Buhari’s economic management challenges (1)
Rising Economic Policy Uncertainty: It is true that a myriad of problems were inherited from the previous regime, the new regime appears to have been too preoccupied with its internal challenges within the government to be able to chart a future policy path for others outside government to plug into.
The euphoria that heralded President Muhammadu Buhari’s regime is giving way to rising economic policy uncertainty as the regime is not providing any holistic indication of its fiscal or broader economic policy directions that others outside government can base their planning on. The regime appears to be struggling with the present, finding it hard to contemplate a future for the country, and even harder to engage others about that future.
Some positive moves, like the resolution of the States’ liquidity crisis in July and the announcement of a Treasury-Single-Account (TSA) in August, have been made by the regime on the fiscal front, but they have unfolded piecemeal, and there is no effort to give any indication of what more is to come within a holistic fiscal policy framework. It is not difficult to imagine that more good news would filter in on the fiscal front in the next few weeks when the positive impacts of various bold efforts to block government revenue leakages, including saving from ending fraudulent fuel subsidy payouts from excess crude savings, ending crude oil theft, and ending abuses in the administration of import duty/tax waivers, and the increased revenue inflow from implementation of the TSA.
But it would have been better for the government to have stated these within a forward looking fiscal guidance document that will leave no one in doubt about the fiscal policy directions of the new government. The fiscal policy direction remains uncertain, and such is not good for the confidence of private economic agents. Beyond fiscal guidance, early indication of broader economic policy directions should help allay fears about the outlook of the Naira and ease the pressures on the Central Bank. More than just doing a string of good things, the new regime needs to demonstrate a clear ability to clarify the future path of its interventions so that private agents can make their plans with much less uncertainty. The weakening naira could indeed have resulted from the loss of confidence resulting from rising uncertainty about fiscal and broader economic policy directions.
Weak Economic Policy Institutions: It is becoming clear that the new regime inherited very weak or non-existent institutions of economic management. Nigeria has strong institutions of security management that ensures no vacuum in the offices of national security adviser, director of state security, military service chiefs, immigrations, customs, inspector general of police, and chief of civil defence corps. These positions are always manned even in the absence of ministers.
President Muhammadu Buhari (PMB) can be assumed to be adequately briefed on matters of national security, even in the absence of ministers of defence or interior. No surprise the President engages effectively on security issues.
In the security management set-up, ministers and ministries are no more than secretary and secretariats, the actual security management rests in the hands of the agents and agencies of continuity. Nigeria needs to replicate this institutional strength in economic management. A striking reality of Nigeria’s governance system is that there are no recognisable agents or agencies of continuity in economic policy management in Nigeria. This has to be redressed.
Since 1946, U.S. Presidents get into office to meet a non-partisan Council of Economic Advisers (CEA) that provides them adequate briefing on economic issues on a daily basis. From the same year, congressmen get into office to meet a standing staff of a bipartisan and bicameral Joint Economic Committee (JEC) who provides them pre-and post-legislative briefings on economic issues. Both the President and Congress look up to the Government Accountability Office (GAO) for insights, foresight and oversight on economic issues.
The CEA prepares and submits the President’s Economic Report to Congress in February of each year and the JEC prepares and submits its response to the President’s report to Congress the following month. In the American set up, economic ministers and ministries are also no more than secretaries and secretariats, the actual economic policy conception and enforcement rest in the hands of the aforementioned agencies of continuity, which are altogether missing in Nigeria. Little wonder that Nigeria has been ineffective in economic management. The economic policy vacuum is becoming very striking in the first three months of PMB. The President will do well to urgently redress this.
Weak Economic Engagement: In spite of compelling reasons to engage on pressing economic issues of the day, the President and the National Assembly have both conspicuously stood aloof in the first three months of the new regime. The President will do well to create economic management agencies that will help him and the National Assembly to directly engage on economic issues and generate ideas and policy directives for ministries to implement.
These agencies must be situated outside the ministries, not within. In the U.S., ministries necessarily operate within policy visions set by the CEA, endure the scrutiny of the JEC staff at congressional hearings, and are subject to ongoing oversight of the GAO. The expectation that ministers will manage the Nigerian economy is misplaced. Institutions for economic management have to be created to provide ideas for ministries to execute and also provide adequate scrutiny over ministerial appointments and activities.
Such institutions are ideally located within the executive office of the President and within the National Assembly to equip the President and Legislators to engage more directly and effectively on economic issues. It was under the Employment Act of 1946 that the US Congress established two advisory panels: the President’s Council of Economic Advisers (CEA) and the Joint Economic Committee (JEC). Their primary tasks are to review economic conditions and to recommend improvements in economic policy.
The CEA and the JEC help the U.S. President and Congress to routinely conceive economic policy ideas and process them into legislation for government agencies to implement, while the GAO scrutinises the efficiency of the conduct of all government agencies. Economic policy conception results from the engagement of President and Congress, while government agencies are only expected to implement Presidential and/or Congressional directives. Little wonder the U.S. President and Congress authoritatively have a lot more to say about all aspects of the U.S. economy than anyone else.
In contrast, since 1999, the Nigerian President and the National Assembly have passed the buck of policy conception and design to agencies that should ideally only implement. The new regime must overcome the growing democratic deficit in which Presidents and Parliaments come into office only to pass the buck of economic policy conception, design and coordination to unelected appointees that should ideally only implement. Efforts must now be made to build the capacity of the Presidency and the Parliament to conceive, design and coordinate economic policies, and exercise meaningful oversight on their appointees.
Nigeria clearly needs to create institutions like the CEA in the Presidency and the JEC in the National Assembly to ensure that the President and Parliament are better able to directly engage to conceive meaningful and effective economic policies.
Budgeting and Policy Coordination: On the execution and coordination side, Office of Management and Budget (OMB) assists the U.S. President to prepare the country’s budget and also helps all executive departments and agencies across the Federal Government to enforce the policy commitments and priorities of the President. The OMB was transferred from the Treasury Department, where it started life as the Bureau of Budget (BOB) in 1921, to the Executive Office of the President in 1939. The OMB also reviews, harmonises and clears all agency communications with Congress, including testimony and draft bills to ensure consistency of agency legislative views and proposals with Presidential policy
Budget Office of the Federation also needs to be moved from the Ministry of Finance to the Presidency so that budget design and policy coordination can also be undertaken from the presidency. Ministries, Departments and Agencies should concentrate on implementing policy directives from the President and Parliament. It should be mentioned that Obasanjo regime toyed with the idea of moving the Budget office of the Federation from the Federal Ministry of Finance to the Presidency in 2004 but balked because of strong objections from his newly appointed minister of finance. The same regime eventually not only left budgeting in the finance ministry but also ceded policy conception, design and coordination to a newly created ad-hoc Economic Management Team (EMT) that was also chaired by the minister who objected to the transfer of the budget office to the presidency. The ad-hoc EMT model had remained since then. The Jonathan regime went a step further by adding the term ‘Coordinating Minister for the Economy’ to the title of the finance minister.
This contrasts with the U.S. practice in which: policy conception is the shared responsibility of the President (with CEA input) and Parliament (with JEC input), ensuring that the legislative programme of the Congress is in sync with the economic programme of the President; budgeting and policy coordination are done in the executive office of the President (with OMB input), while all agencies merely execute Presidential and Congressional directives; and, oversight is exercised by both President and Congress (with OMB and GAO inputs).
• To be continued tomorrow.
• Teriba is the CEO of Economic Associates (EA).