It is necessary to distil some of the economic management lessons from the first three months of President Muhammadu Buhari’s regime and highlight needful reforms. Five issues stand out.
Rising economic policy uncertainty
It is true that a myriad of problems were inherited from the previous regime, the new regime appears to have been too preoccupied with its internal challenges within the government to be able to chart a future policy path for others outside government to plug into. The euphoria that heralded President Muhammadu Buhari’s regime is giving way to rising economic policy uncertainty as the regime is not providing any holistic indication of its fiscal or broader economic policy directions that others outside government can base their planning on. The regime appears to be struggling with the present, finding it hard to contemplate a future for the country, and even harder to engage others about that future.
Some positive moves, like the resolution of the states’ liquidity crisis in July and the announcement of a Treasury-Single-Account (TSA) in August, have been made by the regime on the fiscal front, but they have unfolded piecemeal, and there is no effort to give any indication of what more is to come within a holistic fiscal policy framework. It is not difficult to imagine that more good news would filter in on the fiscal front in the next few weeks with the positive impacts of various bold efforts to block government revenue leakages, including saving from ending fraudulent fuel subsidy payouts from excess crude savings, ending crude oil theft, and ending abuses in the administration of import duty/tax waivers, and the increased revenue inflow from implementation of the TSA.
But it would have been better for the government to have stated these within a forward-looking fiscal guidance document that will leave no one in doubt about the fiscal policy directions of the new government. The fiscal policy direction remains uncertain, and such is not good for the confidence of private economic agents. Beyond fiscal guidance, early indication of broader economic policy directions should help allay fears about the outlook of the naira and ease the pressures on the Central Bank. More than just doing a string of good things, the new regime needs to demonstrate a clear ability to clarify the future path of its interventions so that private agents can make their plans with much less uncertainty. The weakening naira could indeed have resulted from the loss of confidence resulting from rising uncertainty about fiscal and broader economic policy directions.
Weak economic policy institutions
It is becoming clear that the new regime inherited very weak or non-existent institutions of economic management. Nigeria has strong institutions of security management that ensures no vacuum in the offices of national security adviser, director of state security, military service chiefs, immigrations, customs, inspector general of police, and chief of civil defence corps. These positions are always manned even in the absence of ministers. President Muhammadu Buhari (PMB) can be assumed to be adequately briefed on matters of national security, even in the absence of ministers of defence or interior. No surprise the president engages effectively on security issues.
In the security management setup, ministers and ministries are no more than secretaries and secretariats, the actual security management rest in the hands of the agents and agencies of continuity. Nigeria needs to replicate this institutional strength in economic management. A striking reality of Nigeria’s governance system is that there are no recognizable agents or agencies of continuity in economic policy management. This has to be redressed.
Since 1946 US presidents get into office to meet a non-partisan Council of Economic Advisers (CEA) that provides them adequate briefing on economic issues on a daily basis. From the same year, congressmen get into office to meet a standing staff of a bipartisan and bicameral Joint Economic Committee (JEC) who provides them pre- and post-legislative briefings on economic issues. Both the president and congress look up to the Government Accountability Office (GAO) for insights, foresight and oversight on economic issues. The CEA prepares and submits the president’s Economic Report to congress in February of each year and the JEC prepares and submits its response to the president’s report to congress the following month.
In the American setup, economic ministers and ministries are also no more than secretaries and secretariats, the actual economic policy conception and enforcement rest in the hands of the aforementioned agencies of continuity, which are altogether missing in Nigeria. Little wonder that Nigeria has been ineffective in economic management. The economic policy vacuum is becoming very striking in the first three months of PMB. The president will do well to urgently redress this.
Weak economic engagement
In spite of compelling reasons to engage on pressing economic issues of the day, the president and the National Assembly have both conspicuously stood aloof in the first three months of the new regime. The president will do well to create economic management agencies that will help him and the National Assembly to directly engage on economic issues and generate ideas and policy directives for ministries to implement.
These agencies must be situated outside the ministries, not within. In the US, ministries necessarily operate within policy visions set by the CEA, endure the scrutiny of the JEC staff at congressional hearings, and are subject to ongoing oversight of the GAO. The expectation that ministers will manage the Nigerian economy is misplaced. Institutions for economic management have to be created to provide ideas for ministries to execute and also provide adequate scrutiny over ministerial appointments and activities.
Such institutions are ideally located within the executive office of the president and within the National Assembly to equip the president and legislators to engage more directly and effectively on economic issues. It was under the Employment Act of 1946 that the US Congress established two advisory panels: the President’s Council of Economic Advisers (CEA) and the Joint Economic Committee (JEC). Their primary tasks are to review economic conditions and to recommend improvements in economic policy.
The CEA and the JEC help the US president and congress to routinely conceive economic policy ideas and process them into legislation for government agencies to implement, while the GAO scrutinizes the efficiency of the conduct of all government agencies. Economic policy conception results from the engagement of president and congress, while government agencies are only expected to implement presidential and/or congressional directives. Little wonder the US president and congress authoritatively have a lot more to say about all aspects of the US economy than anyone else.
In contrast, since 1999, the Nigerian president and the National Assembly have passed the buck of policy conception and design to agencies that should ideally only implement. The new regime must overcome the growing democratic deficit in which presidents and parliaments come into office only to pass the buck of economic policy conception, design and coordination to unelected appointees that should ideally only implement. Efforts must now be made to the build the capacity of the presidency and the parliament to conceive, design and coordinate economic policies, and exercise meaningful oversight on their appointees.
Nigeria clearly needs to create institutions like the CEA in the Presidency and the JEC in the National Assembly to ensure that the president and parliament are better able to directly engage to conceive meaningful and effective economic policies.
Budgeting and policy coordination
On the execution and coordination side, Office of Management and Budget (OMB) assists the US president to prepare the country’s budget and also helps all executive departments and agencies across the Federal Government to enforce the policy commitments and priorities of the president. The OMB was transferred from the Treasury Department, where it started life as the Bureau of Budget (BOB) in 1921, to the Executive Office of the President in 1939. The OMB also reviews, harmonizes and clears all agency communications with congress, including testimony and draft bills to ensure consistency of agency legislative views and proposals with presidential policy.
Budget Office of the Federation also needs to be moved from the Ministry of Finance to the Presidency so that budget design and policy coordination can also be undertaken from the presidency. Ministries, departments and agencies should concentrate on implementing policy directives from the president and parliament. It should be mentioned that the Obasanjo regime toyed with the idea of moving the Budget Office of the Federation from the Federal Ministry of Finance to the Presidency in 2004 but balked because of strong objections from his newly appointed minister of finance. The same regime eventually not only left budgeting in the finance ministry but also ceded policy conception, design and coordination to a newly created ad-hoc Economic Management Team (EMT) that was also chaired by the minister who objected to the transfer of the budget office to the presidency. The ad-hoc EMT model had remained since then. The Jonathan regime went a step further by adding the term ‘Coordinating Minister for the Economy’ to the title of the finance minister.
This contrasts with the US practice in which policy conception is the shared responsibility of the president (with CEA input) and parliament (with JEC input), ensuring that the legislative programme of the congress is in sync with the economic programme of the president; budgeting and policy coordination are done in the Executive Office of the President (with OMB input), while all agencies merely execute presidential and congressional directives; and oversight is exercised by both president and congress (with OMB and GAO inputs). This means that in the US democracy, policy conception, budgeting and coordination are directly undertaken by suitably advised elected persons (president and parliament), while their appointees merely implement, under the sharp scrutiny of the elected persons.
The PMB regime needs to urgently address the democratic deficit that has emerged in Nigeria in the past 16 years, where elected officials, presidents and legislators alike, had not only stood aloof of policy conception, design and coordination, but flagrantly pass the buck to unelected appointees over which they exercised no effective scrutiny, having not been a part of the policy conception and design in the first place. The regime inherited a situation of growing divergence between conferment of powers through elections and the exercise of such powers between elections. Nigeria needs to learn from the US example and replicate them to ensure democratic effectiveness in delivering better economic outcomes.
Economic intelligence
It should also be said that Nigeria did have a National Economic Intelligence Committee (NEIC) from 1994 to 2012 when the last regime scrapped the agency in line with the recommendations of an ad-hoc Oronsaye Committee who reasoned that ‘the NEIC was established by a decree, which granted it similar mandates with the National Planning Commission, Revenue Mobilization, Allocation and Fiscal Commission (RMAFC) and the Fiscal Responsibility Commission (FRC) with regard to performance monitoring and evaluation in the public sector’. And that ‘the functions that NEIC performs are replication of those of NPC, RMAFC and FRC’. The committee also recommended that NEIC enabling law also be repealed, but it does not seem that the NEIC Act has been repealed by the National Assembly.
It would appear that the Oronsaye Committee could not tell the differences between NEIC and NPC, RMAFC, or FRC, because none of the seven members of the committee was an economist. As such the committee could not tell the difference between economic planning and economic intelligence. They could also not tell the differences between economic intelligence and fiscal activities like revenue mobilization, revenue allocation, and fiscal responsibility issues. At different points in time, Nigeria had merged the budget and economic planning functions within the same agencies, demonstrating the ancillary nature of the two policy design and coordination activities. Both must always reflect the president’s priorities and preferences. Economic intelligence on the other hand involves evaluation of the activities of all agencies of government, including the presidency, to make them accountable. This function must be independent of the president, and could not have been replicated in NPC, RMAFC and FRC.
The US GAO provides the best example of economic intelligence mandate. The GAO was created by the Budget and Accounting Act of 1921 that also established the BOB that was to eventually become the OMB, to ‘investigate, at the seat of government or elsewhere, all matters relating to the receipt, disbursement, and application of public funds, and shall make to the president … and to congress … reports [and] recommendations looking to greater economy or efficiency in public expenditures’. GAO provides government with oversight of federal programmes, insight into ways to improve government, and foresight into long-term trends. Recent GAO work has addressed the use of Recovery Act and TARP funds, problems in mortgage financing, the conflicts in Iraq and Afghanistan, food safety, climate change, postal reform, border security, and the financial pressures facing state and local governments.
The GAO is headed by the comptroller-general of the United States, appointed by the president, by and with the advice and consent of the Senate, for a 15-year, non-renewable term. The president selects a nominee from a list of at least three individuals recommended by an eight-member bipartisan, bicameral commission of congressional leaders. The comptroller-general may not be removed by the president, but only by congress through impeachment or joint resolution for specific reasons. Since the establishment of the GAO in 1921, there have been only seven comptrollers-general, and no formal attempt has ever been made to remove any.
Ayo Teriba
Teriba is CEO, Economic Associates.
ayo.teriba@econassociates.com
