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NESG v CBN: Resetting the Agenda for the October NESG 26th Summit

Nigeria Economy	1618 VIEWS
Nigeria Economy
1618 VIEWS

Saturday, October 10, 2020 /06:30 AM / by Proshare Research / Header Image Credit: EcoGraphics

The NESG 26 Summit must seize the opportunity of the recent conflict with the CBN to broaden the debate over the direction of the Nigerian economy and the required policy imperatives as highlighted earlier.

The NESG should seize the opportunity to address the hitherto unspoken issues of:

Reviewing Nigeria's domestic tax regimes and their impact on business growth
The role of non-state actors in revenue collection and its implications for the domestic tax burden of MSMEs (MSMEs contribute 48% to GDP and constitute 84% of private businesses)
Reviewing the country's tariff structure/rates and analyzing the implications for Nigeria's trade balance and competitiveness
Reviewing of the nature and structure of Nigeria's informal (hidden) economy and its imperatives for revenue generation relative to public-sector support structures
Understanding the implications of the economist's disappearing Philips curve and the proverbial policy trilemma in Nigeria
Nigeria's banking sector's creeping Holdco structure and its implications for the financial system
The role of foreign remittances in igniting long-term economic growth, development and success (reviewing the China and India models for adaptability to local Nigerian conditions)

Illustration 7: NESG Summits: A History of Discourse

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Source: NESG

In Search of a Truce

One of the most difficult things to do is not prosecuting a war but negotiating the peace. The NESG and CBN must both size-up to the onerous task of shelving organizational egos in the larger interest of the country and reestablish a fraternal relationship that will serve the broader interest of economic growth and development of the Nigerian economy. The agenda of the NESG 26 must provide detailed, evidence-based information and analysis that executives of the CBN can review to reshape monetary positions or gain further insight into private sector anxieties based on available data.

Going Forward

In line with the preferred situation of collaboration between the NESG and the CBN, the NESG must always defer to the superior position of data over opinion. While some of its observations in its 15-point communique were ascribable to data, others were mere opinions unsupported by evidence. Such positions are not compelling and are easy targets for potshots by a diligent analyst or observer. The NESG must sustain a reputation of elevated thinking and support its stance with evidence-based facts. The first point in its 15-point communique stated, "The Nigerian Economic Summit Group (NESG) notes that since the inception of this Administration, Agriculture and the need to ensure Zero Hunger for Nigerians has received considerable attention. However, despite the budgetary allocations and huge sums of money disbursed by the Central Bank of Nigeria (CBN) through the Anchor Borrowers' Programme, a huge gap remains in meeting the food requirements, which has resulted in increasing hunger among the Nigerian populace". This statement appears to be populist and suggests sentiments rather than facts.

It would have been more informative if the NESG had stated total agricultural production and dissected the data into crop classes and made estimations of domestic production and domestic consumption thereby estimating the domestic surplus or deficit. It would have been informative if the NESG quoted the amount lent to the anchor borrowers scheme by the CBN and how much has been recovered and by how much farm output has increased (or decreased). Staying true to data rather than broad statements on perception is usually safer as a subject of discourse.

The NESG may need to upscale its research and ensure that its policy interventions are always dependent on the evidence-based interpretation of data. Where legal interpretation is required lawyers available to the group should be consulted to give a robust interpretation of regulation/laws and provide comparative legislation in other countries. The need for the review of legislation of other countries is not for the validation of Nigerian legislation but to serve as a basis for accessing the impact of similar legislation on other economies.

The CBN in turn would need to exercise temperance in its public communication, certain expressions are completely alien to the rarefied status of a country's Central Bank.

Also, the CBN must recognize the right of institutions and individuals to have a difference of opinion. At the heart of growth and development is the rich variety of clever solutions that emerge from a pool of disparate socioeconomic perspectives. To see sinister ghouls in every act of dissension from CBN's positions is unhelpful in building a massive cathode machine of actionable ideas that find refinement in conflict.

Conclusion

The conflict between the NESG and CBN was avoidable but necessary. The essence of the conflict was to establish clarity and policy coherence. The battle of brothers was not fashioned to the death but to promote enlightenment and stronger corporate governance. A number of points become clear in reading the issues raised by both organisations and their responses to evidence-backed information on the economy. The points could be summarized as follows:

The NESG remains a critical part of the economic policy formulation framework of the country and its opinion is critical in shaping a private sector perspective of socioeconomic developments in the country. The views of the NESG are immensely useful to monetary and fiscal policy managers as it provides insight into how economic agents perceive the success of public policy and their likely response to government's intentional "nudges". Therefore, any effort at belittling the importance of the group is ill-advised and self-defeating. The hallmark of great military strategy is to turn foes into friends and turn perception liabilities into "assets". The greatest generals win wars not with bullets but with strategy and diplomacy.
The Summit Group is an integrated system of private sector interest groups and therefore represents a springboard for collective private action. The NESG is an opportunity for government agencies such as the CBN to communicate forward thinking and achieve alignment of public policy and private action. It is , obviously, compelling for the CBN and the Ministry of Finance (MoF) to work with the private-sector think tank to initiate growth-centred mindsets that lead to enterprise growth, increased domestic employment, higher local productivity and stronger economic growth and development. Dumping toxic emotional outbursts and adversarial signalling on the Group may prove to be unhelpful.
While the NESG represents a cornerstone of organized private sector interest the CBN constitutes a major policy lever that the government uses to ensure socioeconomic stability. The Bank is a fulcrum for leveraging sustained economic growth and stability and has an onerous task of defending the country's democracy and sociopolitical values by ensuring that money supply and inflation are managed in a manner that guarantees the lowest non-accelerated inflationary rates of unemployment (NAIRU). To achieve this, the CBN must take actions based on evidence and compelling market data. It would therefore be uncharitable to denigrate the rigour, breadth and depth of the Bank's understanding of latent macro and microeconomic developments. However, the fact that CBN has accumulated impressive data and massive information on the economy does not mean that it has the best interpretation of what it sees. The data produced by the economy has the characteristic of an African elephant in dimension and what each individual looking at that elephant sees depends on positioning. In other words, alternative views are not criticisms but a representation borne out of alternative positioning. Such diverse perspectives gives a better understanding of the economic animal standing in front of us.
In the light of positioning and governance, it is uncommon for the CBN to respond to issues raised by third parties without a recourse to its Monetary Policy Committee (MPC). Such responses typically are the product of intense and broad internal discussion of the Committee which provides evidence-based arguments for the policy action or inaction of the Bank.

The cavalier response of the CBN to the NESG's arguments falls short of best global practices and serves as a point of learning for the Bank to ensure communication governance within its traditionally conservative, measured and subject-matter-focused template.

Nigeria's economic challenges require thoughtfulness outside conventional parameters. The evident failure of the macroeconomic frameworks of the past require a remodelling of the country's fiscal and monetary realities and the adoption of policy responses that may be unconventional but effective. This being said, governance cannot be sacrificed at the alter of expediency. In pursuing its agenda to create growth and employment, the CBN must not be seen to be extending its functions beyond its constitutional remit. The CBN cannot be see to be a sort of 'hold all' institution or ombudsman of the economy. While we can excuse crying in response to emotional trauma we cannot excuse blindness. The shed tears should not remove our sight of danger. The CBN must be allowed to work as an independent entity within the framework of ensuring non-inflationary growth. By delving into the realms of fiscal politics the CBN could find itself dragged into situations that could be considered tenuous and an overreach of its primary mandate. This should not be allowed to happen.
Ultimately the NESG and CBN must see collaboration not as a matter of convenience but one of necessity. This is not about who won the battle but about collectively winning the economic war.