Tracking Buhari’s Economic Policy Direction

BY Tobi Soniyi

It is clear to everybody of cognitive age that Nigeria is going through a storm economically. Inflation hit 11.4% in February and growth has fallen to 2.1%. At the start of the year, financial pundits projected that businesses will need to brace up and devise means of hedging the inevitability of a weaker naira in 2016. As at the time of writing this article, the naira has continued its unprecedented free fall in value against the US Dollar, trading at N352 to USD1 on the parallel market but remains pegged at N197 to the doSo, when MultiChoice announced that it would not be increasing subscription fees on its DStv bouquets this April, many heaved a sigh of relief. That would be one less cost to worry about in light of the present economic strain. However, some wondered why MultiChoice would make such a decision knowing full well that most of the company’s costs are incurred in dollars and high inflation rates have put enormous finan

In the face of government’s seemingly unclear economic policies, many have said that the All Progressives Congress’ led government does not have a clear vision of how to transform Nigerian economy into one that would benefit most people. I disagree.

While conceding the fact that government has not done enough to articulate its economic policy clearly enough, it is not difficult for a discerning mind closely monitoring government’s actions and inactions to identify the key strategies driving government’s policies on the economy.

Out of many other key indicators, three stand out:blocking wastes through fiscal discipline and control, widening the tax nets and diversifying the economy.

Among these three, the first appeared to have received the greatest attention from the government and would also form the basis of this review.

Beginning with the implementation of the Treasury Single Account which President Muhammadu Buhari said had led to the recovery of over two trillion naira to the ongoing war against corruption, this government is making spirited efforts at blocking wastes and sending a clear signal to those who are still bent on engaging in wasting government’s resources to desist from doing so.

But as recognised by the Minister of Finance, Kemi Adeosun, the steps already taken and those still being taking must be complemented by routine audit of all ministries, agencies and parastatals.

According to her, there is actually need to strengthen internal audit across government.

She said: “So, in the interim we have agreed to do the presidential initiative on continuous audits which will give backing to the work that we are currently doing and will allow us to extend this work beyond payroll to other areas of expenditure.

“The control framework over finance and spending of government’s money needed to be strengthened especially in anticipation of the approval of the budget, which is an extended budget.

“If we don’t strengthen our controls then there is a risk that money would leak or would be applied to the wrong things and therefore, the ability to go into various agencies without notice and check and do audits and updates to make sure that public money is being spent in accordance with our expectations and objectives.”

Through this scheme, 23,000 ghost workers had been removed from the Federal Payroll and saved the country a whopping N2.29 billion. The finance minister said another 11,000 of such non-existing workers had been detected. This discovery, she explained would also save the country a yet to be determined huge amount.

By auditing payroll alone, government is able to save a couple of billions, one can only imagine what will happen when the audit is extended to all departments.

No one is in doubt as to the importance of eliminating waste. Prior to now, Nigeria was known as one of the wasteful countries on earth. That disgraceful status may be changing.

While Adeosun should be commended for pulling this initiative through, she needs to do more in this regard. She should generate a memo to the President to impress on him the need for public officials to be frugal with public resources. For instance, she should advise the president to issue a directive banning all ministers and other senior government officials from flying first class. The country will save a lot of money from this. Figures released by the ministry reveals that travel was the single biggest government line item from 2012 to 2014, at N248bn for the three years. This, according to Financial Times, is equivalent to an extraordinary 18 per cent of total government spending.

It rings hollow in the public ears when the citizens are called upon to tighten their belt while public officials live in opulence and luxury.

It is delightful to know that the minister is already thinking in this direction. The finance ministry already said it could save N4bn a year from travel costs by negotiating discounted airfares with carriers, or just under 5 per cent of the approximately N85bn yearly average.

“The Efficiency Unit has engaged in negotiation discussions with local and international airlines for discounts commensurate with the large number of ticket purchases made by government annually.

“The savings generated will increase funding available to the government for capital investment,” the ministry said in a statement.

According to Financial Times, the high cost of travel for government officials is unsurprising.

“The Nigerian elite has a taste for luxury travel, shown by the proliferation of private jets in the country,” it added.

Nevertheless, Financial Times believes that If Nigeria’s finance ministry is serious about cutting costs, targeting the government elite’s private air fleets might be a good place to start.

Still, the minister should be bold enough to advise against flying first class or better still she should lead by example by also refusing to fly first class.

Another area the finance minister should look at to block waste is to closely scrutinise what Nigeria doles out to helping countries in Africa. Charity is good, but not at the expense of the people. At a time when Nigeria is finding it difficult to look after her own people, it makes little sense to keep pumping resources into a country like the Gambia.

If we do the right thing, the potential for growth is enormous. Among other measures, we have to declare a state of emergency in employment. For too long, we have paid lip service to job creation. The time has come to start rolling out the job or to stimulate the sectors that will create the jobs.

For those who are losing hope, I commend a report

by PriceWaterhouseCoopers, PwC which said the Nigerian economy could rise to $6.4 trillion by 2050 to the ninth position among the world’s leading economies with policies and programmes aimed at diversifying the economy from over-dependence on crude oil.

At that level of growth, PwC said the country’s economy could potentially surpass that of Germany, United Kingdom, France, and Saudi Arabia before that year.

The report said potentially, Nigeria’s global agriculture exports could take-off at a rate similar to Brazil’s, with about $59 billion in export revenues by 2030.

“Nigeria’s intrinsic potential lies beyond oil and harnessing this potential has become an imperative given the expectations of lower oil prices and heightened competition in the oil market,” the report said.

Based on recent trends, the report reviewed the impact of low crude oil prices on key economic indicators and the real sector, particularly on priority sectors that should be targeted for diversification efforts.

It identified the priority sectors to include agriculture, petroleum, retail and ICT, with the most dominant transmission links to the overall economy.

“Forward linkages to agro-processing and other services such as logistics as well as backward integration to input supply sectors could improve farm incomes, increase employment and improve domestic food security,” the report noted.

Besides, it said value added to oil and gas output need urgent improvement through the diversification within the sector, pointing out that this demanded investments across the downstream sector to develop petrochemicals, fertilizers, methanol and refining, industries relevant in both industrial and consumer products currently being imported in the country.

Country and Regional Senior Partner for PwC Nigeria and the West Market Area, Uyi Akpata, said consumer spending was the largest driver of the economy, accounting for about 70 per cent of gross domestic product, GDP.

He said this was expected to be the boost for the retail sector growth, even as the country’s population continues to expand, with household consumption expenditure projected to reach $1.1 trillion by 2030, from $317billion in 2014, about compound annual growth rate, CAGR of nine per cent through 2030.

Akpata said with the country’s tele-density at 107.87, a large population of urban, young people and massive improvement in internet broadband penetration, Nigeria was likely to see accelerated growth of its digital economy.

PwC Partner and Chief Economist, Andrew Nevin, said the review of the business environment of some foreign companies in Nigeria, revealed four challenges, namely corruption, inadequate infrastructure, low skill levels and macroeconomic uncertainty.

These challenges, the report said, emphasized the need for the economic and regulatory environments to be transparent and conducive for business, by simplifying complex regulation and processes, and eliminating the hurdles to a bigger and more productive private sector.

“Significant reforms across the labour market, business environment and fiscal management will be required. A skilled workforce is critical to improving Nigeria’s productivity and efficiency,” the report said.

PwC Partner and Head of Tax & Regulatory Services, Taiwo Oyedele, said a well-structured tax system was important in the diversification of the economy.

According to him, Nigeria needs to ensure sustainable fiscal management that is resilient to the global oil price cycles. Improving tax collection and administration have become imperatives for achieving national growth objectives.

It called for a review of the framework for tax exemptions and advised that approvals should target growth inducing sectors even as the government improves collection.

He proposed that efficiency in government spending has to improve as there is room for substantial savings in capital outlays and operating expenditure across the three tiers of government.