ENWEGBARA: Buhari Needs A Crack Team That Can Avert Imminent Recession
Mr. Odilim Enwegbara, a development economist, believes the Nigerian economy is on a cliff hanger, asserting, however, that the challenges could be a blessing in disguise for the Buhari administration. Accordingly, the overall agenda of Buhari’s expected economic team should be finding some creative ways to grow and diversify the economy away from oil. He shared with Assistant Business Editor, MATHIAS OKWE, the signposts to follow by the expected team to prevent a recession.
Fiscal Stimulus Policy
FOR the Buhari administration to reverse the looming economic recession, the economic management team should pursue a pro-growth, investment and jobs fiscal policy direction. This should be the team’s first step. The team’s comprehensive fiscal stimulus package should focus on an unprecedented infrastructure investment. Here, the target should be on power sector with an ambition to generate not less than 100,000MW within the next 10 years.
This time around full power generation diversification is the sustainable answer, which should include coal, solar, hydro, wind, gas, nuclear and geothermic. Next is a comprehensive master plan for a road network crisscrossing the entire nation, linking up important parts of the country for easy and quick access. We must invest in massive infrastructure development without which there is no way we could reduce the current high cost of doing business, one of the highest in the world, and which is standing on the way of industrialising the oil-based economy.
National Infrastructure Bank of Nigeria
For a nation now with a long-term focus on developing its infrastructure, there is the urgency to establish National Infrastructure Bank of Nigeria, modeled after China Infrastructure Bank. Nigerian government through NIBN should begin negotiation with their Chinese counterparts about securing an infrastructure development loan. The goal of this unconventional source of financing is to tap into China’s $4 trillion foreign exchange reserves for the country’s massive investment in infrastructure, which is long overdue.
Nigeria should offer China about 10 billion barrels of Nigeria’s 45 billion oil reserves as strategic collateral with 20-years repayment of the loan without interest on the principal. Since oil swap was used in the 1990s to give Abuja its current excellent road network, why not use oil also as strategic collateral to secure up to $350bn from the Chinese? We all know that with $350bn kept in NIBN, China Infrastructure Bank should from there make payment directly into international construction companies involved in the construction work, meant in addressing Nigeria’s currently embarrassing infrastructure deficit. Rather than interest on the loan, Nigerian government should include in the offer, what Beijing should hardly refuse, which is, that Chinese companies should enjoy first offer of refusal in at least 50 per cent of all the power generation and transmission contracts funded with the Chinese loan. Such infrastructure construction contracts should include contracts to Chinese companies to build in Enugu and Kogi a number of coal-fired power plants with about 50,000MW target. An ambition of 30,000MW nationwide solar power generation should be offered to a number of Chinese companies.
Since China recently built the largest dam in the world—the three Georges Dam in Hubei, China, which generates 22,500MW—we should include the building of a similar dam in Nigeria with 10,000MW target. It is pertinent to note that since the infrastructure construction contracts should be an international bidding, contracts are only awarded to Chinese companies or any other companies meeting all quality standards as specified. Russia and China after all have similar agreement based on a long-term gas supply to China by Russia worth about $400billion.
Diversification Of Government’s IGR
In the effort to drastically increase IGR from less than 12 per cent to as high as 50 per cent of its budgets, which is the lowest target in any modern economy, government should focus all its energies on aggressive diversification of its revenue generation. This diversification effort should be the paramount agenda of the economic team.
For this reason, VAT should be increased to not less than 20 per cent, which is the lowest percentage for a country at our stage of development having to deal with our kind of infrastructure deficit and expectantly running large budget deficits going forward.
Carbon tax on all automobiles by imposing auto number plates’ yearly renewed fees based on auto engine capacity. High tariffs imposed on all imported goods to be easily made locally. Besides financing the construction of road network crisscrossing in the country, if we have to maintain road in the country, tollgates should be brought back, this time using electronic payment.
To encourage leading foreign pharmaceutical and drug manufacturing firms to set up factories in Nigeria, we should impose high tariffs on pharmaceutical products that are easily made in Nigeria. Since national lotteries have been discovered as a kind of money minting machine in so many countries, why shouldn’t it be the same in Nigeria?
SMES Support Programme
If China and the US create millions of job made possible by government SME support programmes, we have no option, but to give Nigerian SMEs all the support they need, if we want to see them create millions of jobs also here. After all, the much talked about economic diversification should hardly happen without fully promoting and protecting SMEs.
Government should workout modalities for the establishment of 37 industrial parks across the nation, in partnership with state governments and FCT minister. The goal here is to provide SMEs essential cluster services such as, built and unbuilt spaces for offices, for plants and equipment and for warehousing.
Informal Sector Formalisation
Government should come up with procedure and deadline for all informal business activities in the country to be formalised and mainstreamed. This has become long overdue since there is no economy can grow while leaving as high as 70 per cent of the economy to be operating informally.
or a nation now with a long-term focus on developing its infrastructure, there is the urgency to establish National Infrastructure Bank of Nigeria, modeled after China Infrastructure Bank. Nigerian government through NIBN should begin negotiation with their Chinese counterparts about securing an infrastructure development loan. The goal of this unconventional source of financing is to tap into China’s $4 trillion foreign exchange reserves for the country’s massive investment in infrastructure, which is long overdue.
Besides doing so will help government extend its SME support programs to these formalised and mainstreamed micro and small businesses, it is going to legitimise the informal businesses by giving them business tax codes and business registration numbers, with which to pay the right tax and as when due.
Academic And Healthcare City
Like in Dubai, Nigerian government should establish an international academic city with the goal of attracting leading universities around the world to set up their foreign campuses in Nigeria. This will immediately reverse the current overseas education costing the country billions of dollars annually with Nigerians now studying and getting the same excellent education from leading universities sited in their country where they in naira.
Also like Dubai’s, our healthcare city should be designed to attract some of the world’s leading hospital chain to set up their subsidiaries in Nigeria in order to take full advantage of Nigeria’s 180 million healthcare seekers. This will bring to an end the medical tourism costing the country billions of dollars.
Government budgeting and implementation should henceforth be timed with deadlines fixed by law, as it is the case in most modern economies around the world. Budget to GDP ratio, which is currently about 5 per cent should be increased to not less than 25 per cent with our deficit to GDP ratio at less than 1.5 per cent, which is one of the lowest in the world, be increased to not less than 6 per cent. This will mean that next year’s national budget shouldn’t be less than N10 trillion with as high as 70 per cent capital spending. Also, Federal Executive Council weekly meetings should stop being where to lobby for contract awards, but instead where fiscal policy is fin-tuned and project performances are reviewed.
Pro-Real Sector Monetary Policy
On the monetary policy side, the new economic management team should work together with their counterparts in monetary policymaking with the goal of reducing imports’ undue pressure on the country’s scarce foreign exchange reserves. Forex should be strictly for imports essential for industrial inputs such as plants and equipment and industrial raw materials. Nonessential imports should source their forex from nonofficial windows such as the parallel market. However, importers should prove forex legitimacy or else, the country’s anti-money laundering including seizure of the imported goods could apply.
Government should carry out a comprehensive, forensic auditing of the MDAs without any further delays. This has become urgent since this government wants to reduce recurrent spending, starting with flushing out ghost workers and to increase efficiency, productivity, and wastages in all MDAs with the goal of driving down recurrent expenditure while driving up capital spending of the Federal Government.