Nigeria is potentially at a watershed. There can be no gainsaying the fact that over the past several years Nigeria has suffered economic downturn in real terms. More Nigerians have fallen below the poverty line in recent times than any other era in Nigeria’s 62 years history than at any other time, to make the country the poverty capital of the world.
With Nigeria’s debt burden almost leveling its revenue, inflation as high as 21.83 per cent year on year, reducing food production as a result of herder farmer crisis, increasing cost of fertilisers, and a host of other economic difficulties, Nigeria’s incoming president is indubitably saddled with problems that require making tough choices, if he must rebuild the economy.
The World Bank, in its recent Nigeria Development Update (NDU) predicted that in the next three years, an average Nigerian could see a reversal of decades of economic growth and the country could enter its deepest recession since the 1980s.
It noted that the pandemic was disproportionately affecting the poor and most vulnerable, women in particular, adding that in the absence of measures to mitigate the impact of the crisis, the number of poor could increase by 15 to 20 million.
The CEO of the Center for the Promotion of Private Enterprise (CPPE), and former director-general of the Lagos Chamber of Commerce and industry, Dr. Muda Yusuf, said the new government would have to make a hard decision of the removal of fuel subsidy.
The CEO of Anthill Concepts Limited, and member of the Board of Directors of NATIONAL ECONOMY, Dr. Emeka Okengwu, agreed that that the issue of fuel subsidy removal would have to be tackled head on. Interestingly, the four frontrunners in the 2023 presidential elections, including the president-elect, Bola Tinubu, had in their election campaign, committed to removing fuel subsidies if elected president.
Cutting Cost Of Governance
Speaking at a recent forum in Lagos, senior partner, OAL and former president of the Nigerian Bar Association (NBA), Dr. Olisa Agbakoba, advised the federal government to embrace fiscal responsibility by reducing its cost of governance.
He also advised the government to sell off some of its assets that have not been generated revenue for the country. He argued that the federal government had continuously intervened in businesses it shouldn’t, saying by privatising most of its dwindling assets, over N30 trillion could be raised to fund essential infrastructure, thereby reducing governments borrowing to fund its budget.
The Senior Advocate of Nigeria explained, “It is one of the principles of fiscal responsibility for the government to say, ‘we are shrinking out of business.’ Look at the four refineries, they are just there doing nothing when they can be sold. “Just as a result of the pressure government is feeling it suddenly have put up Afam power station, Omotosho power station and it is going to bring about N500 billion.
“So, you can just see if they think deeper, Ajaokuta for instance, government is still borrowing to put money into Ajaokuta, whereas all they need do is to sell it and the number of businesses that government has across Nigeria can fetch it about N20 trillion to N30 trillion. The government is not in the business of doing business.”
Furthermore, he said at the country’s present debt level which has remained on an upward trajectory, it was pertinent to implement the Oransanye report urgently.
He added, “The government needs to examine its revenue and if the government is now spending N80 out of every N100 for loan, that means the government only has N20 for the public service, health education and all of us. Government has to have a massive fiscal expansion intervention in the economy. It has to look for the money, if it looks for it, it will find it if they shrink.
“There are some government agencies such as the Ministry of Information which has no place in government. The president has three advisers on media, so it has enough hands. So, you can see the waste in the country? So, the government needs to implement the Oransanye report so it can shrink the workforce and when the workforce is shrunk then the vital statistics can begin to be relevant. The first thing is that there will be money to put into the appropriate sectors.”
He further added, “The problem with politics is that it beclouds economic judgment so I don’t know how far our political leaders are focusing on our economy. I see a distraction and that distraction might be very costly. Nigeria is like a cracked building and the problem with fixing a cracked building is that you are not quite sure what to do.
“On the economic side, the problem I have with Nigeria is that the government has not defined its economic ideology and it is very important that you do that. What is Nigeria’s economic ideology, which is part of the question that the artists will have to answer?”
Chief economist of PriceWaterhouseCooper (PWC) Dr. Andrew Nevin, agreed, saying that Nigeria has dead assets worth $900 billion that needs to be brought to life by privatising or selling.
Reforming Local Government System
Also, the governor of Kwara, Mr. Abdulrahman Abdulrazaq, while sharing perspective from his state, stressed the need for civil service reforms across the country.
According to Abdulrazaq, funding the civil service basically takes away all the resources in his state. He explained that after the payment of civil servants’ salaries, “we have nothing less for anything.
“So, that is why you see some state governments resorting to taking loans in trying to invest in capital infrastructure. In one of the committees set up by the APC, headed by El-Rufai to look at the entire Nigerian political system, it had suggested that we abolish and reform the local government system and put something in place at the state level,” he explained.
He maintained that the third tier of government was “dragging down the whole second tier of government.
“Many local governments don’t budget; they just take the money and spend. In some states, the state government has taken over the finances of the local government, which should not be the case. In Kwara State, we do not do that. So, we need to have a structure for local government funding in Nigeria.
“There should be a national conference to discuss the future of local government. This because if we don’t do anything, by this time next year, it will collapse financially and we may have to be borrowing money to keep up that system of government,” Abdulrazaq insisted.
World Bank country director for Nigeria, Shubham Chaudhuri, stressed that “Nigeria is at a critical historical juncture, with a choice to make. Nigeria can choose to break decisively from business-as-usual, and rise to its considerable potential by sustaining the bold reforms that have been taken thus far and going even further and with an even greater sense of urgency to promote faster and more inclusive economic growth.”
Constitutional Reforms
In a recent statement, a former deputy governor of the Central Bank of Nigeria, Prof. Kingsley Moghalu, stressed that leading inclusive growth for economic transformation in Nigeria now requires far-reaching actions in the political realm.
The former presidential candidate had argued that no amount of “defensive” approaches to economic management would adequately reverse the economic crisis and put the country on a path to real development if the underlying issues that had created the weak economic framework are not addressed.
He explained, “Chief among these structural factors is the urgent need for a constitutional restructuring of Nigeria to true federalism. Nigeria’s economy cannot make real progress as long as it is organised on the basis of the 1999 Constitution.
“The existing constitution contains no incentives to economic production that creates wealth, as it centralises excessive power in the central government. On the contrary, it creates massive incentives for a “sharing” economy based on earnings from crude oil sales, which belong primarily to the Federal Government of Nigeria.
“This in turn creates an embedded incentive to rent-seeking as economic activity, an absence of deep reflection by the political leadership on the nuances of competing economic frameworks as a basis for economic policy, and the commodity dependence that has created frequent economic distress through externally induced oil price shocks.
“Our distress is now further entrenched with extreme levels of foreign borrowing that have essentially mortgaged the future of Nigeria’s youth.”
