Reforming the economy came with a Federal Government promise of increased local content in government commerce. The Executive Order on Support for Local Content in Public Procurement by the Federal Government of May 18, 2017 was a welcome development.
ccording to the order: “All Ministries, Departments and Agencies of the Federal Government of Nigeria shall grant preference to local manufacturers of goods and service providers in their procurement of goods and services….Made-in-Nigeria products shall be given preference in the procurement of the following items and at least 40 per cent of the procurement expenditure on these items in all the MDAs of the Federal Government shall be locally manufactured goods or local service providers; uniforms and footwear; food and beverages; furniture andfittings; stationery; motor vehicles; pharmaceuticals; construction materials; and information and communication technology”.
However, provisions for vehicles in the budgets are still suffused with requests of foreign brands which have locally made or assembled equivalents while information technology procurements are still top heavy with foreign brands and services which also have local equivalents. This is also tied to such policies as the National Automotive Policy which, of late, seems to have been consigned to history. Nigeria needs to activate and implement with great passion and rigour, any policy that will strengthen its capacity to produce what it needs.
The Petroleum Industry Bills (governance, fiscals, host community, etc.) were expected to have strengthened the oil and gas sector, increase transparency, value for money and earn more income for the economy. The expectation was that collaboration between the executive and the legislature would have prioritised the bills and they would have been out of the legislative mill within six months or the first anniversary of the administration. They were supposed to be executive bills. However, it seems the government was not interested in pursuing such an agenda. As I write, only one out of the four bills has scaled through the legislature and awaits presidential assent.
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 N365=1USD. At some point in time, the Central Bank of Nigeria stated that it has 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 CBN 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 and the declining foreign reserves were factors in plunging of the value of the naira, but the policy somersault and lack of coherence in the management of monetary policy contributed to the free fall of the naira. The worrisome aspect of Nigeria’s economic management is that things that go up hardly come down. With improved price of crude oil and greater accretions to the foreign reserves, the value of the naira has not improved. It has simply settled at around N365 to 1USD.
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. The middle of the road approach is to tie lending and deposit rates to a corridor that enables depositors get good returns on their deposits whilst banks make reasonable returns from their intermediation.
Otherwise, there is absolutely no incentive for anyone to save money in a bank except for safekeeping since the money you depots will be less that the value you collect at the end of the year. Considering that Nigeria has one of lowest savings and capital accumulation rates in the world, the banking system should not be seen to penalise Nigerians who save money in the banks.
Further, in a period of grave financial crisis, the dilemma on how to raise funds to rejuvenate the economy comes to the fore. Do we take more loans or do we energise the process of enhanced domestic resource mobilisation? Taking more loans builds up sovereign debts which must be repaid either in the long, medium or short term. However, mobilising domestic resources such as the National Housing Fund for the housing sector; compulsory and universal health insurance for the health sector; a Road Fund for the road sector, etc. are proven strategies for funding public investments. The expectation had been that laws for health insurance and road funds would have been enacted early in the life of the administration. The existing Housing Fund should have been reorganised with competent professionals to drive greater resource mobilisation for housing loans and mortgages which will be matched with public funds.
Greater investments in housing will have facilitated economic revival through greater number of Nigerians employed as artisans in bricklaying, carpentry and wood work, electrical works, plumbing, etc. whilst the companies producing cement and allied products would have increased their capacity utilisation and productivity as well as income liable to companies income tax. Compulsory and universal health insurance law complemented with innovative sources of funding would reduce the demand for public funding of health care while ensuring reduced out of pocket expenditure in health.
The administration was elected on a promise of increased transparency and accountability. However, the details of all statutory transfers are still secret three 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 legislature to be more transparent. Nothing has been done by the administration to open up the votes of 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.
In conclusion, the Buhari administration can still make an impact in the last stretch of its tenure if it can introduce and implement more well-nuanced policies and understand that the Nigeria’s economic situation is in dire straits and it needs to act urgently.
