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Issues in Governance: The SLS Paper and Nigeria's Economic Policy Debate

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Monday, December 05, 2016 6.35AM / By Dr. Mudasiru Adebayo Salami

Here are the slides from Emir Sanusi's lecture titled 'Nigeria: A Plan to Restore Confidence, Direction & Growth'.

The Summary slide clinched his argument:
"The years of “Africa Rising” where one tide could lift all boats are behind us: the commodity cycle has turned, and government balance sheets are stretched.

Sustainable, inclusive growth now depends on investment – and in Nigeria’s case, policy credibility will first need to be restored



The role that government can play in this process is defined by:

(a) implementing the FX policy it already has;

(b) creating the conditions for local manufacturing to develop.


More specifically, it can:

         Allow price discovery to occur in the foreign exchange market

         Close the gap between FX policy design and implementation

         Shift the focus of fiscal policy towards reducing debt-servicing costs

         Firmly and unequivocally eliminate fuel subsidies

         Raise more concessional funding from abroad

         Capitalise NBET, so that arrears can be cleared

         Protect infant industry, specifically labour-intensive manufacturing"


THE TAKE-AWAY:
We agree with most of his submissions except his recommendation for tax increase which is antithetical to recovery in a recession. What we believe he should be pushing for is deepening and widening of our tax net.Too many people and business concerns are still evading tax. That must stop and is indeed improved upon by the current FIRS Management.

It is worthwhile to reiterate the submission(s) of the CEO of iMudah TV, Dr Mudasiru Adebayo Salami a few days ago:

“The key to getting Nigeria out of recession is to improve productivity and spending. The productivity pathway takes time and is indeed helped by putting money in the pockets of people. For without money people cannot buy the products and services that are supposed to be the backbone of recovery.”

The corollary is that increasing taxes in any guise or government tarriffs is a NO GO AREA. For all that does is to further reduce the people's purchasing power. That purchasing power is already maximally emasculated by roaring inflation and crash in the value of the Naira. Every civil servant in Nigeria today is earning less than 50% of what they were earning before APC took over at the federal level in real terms. That is a basic economic fact and cannot be a way to entrench sustainable anti-corruption drive. For our salaries indeed are a joke like a UN agency observed a few years ago!

In essence, like what happened during the American great depression of 1930s and the recent recession of 2008 that President Obama inherited, the key to economic recovery are policies designed to increase the money supply, get the banking system back on its feet and restore trust in financial institutions. There MUST be policies to increase credit to the productive sectors at single digit interest rates.

To surmise, Emir Sanusi has made a solid presentation which is largely at variance with the jaundiced reports of the Nigerian press. His submissions basically aligns with ours since late last year. We must get our Forex right to restore confidence, ensure credibility and boost investment. The challenge is that we have prolonged the remedy by poor policy implementation and policy uncertainty while the people have become more restless to now swallow more painful reforms.

President Muhammadu Buhari is faced with massive policy challenges with little time at his disposal to turn things around. One short term solution is the developing oil price recovery which hopefully should get to that magical number of $60 per barrel; though Goldman Sachs predicts $55 per barrel for the first half of 2017. A sustained oil price rally and an output at 1.9 million barrel per day plus should generate an adequate supply of Forex and reserves to stem the tide of the current maddening speculation.

Of course this must be coupled with a more credible face leading CBN and overhaul of the leadership echelons. United Kingdom recently turned to a Canadian to lead her central bank at a time of economic tumult with noticeable positive change. While we may not need an expatriate to achieve positive change here, a new outsider like UK's case will help rebuild our foremost institution's credibility and boost investor's confidence.

Download the SLS Presentation HERE. 

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