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Counsel for the Economic Advisory Council

By Ejeviome Eloho Otobo
01 November 2019   |   3:34 am
The creation of the Economic Advisory Council (EAC) in September generated all sorts of public reactions. One notable reaction was the view that its creation has diminished the remit of the Vice President, in as much as the Economic Management Team (EMT), previously chaired the Vice President, was abolished. This belief reflects an inchoate understanding…

Buhari Inaugurates, Sets Agenda For Economic Advisory Council

The creation of the Economic Advisory Council (EAC) in September generated all sorts of public reactions. One notable reaction was the view that its creation has diminished the remit of the Vice President, in as much as the Economic Management Team (EMT), previously chaired the Vice President, was abolished.

This belief reflects an inchoate understanding of how economic policymaking and coordination work in other countries, especially the United States of America that Nigeria policy makers whimsically imitate in their operation of the presidential system and federal political structure. For example, in the United States, the Council of Economic Advisers (CEA) created in 1946 under the Truman Administration exists alongside the National Economic Council created in 1993 under the Clinton Administration.

One might suppose that the US National Economic Council is the equivalent of the Nigerian National Economic Council but you would be wrong. The Nigerian National Economic Council is compromised of the Vice-President (who chairs it), the State Governors, and the Governor of the Central Bank of Nigeria. Its remit is “to advise the President concerning economic affairs of the Federation, and in particular on measures necessary for coordination of economic planning efforts or economic programmes of the various governments of the federation.”

By contrast, the US National Economic Council is the equivalent of the abolished Economic Management Team. The US National Economic Council consists of the US federal government departments that have a remit for and involved in, economic matters. Its principal functions are “to coordinate policy-making for domestic and international economic issues, to coordinate economic policy advice for the President, to ensure that policy decisions and programmes are consistent with the President’s economic goals, and to monitor implementation of the President’s economic policy agenda.”

The US Council of Economic Advisers is the equivalent of the newly established Nigerian Economic Advisory Council. The principal functions of the CEA are “to advise the President of the United States on economic policy and provide much of the empirical research for the President and prepare the annual Economic Report of the President…which is published by the CEA in February of each year. [The report] reviews what economic activity was of impact in the previous year, outlines the economic goals for the coming year based on the President’s economic agenda.” Alan Greenspan, who chaired the CEA from 1974-1977, and later became the Chairman of the US Federal Reserve, remarked in his book The Age of Turbulence that “the CEA is essentially a small consultancy firm with a single client: the President of the United States of America.” And so, with the EAC: its single client is the President of the Federal Republic of Nigeria. Even so, its activities would respond to public expectations. In an editorial titled “Deconstructing Buhari’s Economic Advisory Council” published on 3rd October 2019, The Guardian articulated its expectations.

This brief analysis leads one to conclude that, contrary to popular belief, the abolished EMT could have existed alongside the EAC in so far as the former was designed to enhance economic policy coordination and implementation among relevant federal government ministries and departments; while the latter is composed of independent external experts dedicated solely to offering advice to the President of Nigeria. But that is now a mute point. Given the remit of the EAC, the question becomes how best it can contribute to sound economic policymaking, if not policy coordination, in Nigeria. Within its existing remit, there are three tasks crying for urgent attention.

First, given that the EAC is comprised of top experts, some of whom were involved in the articulation and implementation of some recent development plans/strategies –National Economic Empowerment Development Strategy; Vision 20 in 2020; the Nigeria Transformation Agenda —the EAC is well placed to undertake a rigorous review of the implementation of previous plans and programmes dating back to 1962. The aim of such an effort will include an in-depth examination of why Nigeria has performed dismally in the implementation of its various development plans and why countries like China and India have succeeded in national development planning. Such an effort would help distill the appropriate lessons to guide national economic policy making and implementation in the future, in particular before the government embarks on the articulation of a successor plan to the Economic Recovery and Growth Plan.

The second closely related task is for the EAC to explore the question of why Nigeria has signally failed to achieve its economic growth targets in the various plans adopted since 1999 and propose measures for achieving a higher growth rate. The Vision 20:2020 plan envisaged a target of 13 percent annual average economic growth. The Nigeria Economic Recovery and Growth Plan 2017-2020 set a target of 4.62 percent economic growth. Meanwhile, the Nigerian economy grew at an annual average of 7 percent from 2009-2014, 2.7 percent in 2015; and contracted by 1.6 percent in 2016. Growth recovered by a dismal 0.8 per cent in 2017; 1.9 percent in 2018; and it is projected to grow at 2.3percent in 2019; and 2.5 percent in 2020, according to the IMF’ s World Economic Outlook of October 2019. The fact that Nigeria’s economic growth rate continues to fall below its self-set growth targets is bad enough. It is worse that the growth rate since 2015has been below the population growth rate of 3 percent – which means that no dent will be made on poverty reduction, the first of the seventeen sustainable development goals.

Third, the EAC should also assist the government to develop a new budgeting framework that anticipates the day that Nigeria will no longer rely on oil as the dominant source of public revenue and foreign exchange. In my OP-ED, titled Nigeria-Beyond Oil Strategy, published by The Guardian on 31 March 2016, I noted that “in much of the 40 years [1974-2014] of Nigeria’s oil-dominated political economy, the federal budgets have been prepared and implemented on the basis of the prevailing oil price. In other words, the budget was benchmarked on a projected oil price.

In 2004, this approach was modified with the introduction of the oil-based fiscal rule, under which the budget projections were based on less than prevailing or projected oil prices. This fiscal rule was both intended to avoid wild swings in expenditures and, more importantly, to save the excess revenue above the benchmark price. The Excess Crude (oil) Account [ECA] was born out of this approach. Now that oil might become less dominant as a source of revenue, the time has come to consider another approach for budget preparation and implementation. Nigeria can learn from the experience of other countries, where budget revenue is benchmarked on economic growth rate: The higher the growth projections and the greater the share of particular sectors of the economy, the more revenue that the government garners from such sectors.”

Some public commentators have bemoaned the fact that the top-notch experts that constitute the EAC were not appointed to the President’s Cabinet. This reflects the popular view that technocrats can make a contribution to national development only if they hold cabinet positions. In fact, the EAC, as currently composed, has an excellent opportunity to help the federal government tackle some of the most challenging tasks in economic policy management, including the three tasks outlined in this piece.

Otobo is a non-resident senior fellow at the Global Governance Institute in Brussels, Belgium.