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| Henry Boyo |
Expectedly, goodwill messages have,
deservedly, poured in from far and wide to congratulate the clear victor
of the 2015 presidential election, Muhammadu Buhari. The
President-elect may not be unduly disturbed that President Goodluck
Jonathan’s inspirational and totally unexpected early acceptance of
defeat, ironically, favourably raised the incumbent’s rating as a
statesman beyond the pedestrian perception induced by his performance in
governance.
Indeed, despite the complimentary economic growth rates,
regularly, gleefully presented by the Minister of Finance, Ngozi
Okonjo-Iweala, sadly, more Nigerians joined the already bloated poverty
ranks. The horrid level of insecurity, apparently instigated by ethnic
and religious divide, may in fact find their true origin in the
pervading level of unemployment and poverty nationwide.
Consequently, expectations are high that
Buhari will provide an antidote to poverty, corruption and unemployment.
Clearly, Nigeria’s poverty cannot be blamed on an inhospitable climate
or shortage of natural resources. In fact, other nations with
considerably less natural endowments may be excused for decrying what
they consider to be inexplicable inequity by Providence. Clearly, our
inability to galvanise our resources for the greater good is actually
caused by the application of fiscal and monetary strategies that are
antagonistic to consumer demand, and job creation.
Conversely, nations like Singapore, with
little or no resources, succeeded in enhancing mass social welfare with
well thought out fiscal and monetary strategies that are people-focused.
Consequently, if Buhari must succeed, he must quickly reverse the ratio
between capital and recurrent expenditure, such that well over 60 per
cent of total annual revenue projections would be dedicated to the
enhancement of social infrastructure and human capacity. Thus, we must
drastically reduce the prevailing humonguos salaries and allowances of
public servants, particularly our legislators, who are reported to be
amongst the highest paid in the world.
Certainly, Buhari would need to also
reduce the duplication of functions by various Ministries, Departments
and Agencies as per the recommendations in the Steve Orosanye report,
but government must be careful to minimise the inflow of new entrants
into a jobless market. Similarly, the President-elect should be wary of
increasing the current debt to GDP ratio, as this is a straight road to
another unfolding oppressive debt burden.
Incidentally, the 2015 budget proposals
accommodate over 20 per cent deficit; government will therefore borrow
over N1trn and pay between N100bn and N150bn as interest charges to fund
part of its recurrent (consumables and salaries etc.) budget.
Ironically, such huge government borrowings will exist simultaneously
with the unyielding “obstructive” naira surplus deliberately created by
the Central Bank of Nigeria.
Buhari’s economic team must therefore hit
the ground running and readily jettison Jonathan’s 2015 budget
proposal, so that a fresh appropriation bill can be presented to the
National Assembly before July 2015. The All Progressives Congress
majority in the parliament should facilitate this process.
We may also consider May 29 to May 28 as
the fiscal year to align with our established election time table and
thereby prevent politically induced budget truncation halfway into the
year, on the advent of a new a new leadership after elections.
Furthermore, in view of the abysmal
performance in the power sector, Buhari should take a closer look at how
Nigerians were left with over N400bn debt after the privatisation of
the Power Holding Company of Nigeria distribution network. It is equally
curious that almost two years thereafter, government continues to
breastfeed the Discos with selective interest waivers, which have
regrettably not guaranteed low tariffs or improved performance. Thus, in
view of cost implications, Buhari’s administration should advisedly
fast-track the adoption of gas for generating power, as gas is
considerably cheaper at below $3/cubit metre and remains a much cleaner
form of energy. Besides, our gas reserves are multiple times in excess
of crude oil reserves.
Buhari will equally need to shine his
eyes in the area of monetary policy and strategy. As a first step, his
administration should stop the looting of public funds with the
obnoxious Treasury Bills Scam. An arrangement where banks are positioned
to make over N600bn in 2015 as interest on government loans, which are
not applied to any productive or socially enhancing purpose, is clearly
obscene. In successful economies, monetary authorities mop up or reduce
any perceived burdensome surplus cash in the system by borrowing at
minimal rates below two per cent. When government borrows at 10 per cent
and above for what are essentially risk-free sovereign debts, banks
expectedly become reluctant to lend to other borrowers, thus crowding
out the real sector from cheaper investible funds which could spur
enterprise and industrial production and also create more jobs.
The President-elect should not be
hoodwinked by the CBN’s usual propaganda that inflation, interest and
exchange rates cannot remain harmonious. Clearly, in successful
economies, the respective Central Bank monetary policy rate consistently
remains below three per cent rather than the oppressive 13 per cent
currently adopted by the CBN. Furthermore, inflation rates above three
per cent are also anathema to social welfare and therefore decried in
more successful economies.
Regrettably, we shamelessly celebrate
inflation rates which are nearer 10 per cent, despite the reality that
all static incomes would lose over 50 per cent of purchasing value every
five years in such an event. The income contraction caused by inflation
is primarily responsible for the apparent increasing poverty observed
amongst pensioners and retirees as unjust reward for service to their
fatherland.
Additionally, high inflation rates also
constrain consumer demand, which normally drives investment and
industrial expansion decisions to create those jobs, which reduce the
level of unemployment.
Buhari is painfully aware that naira
devaluation only facilitates deepening poverty; this is clearly evident
as the naira steadily fell from its exalted exchange rate of a stronger
currency to a dollar. Conversely, a stronger naira will lift more
Nigerians from poverty. Buhari should therefore interrogate why the
naira exchange rate remained weak much against rational expectation even
when our reserves exceeded $60bn.
Incidentally, weaker naira rates
will, irrespective of crude oil price, also instigate higher fuel prices
domestically and make the abolition of fuel subsidy very unpopular. On
the other hand, stronger naira rates will reduce fuel prices
domestically, and ultimately eliminate annual subsidy values of about
N1000bn and make the collection of a sales tax on fuel possible.
Furthermore, a stronger naira will also make fuel smuggling unprofitable
and unattractive and ensure uncontested deregulation of the downstream
sector by government.
Furthermore, a weaker naira will also make current electricity tariff unsustainable for operators.
Clearly, the excruciating burden of ever
surplus naira, also feeds the pool of funds that facilitates corruption
and is also responsible for abnormally high inflation and interest rates
and is equally responsible for unyielding naira depreciation. A
disciplined investigation will surely reveal that systemic surplus naira
is primarily caused by the CBN’s creation of fresh naira values for
monthly distributable dollar revenue. We will certainly lament Buhari’s
failure four-year tenure if he, like his misguided predecessors, also
ignores this reality.
This Article was first published on Punch Newspaper
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