28 September 2015, Lagos – Its noblest intentions notwithstanding, the Federal Government may have to do more to convince Nigerians its economic policies are not crafted to sink the ship altogether.
The Federal Government has toed policy paths, which officials vow are needed to bring the nation’s economy out of the woods. From The Guardian’s findings, however, not all stakeholders appear to be on the same page with government.
“There are more negatives than positives. If we look at the outcomes we have had in the past four months, they are quite drastic on the negative side. Gross Domestic Product (GDP) is declining; underemployment and unemployment are increasing, and the general level of economic activities is weak. The capital market is also declining. Coming from the position we were after the elections, when there were local and international goodwill and we had the opportunity to leverage on all that, unfortunately, foreign investment has stayed flat from the level we had in the first quarter,” said Chief Executive Officer (CEO) of RTC Advisory Services Limited, Opeyemi Agbaje.
According to the public policy analyst, the above situation can only be blamed on the absence of an economic direction. “Goodwill, on its own, is insufficient; it needs to leverage on the right policies,” he said, adding: “We have no policies, or at least, not a coherent policy. Nobody has defined a coherent economic agenda. We are just doing things on a day-to-day basis.”
The Treasury Single Account (TSA), particularly, has come under criticism. While experts acknowledged its constitutional basis, they argued that unless it is properly executed, it could stifle key economic nerves.
“The major advantage of the TSA is the fact that it will ensure and improve revenue inflow into the Federation Account, and this will improve the fiscal stability of all the levels of government – federal, state and local. However, it is necessary to caution against the resultant bureaucratic bottleneck that could be created in the disbursement of funds to the Ministries, Departments and Agencies (MDAs) for their operations. If care is not taken, the operations of some of the agencies may be crippled, if there is no adequate framework for speedy release of funds to the agencies for their daily operations. This is an area the authorities need to watch properly,” said Muda Yusuf, Director General of the Lagos Chamber of Commerce (LCCI).
Asked what he thought could happen if the Central Bank of Nigeria insists on its policies, in view of the negative effect some of these have on the real sector, Yusuf said: “Some industries will have to close shop, as their critical inputs diminish. There will be loss of revenue to government through customs duties, as there will be high decline in importation, especially through official channels. Contraction of economic activities will lead to loss of jobs. Nigeria’s country risk, as well as its sovereign risk, will be negatively affected because of the liquidity crisis in the forex market.
“The inflow of forex through autonomous sources will remain low, round tripping will continue to flourish in the forex market, given the high premium between the official and parallel market, as well as the transfer market. Transparency problem in the allocation of forex by the CBN will become more pronounced and vulnerable to corruption. Banks will witness increase in non-performing loans, as some of their customers face challenges with the current polices. Profit margins of businesses will drop because of the increased costs imposed by this policy.”
Manufacturers, a vital component of any thriving economy, have equally faulted policies of the CBN which they say are not in agreement with the fiscal policies of the Federal Government. “The CBN governor, I’m sure, has reasons for what he is doing. I know he carries the interest of the country at heart, but maybe the way he is going about it is faulty,” said President of the Manufacturers Association of Nigeria (MAN), Frank Udemba Jacobs.
“We paid a courtesy call on the CBN governor on the aftermath of these policies, and we told him that whereas we support the measures he is taking to strengthen the naira vis-a-vis the dollar, we appreciate the current position of government in terms of foreign exchange reserve, yet we figured that he ought to have consulted widely with stakeholders before coming up with these policies. The 41 items that are no longer valid for foreign exchange, some of those items are raw materials for manufacturers without which those manufacturers won’t be able to produce. That policy is on and people are undermining the policy by going across the border to transfer money overseas and pay people in naira, at an exorbitant rate. They can’t do anything about it and that is why we told the CBN governor, in clear terms, that we want items that are raw materials of our members not to be on the list; most of the items were lumped together.”
Asked for his views on how persons going across the border for foreign exchange would affect the cost of production, Udemba said: “That is why we are still appealing to the CBN to reconsider its position. All along, people have been using the raw materials they stacked up, but in the next few months, we believe that cost of production would have gotten so high and it would soon lead to inflation, unless the CBN amends these policies, including the issue of access to your domiciliary account for purposes of importing. That policy is neither manufacturer-friendly, nor Nigeria-friendly, and needs to be revisited. We are hoping that CBN will revisit that policy because it will not help the economy.”
- The Guardian