Charles Soludo, former governor, Central Bank of Nigeria (CBN), and other stakeholders unanimously agreed that restructuring Nigeria’s macroeconomic structure and ensuring foreign exchange stability, among other factors, would drive the success of the Economic Recovery and Growth Plan (ERGP), the medium-term economic recovery strategy of the present administration.
Speaking at the Vanguard Economic Discourse, themed, ‘The Hard Facts to Rescue the Nigerian Economy,’ at the weekend in Lagos, Soludo and other panellists like Kayode Fayemi, minister of solid minerals development; Bismarck Rewane, economist/CEO, Financial Derivatives Company (FDC); Muda Yusuf, president, Lagos Chamber of Commerce and Industry (LCCI); Obadiah Mailafia, former deputy governor of the CBN, and Alex Otti, former managing director of Diamond Bank, agreed that effective and transparent implementation of the new plan would make a different from the previous economic plans.
Fayemi observed that the ERGP drew inspirations from other previous good plans, adding that the bane of the economy was more with plan implementation.
For instance, Soludo said a mismatch of policies, the command and control measures, and demand management currently being adopted by the government had wreaked havoc on business confidence and private investment, leading to massive capital flight from the economy, saying “most macroeconomic variables have worsened.
“The Federal Government has continued to spend 100 percent of its revenue on recurrent expenditure and still plans to borrow to finance recurrent expenditure, just as the previous government did. Serious plan to change from the oil regime should deal with the elephant in the room, the discouraging exchange rate environment,” he said, maintaining that the country should make effective transition from oil commodity dependence.
“Most macroeconomic variables have worsened,” Soludo said, saying, “The APC government pledged a conscious plan for a post oil economy. But all other previous plans also promised to diversify the economy. What has changed?”
The government cannot really claim to be diversifying when the ERGP has been designed to be dependent on the same resource it promised to diversify away from – oil, he said.
Inflation has jumped from about 9 percent to 19 percent; exchange rate has now worsened from N197/215 per dollar to N305/460 per dollar; unemployment rate from 2.5 percent to 14 percent, and GDP growth rate from about 2 percent to -1.5 percent.
Market capitalisation of the stock exchange plunged from about N11.68 trillion ($54bn) as at the eve of swearing in of President Muhammadu Buhari, to around N8.7 trillion ($18bn) as of March 10, 2017, he said.
Poverty is escalating, business confidence remains very low. Savings and investment rate is very low. Asset prices have dropped. Surprisingly, Nigeria’s ranking on the corruption perception index has remained unchanged, while the ranking on the failed state index has worsened.
On his part, Rewane observed that the Nigerian economy was in an emergency situation and needed emergency rescue measures, saying the economy, just like other economies, was sensitive to (policy) signals and market demand and supply forces.
The economy needs not just increased spending on consumption, but increased spending on investment, Rewane said, and urged the government to reduce subsidies in order to have more money to channel towards investment and restructure the foreign exchange market.
“Subsidies and reverse taxes cannot help our economy. We need to stabilise our economy first. The Nigerian economy is in an emergency state on the site of an economic accident. The ERGP is geared towards recovery in 2020, but to get to 2020 we have to first end 2017,” he said.
The exchange rate is misaligned and that if we don’t reform the FX market, the economy will remain comatose, he said further.
Alex Otti advised that, “As we are restructuring the economy, we should also restructure the polity. We can’t afford the presidential system we are running today.”
Nigeria cannot afford to fund up to 360 house of representative members, 108 senators, and 36 governors and deputy governors who sometimes appropriate close to N1 billion as security votes, Otti said, saying “it is time for us to sit down and ask ourselves questions.”
Furthermore, Fayemi said the plan also referred to other previous good plans, noting, “the plan does not pretend to come from a ‘tabula rasa,” as it was not lack of plans that the economy suffered from, but lack of implementation.
According to Yusuf, to address the liquidity issues in the FX market, the country needs to move away from FX allocations and allow the market to play a greater role as the government is creating problems for the supply side of the market.
“In addition, monetary policy regime has not been supportive of the plan to rescue the economy. There is a challenge in the way the government is borrowing. Government is currently borrowing at up to 18 percent and crowding out private sector’s borrowing.”
We want to diversify the government’s revenue base, but that the policy is moving in opposite direction, Yusuf said. “The 2017 budget earmarked N1.6 trillion for debt service; how much was earmarked for infrastructure?” he said
The stakeholders also agreed that the private sector needed to be encouraged to play its role of driving both economic growth and development, since it comprises close to 90 percent of the country’s economy.
HOPE MOSES-ASHIKE & INNOCENT UNAH
