In the effort to consider how foreign exchange policy, interest rates, inflation, etc. are relevant to the Nigerian on the street, The Liberal Forum, TLF, a think-tank, organised a panel discussion in collaboration with the Nigerian Economic Students Association, NESA, on the theme “Who Finance Don Epp? – Foreign Exchange, Interest Rates, Inflation etc. and Nigerians’ Welfare.”
The discussion, part of NESA’s 2017 National Economic Discourse, held at the Afe Babalola Hall of the University of Lagos on March 7. It was a gathering of financial sector specialists, pundits, business leaders, students and the general public.
Central to its reasons for engaging in this discourse, TLF, an economic and public policy think tank with a special focus on educating voters and citizens on policy choices, believes that the government will adopt policies that promote citizens’ wellbeing if the average Nigerian is equipped to make informed contributions to these debates.
In a statement prior to the event, TLF said that it was collaborating with students because they are more open-minded and ideally placed to champion a trend based on the coherence of the economic or public policy plans of candidates and political parties, than on ethnic or religious identification.
In the keynote address delivered at the event by lawyer and political economist, Opeyemi Agbaje, CEO of RTC Advisory Services, he explained that there are three critical problems with the structure of the Nigerian economy, and each of these revolve around questions of poor budgeting.
According to Mr. Agbaje, “The practice of government consistently spending between 60-75 per cent of its expenditure on salaries, emoluments, pensions and overheads of about three million Nigerians engaged in the public sector at federal, state and local governments, including political appointees, is compounded by the fact that the limited sums appropriated for capital projects and social services are subject to rampant corruption which severely diminishes the value received by ordinary Nigerians from government expenditure”.
He pointed out that structurally defective budgeting has seen 70 per cent of appropriations devoted to recurrent expenditure, amounting to severe suboptimal misapplication of the nation’s oil revenues. Mr. Agbaje then implored the government to offer structural, rather than emotional, responses to Nigeria’s economic challenges, such as through transparent and competitive privatisation, which will reduce the space for public sector corruption. This, to him, would also encourage the deregulation of public processes to minimise official indiscretion and enhance procurement transparency. On the current economic recession in the country, Mr. Agbaje stated that if the Nigerian government had agreed to devalue the naira by 10 per cent, as advised by foreign investors such as JP Morgan and not asked them “to go to hell”, the economy would not be in such a critical state now.
Economic analysts at the panel discussion advocated for the adoption of a strategy of deepening long-term savings through pensions and savings reforms, and also land reforms in order to eliminate the constraints of time and costs involved in land transactions. In an observation during the session, Dolapo Oni, the Head of Energy Research at the Ecobank Group, pointed out that although the Nigerian economy is quite diverse as a result of the huge contribution of the services sector to national GDP, however identifying which of the sub-sectors are formal and which are informal, constitutes a challenge. Yet, this is necessary in determining how much of the economy is regulated by government, and the potential sources of increased tax revenues. For him, “Oil and gas is 7 per cent of GDP but 95 per cent of exports in Nigeria, so in order to diversify our economy, we need to generate income from more than just oil and gas but also other sources of foreign income”.
In speaking on the Nigerian economic recession, the Director of Fritova Economics, Mr. David Adeoye indicated that whilst the economy is foreseen as coming out of the current recession sooner than expected, this would be as a result of the recovery of oil prices in the international markets, rather than any conscious action or policy reaction of the government. He also noted that although the economic recession is a really big problem in the country, yet many long-standing problems like corruption, low productivity, high unemployment and poor power supply would require more durable solutions, in order for Nigeria to get on the path of sustainable development.
This point was buttressed by Mr. Agbaje, who said that, “The federal government must continue to tackle corruption, and redefining the nation’s primary national security imperative as the abolition of corruption, which in any event, is what the constitution stipulates. Our leaders must find the political will to fight corruption, whether by its friends or foes”.
Also on the subject of the economic recession, Robert Omotunde of Afrinvest securities advanced his belief that the fall in global oil prices was not at the hem of the dire situation but the failure of government to put in place adequate policy responses to soften the effects of the price fall. He stated that while private consumption accounts for 65 per cent of our total GDP, the government should have appropriately adjusted prices on time, rather than its undesirable funding of lifestyle choices through forex shortages.
Mr. Omotunde added that the government should know that printing more money and borrowing will not get the country out of the recession – although borrowing cannot be considered as being entirely bad, if spent on income earners that would repay the debt.
The Director of Research and Advocacy at the Lagos Chamber of Commerce and Industry, LCCI, Vincent Nwani, equally stressed the negative effects of government borrowing and called on government to always put together policies that would create jobs and better the lives of Nigerians.
“The more government is borrowing; the funds are getting spent on the current generation. Presently, interest rate on our debts stand at about 40 per cent of total revenue. It is a lazy way out of the current problem to borrow money”.
In rounding up on the discussion, the Project Manager for TLF, Kunle Raji, observed that policies such as exchange rate, interest rate and inflation targets have a direct impact not only on the welfare of Nigerians but also on their life chances. As such, he urged Nigerians to seek to understand the rationale and potential impacts of government economic policies, so that they can effectively engage them on these.