By Eze Onyekpere
President Muhammadu Buhari was elected on a promise of increased transparency and accountability. However, the details of all statutory transfers are still secret two years into the life of the administration. The only one that has just been opened is the vote of the National Assembly and the opening was a product of increased civil society agitation for the federal lawmakers to be more transparent. Nothing has been done by the administration to open up the votes of the Independent National Electoral Commission, Public Complaints Commission, National Human Rights Commission, National Judicial Council and Niger Delta Development Commission. The administration is called upon to note that the secretive nature of these votes is not only illegal but also unconstitutional.
According to the Debt Management Office, the Buhari administration met Nigeria’s debts at N12.118tn as of the end of June 2015, but today, the debt has risen to N17.360tn as of December 2016 which excludes the Eurobond and all other debts incurred since the end of 2016. And we are still borrowing and planning to borrow more. In the 2015 Federal Budget, the provision for debt service was a total of N953.620bn comprising of N894.6bn for domestic debt service and N59.01bn for foreign debt service. This is in contradistinction to the 2017 figures of N1.663tn made up of N1.488tn in domestic debt service and N175.882bn in foreign debt service. This is not a sustainable way to run an economy particularly with the lack of clear mobilisation of public support in the projects on which these loans will be spent upon.
The promise of mobilising financial support and investments from the private sector and public private partnerships as an option for funding infrastructure projects which is the cornerstone of the Economic Recovery and Growth Plan seems to have taken a back seat. Clearly, the financial demands to bridge our current infrastructure deficit are too large for government to raise. Compare and contrast the different policy positions in borrowing from the Chinese to develop new standard gauge railway lines whilst at the same time concessioning the old Port Harcourt to Maidugiri rail line to General Electric, an American firm, which is expected to invest over $2bn to upgrade the rail lines and make it more functional with standard services. In the second model, we are not incurring debts, rather a private firm has been given the opportunity to improve services and have its return through user fees. This seems to be a better option if there is transparency in the process of handing over these assets to private sector managers. If we keep pursuing the first option, the debts will become unsustainable very soon.
The administration met the value of the naira at less than N200=1USD. But today, the naira has been so devalued that at some point, it was almost N500=N1USD. But it has recovered to about N380=1USD. The poor and archaic management of the value of the naira by the Central Bank of Nigeria through multiple exchange rates, control and ban of certain items and making them ineligible to be funded from the official foreign exchange window have created a distortion in the system. At some point in time, the CBN stated that it had more than enough foreign exchange to meet the local demand for foreign exchange and asked banks not to collect foreign currencies into domiciliary accounts. Thereafter, it somersaulted and it was clear that the apex bank was grandstanding and political considerations had taken over pure technical monetary policy issues. This sent very worrying signals to investors and persons who had foreign currency. Yes, the low price of oil in the international market was a factor, but the policy somersault and lack of coherence in the management of monetary policy led to the free fall of the naira.
The soaring lending rate of over 20 per cent per annum is not the way to stimulate economic recovery and growth. This places economic agents in Nigeria at a disadvantage in terms of cost of production and service delivery thereby making them uncompetitive. To the extent that we need to reduce inflation and rein in other macroeconomic fundamentals to stabilise our economy, a middle approach should be found to ensure access to credit at single digit rates. The argument that double digit inflation rate cannot support single digit interest rates falls in the face of single digit deposit rates paid by banks to depositors. If that argument held water, then the CBN should regulate the spread between deposit and lending rates. A situation where depositors are paid interests less than the inflation rate whilst those seeking loans are compelled to pay over 20 per cent per annum is a recipe for the type of economic disaster we presently witness.
It is safe to conclude that the economy has not been managed in the most efficient and reasonable manner to enable the Federal Government fulfil its obligation of improving the standard of living of Nigerians. A majority of Nigerians are now living below the poverty line and life has become so miserable and intolerable for the majority. Thus, the Federal Government needs to take concrete and targeted steps towards rejuvenating the economy and inclusively ensuring that all hands are on deck for this national assignment. Some of the recommendations will include rejigging the key personnel of the administration; placing round pegs in round holes. Also, it should appoint all remaining boards and policy positions in all parastatals for a full complement of staff and needed competencies to run the government; release the full details of all statutory transfers and harmonise fiscal and monetary policy positions and reinforce the Economic Management Team to fulfill its true purpose. The Federal Government needs to rethink the privatisation of the power sector so as to bring in competent and capable investors with financial capacity, especially at the DISCOs so as to bring in new resources to turn around the sector. This is imperative for the improvement of capacity utilisation in industries, beefing up manufacturing and general economic turnaround of the country.
The executive should submit a comprehensive borrowing plan with details, cost-benefit analysis and details to the National Assembly – who are enjoined to review the same and approve of it based on sustainability, equity and national interest; split the Ministry of Power, Works and Housing into three distinct ministries and appoint transformational professionals with core competencies to run the ministries; repackage the National Housing Fund as the best option and cheap source of funds for housing finance and ensure that the major qualification for benefitting from the Fund is being a contributor to the Fund.
It should also immediately start the preparation of the 2018 federal budget and ensure that it gets to the National Assembly on or before the first week of September this year; prepare and disseminate all pending Budget Implementation Reports within one quarter from the date of this midterm review. For equity, to improve access to credit and cut down the cost of borrowing, reduce the spread between deposit and lending rates to no more than 500 basis points corridor; provide direction and incentives for local investors to put money into key sector of energy, low cost housing, steel, transport, etc. Instead of the fixation on import substitution which is a basic minimum, align economic policies towards export led growth. Exports will help improve the value of the naira and reposition the fiscal and external accounts.