I was thinking intensely along the lines of the tough choices which the Buhari administration has to make after contemplating the theme of the recently concluded Nigerian Economic Summit, “Tough Choices: Achieving Competitiveness, Inclusive Growth and Sustainability”. It is probably in order to salute the promoters and as well the entire membership of the Nigerian Economic Summit Group (NESG) for the staying power. The body has so far provided a robust and veritable platform for the promotion of public/private sector dialogue that goes back more than twenty years now. We salute in a special way the individual juggernauts behind this initiative: Ernest Shonekan, Dick Kramer and Pascal Dozie.
My involvement with this august body spanned acting initially as a rapporteur, then a consultant and occasional breakout session chairman, and as a regular contributor by way of articles to the Digest published often in the flagship Summit edition. But I decided to move on after some time, particularly after I contested for the chief executive of the body before the coming onboard of Frank Nweke, who was preferred because of the reach he was expected to have in doing advocacy for the body as a former minister of the federation.
My initial take on the matter is that there are no real tough choices as far as the economy is concerned. What is ideal to be done is often not contestable. It is often well known and canvassed. For instance, if you take the Nigeria economy, there is no one who is in doubt that there is the need to diversify the economic base away from the injurious and unsustainable dependence on the oil sector, and it has been work in progress since 1986 following the introduction of the Structural Adjustment Programme (SAP). Nor is there any quibble about discontinuing the fraud-infested subsidy regime which is inimical to the developmental aspirations of the country.
But the challenge is finding the political will to initiate and take the rightful decisions. Those in authority are often, as should be expected, concerned about the likely fallout of such a decision. For instance, what if there is resistance from organized labour? This, for me, is really not such an obstacle as what is really required in the circumstance is to go into negotiation with such organized bodies to secure their buy-in and ensure that everyone is onboard. But the more difficult aspect in taking such decisions is if the anticipated outcome was not realized because of the occurrence of unanticipated developments which could often border on the fact that the resource implication of such decisions has not been properly factored in, or sometimes it could arise from the realization of the unavailability of requisite capacity. What we propose to do in contributing to the dialogue in this connection is to highlight some of the really tough choices confronting and staring the country in the face and to suggest what we consider should be the way out of such quagmire.
Often questions have been asked regarding the economic thrusts of the Buhari administration and answers have often been given which do not convey a thorough conceptualization and understanding of this concept. And I have been on record as having observed on more than one occasion that the economic policy of this administration has no choice but to be expansionary and accommodative. It is unrealistic to contemplate any other policy, never mind restrictive one, against the background of rising unemployment with its potential for the undermining of the quality of life of the citizens with its untoward social consequences. But the difficulty in undertaking the expansionary thrust of economic policy is that we would have to risk in the interim spike in prices as the inflationary conditions worsen. It would also mean that if this is the preferred thrust of policy the monetary authorities would have to tag along by, for instance, working for across-the-board reduction on the level of interest rates by adopting measures that would deliberately inject more liquidity into the economy, risking in the process the undermining of its price and exchange stability core mandate.
If we adopt expansionary fiscal policy it also has far-reaching implications for the preparation of the annual budget. The administration has advertised its preference for the adoption of the zero-based budgeting procedure, which is realistic considering the dire straits we find ourselves in as a country. It is necessary to caution here that the term zero-based budget is meaningless when we simply speak of zero budget which often slips through during conversion. There is zero-sum budget, but for emphasis there is nothing like zero budget, which probably explains why the vice president is on record to have observed that some people have concluded that this administration, because of its tight-fisted and austere orientation, is not even prepared to spend any money. Often the fact that zero-based budgeting allows for allocations to budget heads to either increase or decrease, as opposed to incremental budgeting which sees allocations only increase, is not emphasized as further justification for its introduction.
Therefore, if we adopt expansionary policy thrust, there will be the need to revisit the Fiscal Responsibility Act to remove the cap of 3 percent of deficit to GDP to be able to accommodate deficit beyond this limit as is the case in most other countries within the sub-region and beyond. In an attempt to address the perennial issue of the lopsided nature of the budget in its relatively higher allocation to recurrent expenditure and in the process undermining development which can realistically follow from robust capital expenditure, it might be required to broaden the tax base and therefore the ratio of tax/GDP which the country now enjoys, which compares unfavourably with that of most other countries even in the sub-region, to boost income from this source. Is the country prepared to risk increasing the tax rate or simply make an attempt to bring in more taxpayers into the tax net? And is either of the options able to satisfy the needs of the country?
The conversation regarding rationalization and streamlining the MDAs to reflect the austere times confronting the country and the imperatives for reduction of the amount now spent on recurrent expenditure must receive due and necessary attention. And there is the need to clearly prioritize agriculture and education as preferred sectors for the allocation of budget expenditures.
One of the tough decisions which this administration has to confront sooner than later is whether to stop the payment of subsidy. Despite the known fact that the amount currently spent on subsidy is bloated by corrupt practices and, therefore, its retention amounts to the rest of us subsidizing some greedy and unpatriotic individuals, the administration is still contemplating the removal of subsidy fearing its likely effect on the poor and downtrodden. But what is required is simply to agree the introduction of some palliatives to act as buffer to absorb the certain follow-through of price increases. We should go into dialogue with organized labour to educate them regarding the misapplication of resources which the payment of subsidy in its current form represents and that it’s in their patriotic best interest to cooperate for its removal.
We cannot improve on the country’s competitiveness if we do not take steps to guarantee the sanctity of contracts. I listened to Wale Babalakin recount his experience with going into the public private partnership scheme and it’s mind-boggling. And this experience is now common knowledge amongst would-be investors and we still wonder why the country’s record in attracting Foreign Direct Investments is not as should be expected. We would also have to act to remove lack of continuity of policies as another major bottleneck in this connection. We would have to take deliberate steps to build institutions and deemphasize the strongman syndrome. There are most certainly tough choices confronting and staring us in the face and the earlier we rise to the challenge this portends, the better for the developmental aspirations of this potentially great country.
Boniface Chizea
