Fresh Mandate: Opportunity to end blame game, revamp economy

• Budgeting System Should Be Evidence-based, Participatory, Transparent
In a matter of weeks, President Muhammadu Buhari, who just got re-elected, would have spent four years in office. But his administration, which was voted into office as a result of the gospel of “change” it preached in 2015, has left many wondering what has really changed for good.

From the country’s economy, to the individual well-being of citizens, its daring for so many to conclude that yes, a change has taken place for the better. This is perhaps why an economist, Ucha Nwagbo, retorted: “The difference was the direction of the change. Everyone got it rough and tough.” Indeed, what many got was far from what they expected way back in 2015.

Having spent four years studying the myriad of the country’s economic issues and the consequences of inaction and poor policy options, with most part of the period devoted for blame games, it is a general belief that the Federal Government must now rise to tackle the challenges, without dilly-dallying as a proof that it has learnt from its experience.

With a first caution on the snail-paced expansion of the economy, lack of evidence-based budgeting, non-accountability and non-transparent implementations, which have left millions of citizens in extreme poverty, the lessons so far learnt, alongside goodwill and political will, are enough to fill in the capacity gaps needed to expand faster than what obtains at the moment.

It is worth reiterating that the renewed mandate presents an opportunity to choose between setting the country on the path of prosperity, or sustaining poor policy choices with economic consequences of bleaker growth prospects.

Of course, the country is now in dire need of reforms for improvements in quantity and quality to get more youths into schools in order to stem the rising tide of functional illiteracy, with a damning international record of 13.5 million children being out of school. The brand of the exigent education should focus inter alia on curriculum reform, which links knowledge to industry for acquisition of functional skills and competencies needed in the market; improvement of learning facilities such as libraries and laboratories and enhancing the capacity of teachers. More importantly, improving transparency and accountability in the management of education funds should be central.

There should be re-tinkering of the nation’s debt business. Unfortunately, the country is back to the scenario before the 2005 debt relief. The last four years have seen the country ramp up domestic and foreign borrowing, still without any feasible funding alterative to reduce the deficit financing of the budget. Nigeria is currently paying debts with 68 per cent of its retained earning. In essence, the country is using up 68 kobo out of every 100 kobo earned to service debts. The irony is that the country is still borrowing more money thereby increasing the percentage of retained revenue that will be required to service debts in the future.

For the umpteenth time, experts have stated that this administration must hit the ground running with effective innovation and alternative sources of funding capital projects that is devoid of sovereign debts. The new funding scenario should include innovation and strengthening public private partnerships, creating special purpose vehicles to raise funds from institutional and retail investors for specific bankable projects and enhanced revenue generation drive to plug all leakages.

As matters stand, some of the current economic pressure points include, weak disposable income; riding on the back of inflation and low productivity; high unemployment rate and weak infrastructure development that is not supportive of the country’s growth ambition.

Others are poor policy options, that created “economic depression” in the real estate sector of the Nigerian economy, which otherwise, would have been a quick win for increased activity and employment generation; fragile foreign exchange market, and persistent weak revenue management leading to ongoing fiscal crisis.

A research by FSDH Merchant Bank Limited noted that there is urgent need for the removal of all administrative delays in obtaining business licences and approvals, devoid of political intrigues and mere claims, including titles to landed properties for building and agricultural purposes.

The bank’s Head of Research, Ayodele Akinwunmi while unveiling the lender’s Economic and Financial Outlook for March, pointed out that government should support the provision of long-term mortgage loans at concessionary terms for its workers in order to activate economic activities in the real estate sector.

He said that renewed activities in the sector is capable of triggering a significant growth pattern, as thousands would be employed, raising new numbers in consumptions, services and financing taxable incomes.

“There should be investment in infrastructure through partnership with the private sector, which will reduce the risks involved in agriculture and agro-allied industries. Investments in affordable public healthcare system to increase productivity of workers, reduce brain-drain and reduce foreign medical tourism with its associated drain on foreign exchange earnings is highly encouraged,” he said.
The Head of Coronation Research, Guy Czartoryski, also agreed that a feature of President Muhammadu Buhari’s first term in office was weak economic growth, which fell well below trend and into recession in 2016, as dependence on oil and price crash put pressure on government revenues; exchange rate; trade account; and Nigeria’s ability to import critical industrial inputs.

While noting that the slow economic growth was associated with rising unemployment and has continued to rise during the weak recovery period that followed the country’s exit from recession, Czartoryski said the new mandate presents opportunities to take up economic issues head-on.

“The Senate President, Bukola Saraki, has now lost his Senate seat. The APC has a simple majority in the Senate, which implies that it would be able to elect a Senate President. On paper, however, it looks as though the President may have an easier relationship with the legislature than during the period of 2015-19,” he said.

He noted that while the President depended more on executive orders where possible, the constitution of the current National Assembly, should be a quick win for him to promote good economic policies that would rub-off on the country in general.

For FXTM research analyst, Lukman Otunuga, now that the presidential elections are over, the key question on the mind of many investors is what this means for Nigerian economy in 2019 and beyond, with the focus returning to the country’s efforts at diversify away from oil reliance, not just proclamations or declarations.

According to him, lessons from the past should encourage the administration to invest in infrastructure and step up its efforts at finding growth from other sustainable sources, as this is not a time for needless utterances.

“I am afraid Buhari’s election victory suggests continuity of policies, but it also offers the government an opportunity to build on what has already been achieved over the last four years, if infrastructure development is worked upon and there is diversification, especially in agriculture, coupled with strategies to mitigate external risks.

“Nigeria can still surprise the world this year, but falling oil prices will not only shave off government revenues, but also disrupt foreign exchange stability by complicating the Central Bank’s efforts to defend the naira. The quicker Nigeria is able to derive sustainable growth from non-oil sectors, the quicker there would be a change of sentiment and confidence towards the nation,” he said.

Also, the Head of Research at FSDH Merchant Bank Limited, Ayodele Akinwunmi, said while promises and plans are important, the strategy and implementations would, to a great extent, determine the financial market’s response, especially on pending economic and social issues.

According to him, the market is now eager to see government’s new financing options in the face of growing expenditure and low revenue; the management of the ratio of interest expenses to its revenue; what would happen to domestic or foreign debt markets; the issue of deregulation, particularly petroleum subsidy; the argument over cost reflective tariff in the electricity sector; the promise of N30, 000 new minimum wage and its economy-wide effect, as well as high unemployment rate in the country.

“Government should support the provision of long-term mortgage loans at concessionary terms for its workers to activate the economic activities in the real estate sector in Nigeria
“Investment in data generation in the solid mineral sector. Government can sell the data to potential investors interested in the sector. This will reduce the risk inherent in this untapped sector of the Nigerian economy.

He said: “Urgent restructuring, deliberate and consistent investments in the nation’s educational system to enable it provide relevant trainings that are needed in the modern digital age is sorely needed, as observed critical skill gap, particularly in the public schools at all levels is growth retarding,” adding that, “there is the need for the establishment of well-funded technical training centres in all local government areas, and investment in infrastructure in the country, in conjunction with private sector operators to reduce risks involved in agriculture and agro-allied industries,” he said.

He also called for investments in affordable public healthcare system as a way of increasing workers’ productivity, reduce brain drain and foreign medical tourism with its associated drain on foreign exchange earnings.

For analysts at Afrinvest Securities Limited, results from actions taken  —  that is the three cycles of actions so far  under the Presidential Enabling Business Environment Council (PEBEC), tasked with reforms expected to come in the form of reduction in cost, time and procedures in starting and running a business,  have been mixed.

“We observed that the largest improvements were in the earlier phases of the programme, as the initial momentum seems to have waned. In the first phase, PEBEC hit the ground running by achieving c.82 percent of its reform targets over a 60-day period from February 2017.

Ayodele Akinwunmi

“The second 60-day National Action Plan expanded the scope of the reforms to include such areas as selling to government, trade within Nigeria and trading across borders. The reforms achieved a poor success rate of c.52 percent.

“Between February and April 2018, the third phase of reforms covered nine indicators and the success rate marginally improved to c.62 per cent. These reforms improved [slightly] Nigeria’s score from 52.03 to 52.89 in the 2019 EoDB rankings, but the country slipped one place to 146 out of 190 countries. We suspect that the slow pace of reforms in the second and third phases had a negative impact on the 2019 ranking,” they noted in a Weekly Market Report.

Already, the fourth National Action Plan has been set in motion by PEBEC and it is intended to cover 10 reform areas from March to April 2019.

The analysts added: “Since the target is to achieve a ranking within the top 100 when the 2020 EoDB ranking is published in October 2019, we make the case for faster and more effective implementation to achieve a better success rate. This is because strong upward movements in the EoDB rankings requires that the pace of reforms is faster in Nigeria than in other countries.

“We also believe PEBEC must look past implementing reforms on paper; the processes must be institutionalised to generate gains. Anecdotal evidence reveals that Nigerian institutions are slow in transitioning to new processes, thus perpetuating inefficiency and corruption, which have always made doing business difficult.

“We posit that helping institutions attain quicker transition and monitoring their processes post-reforms is necessary for sustainable improvements. To attract investment, we believe PEBEC and the FG have to look beyond gains in the ranking as business environment reforms must be complemented by pro-business regulations, accommodative monetary and fiscal policies, and the opening up of sectors to private investment.”

A fiscal governance campaigner, Eze Onyekpere, said now is the time to identify key laws that need to be enacted, those to be reviewed and repealed, adding that it is also important to submit executive bills very early in the life of the administration to the legislature.

But for this to be effective, the lawyer and Lead Director of Centre for Social Justice, said it would be imperative for the government to start with a deep, honest and dispassionate internal review of its economic performance over the last four years.

“The campaigns have come and gone and so, such a review is needed to identify what has gone wrong and the few areas of success that can be replicated in other areas. This will involve a review of the entire Economic Recovery and Growth Programme (ERGP), its targets and achievements, as well budgetary appropriations, releases and implementation so far.

“In this review, questions would be posed about extant priorities and whether they are in tandem with the demands of the people, sectoral and business priorities. This will lead to conclusions, course correction and intensification of best practices,” Onyekpere stated.

He added: “The second component of the review is to rejig the economic team and bring in the available Nigerian best in class. These are persons who combine capacity with integrity. This is in view of the lacklustre performance of the economy over the last four years.

“These best in class will be creative and innovative minds, who have track records and are suited to working for success. They are men and women who will rather give reasons on why they succeeded than continuing the blame game, which has been the hallmark of the administration.

Lukman Otunuga

“The third is to commence the opening up of the economic and bureaucratic system. For instance, the budgeting system should be made more evidence based, participatory, transparent and accountable to the needs of Nigerians. A more transparent and accountable process will increase faith in governance and galvanise the energy of a broad spectrum of Nigerians for national development,” he said.

The fiscal governance campaigner noted that it was high time the lump sum model of budgeting by some government agencies ended, as there are still statutory transfers to the National Assembly, National Judicial Council, Universal Basic Education, Niger Delta Development Commission, without details and disaggregation.

“This is wrong in law and contrary to many decisions of the courts to the extent that no one is permitted in a presidential constitutional democracy to spend public funds in a way and manner that is unknown to the people who are the ultimate sovereigns.

“Some ministries and agencies are joining the trend of these statutory transfers. The Ministry of Agriculture and Rural Development simply proposes lump sums of money for various agricultural value chains without the details or disaggregation of what the money will be spent on.

“Merely proposing N2b for cocoa value chain says absolutely nothing of the nature of the activities, projects and programmes to be funded, neither does it state the location of any activity. Proposing N45.5b in service wide votes for Sustainable Development Goals creates no projects, activities and deliverables, which citizens can look up to or hold government accountable for,” he said.

This has been the practice since the return to civil rule in 1999, with successive administrations creating lump sums of these types, but having the challenge of showing Nigerians what they have delivered with these huge sums of money. The time to end is now.