An econonmic agenda: Our expectations (3)
Continued from yesterday
OTHER initiatives must be introduced. For instance, there’s a dire need to inaugurate Commercial Courts that would quickly attend to commercial Issues, including cases of loan recovery so it won’t take a bank six years (and huge legal bills that far outweigh the loan in default) before they can recover a bad loan.
The cost of obtaining governor’s consent and other Security Perfection Approvals must be greatly reduced. It is a legal requirement that Bank Credits have full collaterals. State governments charge excessively high amounts of money for perfection of securities – so a business that wants a N10 million loan could pay up to N1.5 million to perfect its security. The business owner rejects the expense and the bank refuses to disburse the loan! With the reduction in FAAC inflows, many state governments would be looking at such avenues to improve their Internally Generated Revenue; in fact cost of perfection may go up! How then can access to bank credit be improved?
Our unemployment rate is unsustainable. It is both an economic risk as well as a political risk. The more people that are employed, the greater the GDP and of course the greater the consumer demand for goods and services which also increase the GDP.
Cash/Grants Disbursement Programs (e.g. YouWin) have not produced required results because of a general lack of Business Management Skills and Financial Literacy – technical expertise is never enough to run a business – many failed not because of a lack of expertise or even a lack of commitment but for lack of management skills. The problem areas in existing programmes should be identified and corrected in future programmes.
The APC government should avoid the lure of recruiting a corps of 20,000 (or any other number) youths and assume they would have done their fair share for youth employment. That is unsustainable. Besides, the last thing we need now is for government’s Wage Bills to balloon further out of control.
More enduring solutions must be developed. The agriculture sector in recent years has been made a little more attractive to the youth, that advantage should be sustained and exploited further. The job multiplier effect of an increase in primary agric production is common knowledge; primary production of raw agric produce leads to a processing need which in turn leads to a marketing need – several people would be employed along one single agriculture value chain. Agric is vital to Nigeria’s unemployment problems because of two main reasons – many of our people live in rural or semi-rural communities and the financial requirement for entry into agribusiness is comparatively very low. Therefore, its benefits must be fully harnessed to fight the unemployment scourge.
APC state governments have been very bullish about obtaining loans; the states they control are some of the most heavily indebted states. With Nigeria’s very low Debt-GDP Ratio, we can bet that soon we’ll be talking about obtaining loans to finance our infrastructural deficit. No doubt credit is good, but if it is initially properly structured and then painstakingly used solely for the purpose for which it is obtained.
Even after due diligence has been done, cash flow must be carefully managed, so that we would avoid the mistakes of Dubai – not everyone has a big brother that can ‘dash’ you $6 billion to prevent Loan Default like Abu Dhabi did for Dubai in 2008/09 when the Global Recession set in and the Financial Projections made by Dubai did not generate the funds required to pay their creditors even though the loans were prudently disbursed for the genuine purposes.
All debts especially FX-denominated must be carefully managed and kept at optimum levels. The comfort of future generations must not be sacrificed for our own comfort.
Fuel Subsidy in any country is not solely an economic topic but more a political one. With current low price regime of crude oil, many analysts have argued that now is the time to remove the subsidy completely. However, we are all aware that the Naira devaluation has eroded most of the gains that should have accrued from the current low prices. Still, the issue of fuel subsidy must be tackled frontally. The President-Elect is a bold man, we expect him to take tough but wise decisions for posterity.
Recovery of missing funds.
We expect that monies missing from Nigerian treasury would be recovered like the Abacha loot is being recovered. Pension Fund Managers, NNPC, and any corrupt individual or institution must be made to refund all missing monies whether held locally or in foreign banks.
Governments at all levels have a tradition of rolling out accomplishments made after 100 days in office, we expect the Buhari Government to do the same. Areas where quick wins can be made include:
Improving Youth Employment
Reducing Local Debt
Attracting Valuable Foreign Direct Investments that would diversify the Economy
Recovery of NNPC Missing Funds
Legalizing the Excess Crude Account
Increasing FX Reserves
Improving the Value of the Naira
Increasing Nigeria’s Economic Rating by Global Rating Agencies
Establishment of a Commercial Court
Establishment of Effective Tax Tribunals in all 36 states and the FCT
We all love Nigeria and are rooting for her. We wish our new President only the very best as he goes on the driving seat.
• Adesola is Managing Consultant, LA Consult Limited, Lagos.