Nigeria’s 2017-2019 Medium Term Expenditure Framework (MTEF) must be structured such that it significantly de-risks the investment landscape , the Organised Private Sector (OPS), said Thursday.
This was a fall out from deliberations made by Nigeria’s Economic Management Team and the OPS, that the latter may add bits and pieces to arrive at a popular consensus for the MTEF, which is targeted at reflating the ailing economy.
One of the investors in the room observed that for the MTEF to be bankable, government must hold strong on creating an enabling environment and enacting favourable policies that spur private investment.
“Government has been timid in privatisation and making away with harsh regulations. Investors do not need to be encouraged, we need to be incentivised.”
Incentivising investors would mean government de-risks certain sectors by leading the way to invest there and allowing for market driven policies instead of subsidies, experts say.
“Nigeria needs social and physical infrastructure. An investor would most likely go for the physical ones which are often more bankable than social projects,” said Ayo Fashina, a director at investment bank, Chapel Hill Denham.
“So government must be clear on the projects to involve the private sector on, so that it isn’t one without returns.
“Asides policy assurance, they must also communicate the Public Private Partnership (PPP) model they wish to undertake.”
Other suggestions emanating from the OPS included leveraging technology to boost the efficiency of government services and reduce overhead costs.
“The issues Poland faced in the 1990s are quite similar to those which the country faces today, and they were solved by technological advancements.It’s a no brainer that technology would help improve government services and aid economic growth,” a stakeholder asserted.
He further noted that increasing taxes may not be the way to go in improving non-oil revenue; Rather, “We can take a cue from Croatia and simply leverage technology to broaden the tax base to capture every one that is taxable by law.”
Giving his voice to the deliberation on tax, Ben Akabueze, the new Director-General, Budget Office of the Federation, agreed that the private sector was not averse to paying taxes but was being discouraged by government’s mismanagement process in the past.
“Tax to GDP in Nigeria is still very low and the private sector must come to terms with the need to pay higher taxes while government ensures more transparency and judicious utilisation,” Akabueze said.
He also pointed out that the MTEF would not provide a substitute for a long term development plan, even as he welcomed the suggestions of the OPS in charting the right course for the framework.
Udoma Udo Udoma, the minister for Budget and Planning, said government was well aware of the need for Public Private Partnerships (PPP), to see through capital projects, as government revenue heads south.
“We are looking for investors willing to partner with government to provide jobs and necessary infrastructure that would resuscitate the economy,” Udoma said.
The minister added that government was particularly committed to an economic growth target of four percent in 2019 and “we need private investment to achieve this.”
Nigeria’s economic crisis has seen businesses go under water, while unemployment rate grows proportionately. For businesses that have stood their ground amid the headwinds, Udoma said, “Government will assist these resilient businesses through specifically tailored policies that could make the heavy burden on their shoulders lighter.”
While sharing in the optimism of the forecast GDP growth in 2019, the OPS said in completing the final draft for the MTEF, provisions should be made to revise lending rates downwards to improve the ease of doing business and by implication, spur private investments.
“There’s also no reason why the government should borrow at more than five percent interest.
This is because if the banks can make 16 percent interest from lending to government, they won’t lend to businesses,” the OPS observed.
Biodun Adedipe, an economist and chief executive officer of consulting firm, BA Associates, said government spending should be tailored towards projects that have significant local content, so that credit is retained within the company and jobs are created.
“We need to accept that oil is leaving us and should not be a major driver of our revenue for MTEF going forward,” Adedipe added.
The Economic Management Team has met with top economists, financial experts and non-governmental organisations (NGOs) in Abuja, as it makes consultations towards tackling the economic recession in the country.
As deduced from the team’s presentations, GDP growth rate is projected to rise to 4.04 per cent in 2019, averaging 3.77 per cent during the MTEF period.
Udoma said government would be working with an exchange rate assumption of N290 to the dollar consecutively for the three years.
LOLADE AKINMURELE
