Former governor of the Central Bank of Nigeria (CBN), Prof. Charles Soludo, has expressed support for President Muhammadu Buhari’s emergency economic bill aimed at reviving the economy.
In a mini-blueprint for the All Progressives Congress (APC), Soludo also proposed a public spending of 15 percent to 20 percent (N14 trillion to N19 trillion) of the nation’s gross domestic product (GDP) to steer Nigeria out of recession to the next level.
He said the document, acquired by TheCable, is not a “blueprint” in itself but “only broad pillars,” which could be worked upon by a dedicated team to save the economy.
Highlighting the challenges face by the country, Soludo said Nigeria is ranked number 13 in the failed/fragile state index, behind Somalia, South Sudan, Central African Republic, Sudan, Yemen, Syria, Chad, Congo D.R., Afghanistan, Haiti, Iraq, and Guinea.
Professor of Economics, Soludo said this was due to uneven economic development, poverty and economic decline, demographic pressure, group grievance, refugees and IDPs, human flight and brain drain, state legitimacy, human rights issues and rule of law, poor security apparatus, factionalised elite and external intervention.
Soludo stated that Nigeria’s GDP compression from about $575 billion to about $296 billion (almost 50 percent) back to second position in Africa after South Africa could have been avoided.
“Exchange rate and crude capital controls: confusing trial-and-error of tried and failed neo-socialist command and control policy regime of 1960s- mid 1980s.
“As predicted, quantities (employment and output collapse)! Capital market comatose; capital flight with vengeance, private investment pulse, inflation soars, and twin deficits exacerbate. Economy in Recession compared to APC 10 percent Growth; three million jobs per annum.” He said the recession was caused by “delayed, incoherent (dysfunctional) and incomplete adjustment exerting great toll on the economy”.
“Outcomes so far (especially in 2016) self-inflicted by acts of omission and commission. Nigeria would have avoided a recession: One year enough for blaming fall in oil prices; after that blame our failures.”
At N6.06 trillion, Buhari’s budget of change was seen as the biggest budget in Nigeria’s history. But, Soludo says the budget, in dollar terms, is the smallest in recent years.
“Government’s budget in US$ is smallest in recent years $15- 19 billion, depending on exchange rate and about five percent of GDP— or approx. $80 per capita.” In context, former President Goodluck Jonathan’s last budget in 2015, was 26.4 billion in dollar terms, while Buhari’s 2016 budget is only 19.9 billion in dollar terms. Government’s 2016 budget signals more of the same, with tinkering at the margins; bail-outs, borrowing,” Soludo added.
In proffering solutions for the APC-led government, Soludo said the emergency economic bill is “a positive step forward; akin to Shagari’s ‘Economic Stabilization (Austerity measures) Act of 1982.’”
He warned that it “must be seen as only ‘first step,” and added that the problems are “beyond short-term demand management.”
He also said the focus so far has been stabilisation plus reflation (basic pump-priming), which he called “faulty and could become race to the bottom.”
He said the transition to an oil-independent economy is not sustainable by merely pumping money into the system but must include an agenda for supply-side/structural transformation.
He said the APC has 607 working days to make an impression on Nigerians. “Big ideas to steer the economy to the next level need aggregate public sector spending of 15-20 percent of GDP; unconventional monetary-fiscal-exchange rate-financial regime; structural and institutional changes; infrastructure boom; unleashing the states.”
He said the APC needs a policy war room, which would drive political transformation and distinguish APC states.
“Politics always trumps economics, although sound economics is excellent politics: Sustainable change is impossible without political transformation of Nigeria!”
“No successful transformation to a ‘productive and competitive economy’ with META-level institutions designed for ‘distribution and consumption’”
He asked the APC to put up an agenda for “competitive federalism via fundamental constitutional change, including fiscal federalism—taxation powers, rights over natural resources, wage setting, fiscal responsibility, etc – breaking from unitary-federalism of uniform standards to multi-speed federalism with only minimum standards”.
“Too many of existing laws are inconsistent with a regime for competitive production; new ones needed.”
He proposed, among other things, that the policy war room should be fully funded to drive an industrialisation plan.
“Merely getting infrastructure and prices right won’t automatically ignite industrialization: It requires intensive case study approaches – Dangote or our big banks did not just happen: deliberate efforts were set to ‘create them.’”