• Experts back reforms
• Foundation laid for growth
Ahead of the one-year anniversary of the President Bola Tinubu’s administration, economic and finance experts yesterday examined the scorecards of the government, with most agreeing that the government has laid the foundation for economic rebound.
Experts said despite the obvious challenges that came with many of the reforms, the macroeconomic changes initiated by the government were necessary and unavoidable.
They explained that reforms for long-term sustainable economic growth, like the one promised by Tinubu, take time to fully materialise, calling for patience and support for the macroeconomic reforms.
Many experts, however, said the government appeared to be losing its initial momentum. They said the government should rededicate itself to re-energising the key sectors of the economy.
Experts who spoke yesterday included Managing Director, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf; Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe; Managing Director, APT Securities and Funds, Mallam Garba Kurfi; Managing Director, AIICO Capital, Mr. Femi Ademola and Managing Director, HighCap Securities, Mr David Adonri among others.
Yusuf said the performance review of one year of the current administration requires proper contextualisation as there were significant legacy issues which posed serious challenges, especially from a macroeconomic point of view.
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According to him, at the time the government assumed office, the fiscal space was very tight with the Central Bank of Nigeria (CBN) assuming the role of a major financier of government operations and CBN’s ways and means financing rose to levels which were unprecedented in the country’s history.
He said there were also legacy of incredibly dysfunctional foreign exchange market riddled with roundtripping and all manners of malpractices, which created major distortions in the economy, as well as fuel subsidy regime which created opportunities for corruption and bleeding of the country.
He said Nigeria was at a point when oil subsidy was obviously unsustainable and the state of affairs in the country’s oil sector was a major disincentive to investors, with the oil sector becoming hotbed of corruption of huge proportion.
He noted that the huge backlog of matured foreign exchange (forex) obligations was in excess of $7 billion, which created a major liquidity crisis in the economy and undermined investors’ confidence.
He said the government over the one-year period has made significant progress in restoring some sanity to the oil producing areas, which were hitherto plagued with vandalisation of oil production facilities with incredible impunity.
“The truth is that reforms take time to be conceptualised and executed. It could take even longer time for the results to be felt. But my view is that the reforms were necessary to pull back the economy from the brink.
“Much has been achieved with fiscal consolidation. Government revenue had improved significantly following the reforms. There was also the tax reform initiatives.
“The point to stress is that much of the first year was devoted to corrective reforms which were in many instances also painful. But the reforms were inevitable because you can’t build something on nothing. Fixing the economic fundamentals were crucial for economic sustainability,” Yusuf said.
He, however, noted that the government has not shown enough agility in terms of the speed of delivering mitigating measures to ease the pains of the reforms.
“There is also need to address the volatility in the foreign exchange market. Frequent swings in the exchange rate is very detrimental to business because of the uncertainty that comes with it.
“The CBN should also address the frequent changes in exchange rate for import duty computation. This rate should actually be fixed at N1,000 per dollar or even less to subdue current inflationary pressures,” Yusuf said.
Amolegbe said the government’s reforms were well intended and necessary to restore the economy to the path of growth.
He said the government, at the cost of popularity, took painful decisions which showed leadership courage and commendable long-term view of the economy.
“To my mind, the first duty of any new government is to steady the ship of state by ensuring a rancour-free transition and continuity in desirable policies while stating clearly its own policy objectives and rallying the populace to support same. This isn’t always as easy as it sounds as our recent history has shown. So, in this regard, I will score the administration quite high.
“Also, political leadership always entails keeping an eye on the next election and taking actions that are popular with the electorate. This sometimes means kicking the can down the road regarding taking tough economic policies decisions. This administration has shown guts in bulking this trend and focusing on policies that are in the long term interest of this country economically, rather than what is politically expedient at this time. For this, I also give them kudos,” Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS), said.
According to him, while the decision to remove fuel subsidies as well as liberalise the forex market have led to serious hardship to the populace and have unsettled the economy on the short run, but ultimately history will adjudge them as the right steps to have taken.
He noted that while some might argue about implementation strategy and timeline for the removal of the subsidy, none can argue that it’s not the correct decision to take.
“Our fiscal balance sheet as a nation is already looking better and states that used to owe staff salaries are now paying as and when due,” Amolegbe said.
He, however, noted the need for government to improve in its efforts on security, infrastructural development, agriculture and trades going forward.
“We also look forward to efforts to utilize the capital market more in the financing of its programmes. Overall I will score the administration well above average on the economic and financial front,” Amolegbe said.
Kurfi said the removal of oil subsidy and the streamlining of the forex market were policies that would take the economy to the next level.
He added that the government’s educational reforms such as student loan programme and additional internal funding of institutions would impact positively on the country’s human capital development and reduction of poverty.
According to him, with students’ access to loans and institutions being able to apply additional funding for their development, there would be increased opportunity for all Nigerians to acquire necessary education while also reducing industrial crisis in the educational sector.
Kurfi however said the government “needs to do more in terms of security and energy”.
Ademola said one year was a short period to appraise the government but many of the reforms were in the right direction.
According to him, while economic indicators are not at the right places now with high inflation, interest and forex rates, the government should be commended for keeping the country standing.
“If we check economic fundamentals which may not be visible to the public, the government should be commended for keeping the country standing. The economic reforms-the removal fuel subsidy and foreign exchange subsidies, were in the right direction to strengthen the economy and allow the country to continue as a going concern.
“The government appears to have started well with road infrastructure as can been in the Federal Capital Territory (FCT) and some other states. However, they have not really done anything in one of the most priority sectors of the economy, power,” Ademola said.
He lamented that security has also not improved significantly despite the promises of the government, noting the need for urgency in addressing some of the signs of governmental failure.
“While there is still time to do a lot before the expiration of the tenure of this administration, the citizens are not ready to wait until very late on. They want to see actions immediately,” Ademola said.
Adonri said the government has lost its momentum and many of its programmes being distorted by conflicting policies.
According to him, the market reforms initiated at the beginning of the administration were unarguably the right steps in correcting the economic imbalances that had plagued the economy for long. However, their implementation has been distorted by conflicting public policies and the inability of the government to restore firm order to the rural economy.
“While the naira has been floated, the forex cannot be said to be deregulated as it lacks a modern market structure that eliminates administrative interventions. CBN remains an overlord in the forex market where it allocates hard currency rather than being a participant like every other socioeconomic element in the country. In spite of continuous tightening of monetary policy, inflation has continued to rise indicating non responsiveness to monetary policy tools and neutralization by expansionary fiscal policy,” Adonri said.
He noted the challenges facing production and trade sectors of the economy noting that insecurity has crippled domestic production while trade policies by government are geared towards income generation rather than trade facilitation.
He decried government’s continuing debt accumulation amid challenging macroeconomic environment.
“For the laudable market reforms to work, first and foremost, insecurity must be eliminated. Secondly, fiscal interventions must be stepped up to close the supply gap which underpins Nigeria’s galloping inflation. Finally, fiscal and monetary policies must be realigned so that imbalances can be expeditiously dealt with,” Adonri said.
