Deconstructing Buhari’s Economic Advisory Council
The news of the recent appointment of an Economic Advisory Council (EAC) by President Muhammadu Buhari has elicited interesting comments from various stakeholders both from within and outside the shores of Nigeria. A few have seen it as the manifestation of a political power game at the highest level of governance and have thus expressed scepticism about its fallout given that it displaces an already existing Economic Management Team (EMT) of select government ministers and bureaucrats under the chairmanship of the Vice President, Professor Yemi Osinbajo, who is also chairman of National Economic Council (NEC), a body created by the Constitution. Many others have, however, applauded the move in that it will bring fresh thinking into the management of the Nigerian economy and thus arrest its current drift.
In any case, the critical thinking which the EAC will bring to the table appears welcoming since the members are largely outsiders in the country’s governance structure and thus not likely to play the “yes man” role in carrying out their assignment. In this regard, the EAC would need to “think outside the box” and consider the following issues as they advise Mr. President on the running of the Nigerian economy.
The broad objective of the EAC should be to ensure that the Nigerian economy is growing satisfactorily. This is necessary in the quest to address the multifarious problems confronting the Nigerian society, such as the high level of poverty, unemployment and misery. According to the latest report on the misery index, which considers the state of inflation, unemployment and bank lending rate, released from the John Hopkins University in Baltimore, United States of America, Nigeria was ranked as the sixth most miserable country to inhabit in the world. Hence the economy needs to grow robustly to address these problems that should not be associated with us, ordinarily.
According to previous policy documents, government itself acknowledged that Nigeria has lost decades of development due to negative-to-slow growth and has been one of the weakest growing economies in the world on a per capita basis. The gross domestic product, GDP grew by about 2.8% in the 1990s and about 6.0% for the post-1999 period, up to 2015. Since then, the growth rate has fallen sharply with the economy entering into a recession for about five quarters up to mid-2017. Despite coming out of recession since then, the recovery is still considered very fragile. The last National Bureau of Statistics report indicates that GDP growth has been declining and is currently about 1.94 per cent in the second quarter of 2019. Hence the first major assignment of the EAC is to return the economy to a path of robust and sustainable growth, sufficient and inclusive enough to address the core issues of poverty, misery and unemployment, which are currently ravaging the economy. In attempting to do this, the EAC may well take a close look at the following issues.
First, the issue of fuel subsidy and provision of petroleum products to final consumers has preoccupied every administration in the history of governance in this country. To obtain a long-lasting solution to this issue, a holistic perspective is necessary such that the various ramifications of all impinging factors that lead to the existence of the subsidy in the first place are evaluated, first of which is the issue of fuel supply. The need to strengthen the domestic supply of the product to the populace at minimal cost is very critical. That implies that the refineries must work, at some reasonable level of capacity, to attain this objective. On the issue of fuel demand, which really drives the volume of importation, the figures of about 56 million litres per day in 2019, being bandied around are quite depressing and largely suspicious. The subsidy figures recorded since the inception of this administration by far surpasses that reported during the previous administration as well as others before it. This is curious and definitely not sustainable. It also suggests the prevalence of massive corruption in the sector. The Nigerian Economic Society (NES) on analyzing these issues and their impact on the national economy has called for a phased removal of this subsidy, else the economy will be headed in the direction of serious bankruptcy. The EAC needs to advise on this, urgently.
Second, the need for government to invest massively in infrastructure needs to be emphasised. Without a functional infrastructural base any idea of enhanced productivity and growth of the economy will just be mere wishful thinking. As is well known, when basic infrastructure are provided by the public sector, the functioning of the private sector as well as other productive activities in the economy is enhanced. According to a report of the African Development Bank years back, the infrastructure gap in Nigeria is believed to be $350 billion aggregated.
Doubtless, except Nigeria develops its infrastructure, it will continue to lag behind economically. The private sector must be fully engaged in this venture, through public-private partnership arrangements to confront the issue headlong. Hence, the EAC should suggest a revisit of the 2020-2022 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) in which capital expenditure votes have been reduced. Infrastructural development by the public sector cannot thrive under this sordid arrangement.
Third, the current operating environment in the economy is not conducive for the private sector. The EAC needs to address the various internal inconsistencies within the country so as to enhance productivity in the economy. Appropriate policies need to be put in place to attract foreign capital and boost production. The crises of uncertainty and insecurity need to be addressed else, Nigeria will just turn out to be a dumping ground for goods even from within the African continent, with the advent of the African Continental Free Trade Area arrangement. Currently, the level of capital flight and the consequent effect on the stock market have been counterproductive. This is not cheering.
Fourth, given the recurring challenges in government revenues due largely to the volatility of oil prices, the EAC should work towards fast-tracking efforts to meaningfully grow the non-oil sector and the enhanced diversification of the Nigerian economy. A success in this will help to arrest the unhealthy growth in the public debt, which currently stands at over N25 trillion. Though there are many other economy-related issues that the EAC may need to attend to, it must ensure that a curious combination of market principles and state participation may be necessary in respective sectors, as applicable, in ensuring that the current negative trajectory of the Nigerian economy is reversed.
The EAC has its work cut out for it and it is hoped that with the calibre of the people appointed to the Council, Nigerians will soon see positive outcomes in fulfilment of the “Next Level” campaign promise of Mr. President for his second term in office. It will therefore be a tragedy if the nation gets any impression tomorrow that the EAC is a mere heat without fire, thus signifying nothing.