must also be given so that the poor do not become poorer as a direct result of government actions.
For too long, Microfinance banks have refused to effectively serve their target market. The CBN stipulates that a certain percentage of their loans must be micro loans. They routinely flout the regulation and nothing happens. The CBN should be encouraged to enforce its own policy. Microloans with Financial Literacy and Business Management training should be made easier to access by the urban poor.
Improving access to bank credit
Banks are in business to lend money and no bank would see a good opportunity and overlook it. They are not lending to businesses (small and medium) because the risks far outweigh the benefits; risks of diversion, risks of mismanagement, risks of default, etc. There’s a need to put in the Framework to make loan recovery easier. The Central Bank of Nigeria (CBN) is championing some initiatives – Collateral Registry, Bank Verification Numbers, Credit Bureaux, etc. These must be allowed to grow and produce the full results.
• To be continued.
• Adesola is Managing Consultant, LA Consult Limited,
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