The consequences of these developments are better imagined. The growing fiscal deficits would mean aggressive domestic and foreign borrowing by the government, leading to higher interest rates in the nation’s money market with the treasury bills being the transmission mechanisms. Considering the currently high CRR on banks, lending to the real economy would become practically impossible and/or costly due to high cost of funds. National productivity and economic growth could be clearly hampered.
With an eroded external reserves position, the CBN would finally lose its battle in the defence of the local currency. Naira may therefore have a free fall – the like that we witnessed late 2008. Note that there was a significant drop in oil prices in 2008 similar to the type being witnessed today. The ultimate impact of these developments on inflation figures would be disastrous.
Unfortunately, institutional and governmental concerns make it very difficult to suggest that we have the capacity to weather the impending storm. Careless spending, excessive recurrent expenditure (despite the much-touted Medium Term Expenditure Framework), poor public accounting system, lack of transparency in the nation’s revenue generation calculations, poor information on contract awards coupled with reluctance in embracing the Public-Private Partnership model, and politicised budgeting process are some key drags in our readiness to combat the on-coming crisis.
In light of the foregoing, it is my considered view that the president and all the nation’s economic managers must, as a matter of national emergency, strategise and come up with very practical and radical approaches to safeguarding the nation’s economy from the inevitable challenges facing it. I would offer a few suggestions which I believe must be part of our short-to-medium-term strategies and steps to improve the chances of our survival, not just during the impending crisis but also well after it.
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Every attempt must be made to cut down the size of our government, especially at the state and national levels, in order to curtail overhead expenses. The number and structure of the ministries, departments and agencies of government must be seriously pruned down, perhaps in a phased implementation style, starting immediately. Entrepreneurship development programmes should be organised for the staff of the MDAs who may be affected in order to ease their life transition process. Efficiency- and effectiveness-enhancing training programmes must be organised by the surviving staff to ensure better running of government institutions.
The finance minister and the CME must work together with the National Assembly to design and implement a sound and robust budget implementation and monitoring process. Quarterly or monthly budget review meetings must be held to assess the variance between actual and targeted positions, especially in oil revenue and expenditure lines – with emphasis on NNPC figures, budget implementation level, among others.
There must be renewed efforts to harness the opportunities in tax revenue generation through the Federal Inland Revenue System (FIRS) which has been doing a good job in recent times. Government must closely monitor and pay attention to the tax revenue drive process – especially company income tax, Value Added Tax, and the Withholding Tax components. Certain Small and Medium Enterprises (SMEs) should be given tax rebates or concessions in order to promote entrepreneurship and job creation.
To facilitate the infrastructural development drive and reduce the burden on governments, the president must encourage and enforce PPP as a model to drive our development as a nation. On-going projects which may soon experience fund release challenges must be privatised and closely monitored. The PPP framework must also be streamlined with the roles and responsibilities of the various participants more clearly defined.
Nigeria must do everything possible to improve its refining capacity. There is an urgent need to reduce our fuel subsidy expenditure, introduce export of refined petroleum products, reduce or eliminate importation of petroleum products, and maximise our oil revenue potentials.
The Nigerian National Petroleum Corporation (NNPC) which owns a majority share of the six substantive joint ventures currently operating in the country must be brought under the strict control of both the petroleum and finance ministers. It must not continue to run like a cartel of its own in the scheme of national income accounting. Its autonomy must be re-examined. Information concerning its finances – funding systems, asset holdings, overheads, operating liabilities, among others – must be available to the responsible ministries, and also be open to external auditing processes.
In the long run, it remains critical to diversify the Nigerian economy away from oil-dependence and into multi-product-based economy. Deliberate, honest and concerted attention must be refocused on power, agriculture, solid minerals, tourism, financial services, education, and housing sectors for improved productivity and prosperity. Fostering youth entrepreneurship is critical in these strategies. Training and human capacity building are indispensable in this holistic drive.
I am persuaded that these critical steps must be taken urgently to address the challenges posed to our economic survival by the vagaries in the global oil market. Having achieved significance as the largest economy in Africa, and as the world’s 26th largest economy, the journey to Vision 20:2020 must now be driven by pragmatic steps and initiatives to enthrone sound monetary and fiscal practices, going forward.
Orji Udemezue