By Ayobola Abiola
I want to congratulate His Excellency Asiwaju Bola Ahmed Tinubu, on the occasion of his inaguration today as the President and Commander-In-Chief, Federal Republic of Nigeria. The President’s victory in the February 25, 2023 presidential election was no doubt well deserved, given his popularity, democratic credentials as well as his positive antecedents as a former governor of Lagos State. With President Tinubu’s assumption of office today, it seems to me that our country is indeed on the threshold of rapid and perharps quickening change.
This new government has the potential to do exceedingly well and ahead of previous administrations, because for the first time we have as our president a man that prepared real hard for the job of presidency and a man that offers us a fresh perspective on governance. His sagacity, brilliance, courage, rare determinaton and leadership skill mark him out as the ideal man to chart a new and positive beginning for our dear country. Therefore, I feel and convincingly too, that today marks the beginining of our country’s transformation and journey as a people towards nationhood at a level never witnessed before in the annals of Nigeria. This optimism is based on his visonary, audacious and result oriented approach to governance that was witnessed when he was the governor of Lagos State.
Naturally, expectations are high on all fronts and Nigerians expect the new administration to fire on all cylinders, as it begins the process of addressing some of our pressing national problems bodering on the economy, national integration, security, corruption, infrastructure and education amongst others.
Against this backdrop, this essay focuses on the analysis of President Tinubu’s past economic precriptions and pronouncements to enable us gain a deep insight into his thoughts about the role of government in economic development. As a private person then and national leader of the ruling All progressive Congress (APC), he was not just concerned about the development in the political space but was courageous enough to put forward his thoughts and suggestions at different times regarding the management of the economy, especially beginning with the emergence of the global pandemic in 2019.
Market Versus The State
Research has shown that the development of any nation doesn’t just happen by accident. Rather, it is through deliberate and conscious efforts on the part of political leaders and policy makers that make it happen. This is because the free market approach to economic development if left on its own does not guarantee a sustainable development because of its inherent imperfections. Hence, the need for State’s intervention in the market to guide the level and direction of economic development is considered strategic, especially for the less developed nations that want to move from the mere aspirations to the era of fulfillment.
A key rationale for government intervention is the assumption that market may not be able to provide all the goods and service desired by the citizens at all time. It is argued that the free market alone cannot be relied upon to generate the desired outcomes without it being guided, corrected, complemented and supplemented in certain situations by governments. This appears to me to be the president’s short term strategy for national development, given his economic economic prescriptions and pronouncements over the years and more recently during his campaigns. I hasten to submit that this administration will not only intervene in the market but will give credence to economic planning.
Creating A Developmental State
A deep analysis of President Tinubu’s economic prescriptions is his attempt at redefining what should be the role of government in economic development in the context of a less developed country. It would seem to me that the President is more inclined towards the creation of a developmental State rather than the nation continuing as a regulatory State. A developmental State is a State that is capable of generating growth on a long term sustainable basis. It is a State whose politics are geared towards the attainment of agreed developmental objectives whether by developing and promoting conditions for economic growth ( capitalism) or by organizing it directly ( socialism) or by a combination of the two systems ( mixed economy).
South Korea, Singapore, China, Taiwan, Indonesia, Thailand and Malaysia are developmental States that have been able to generate sustained developmental momentum over the past four decades. A unique feature common to these countries is that their political goals, economic choices and institutional structures have been developmentally driven while their developmental objectives have been politically driven. In these countries, political factors, which have normally included nationalism, ideology and a wish to catch up with the West have fundamentally shaped the urgency, thrust and pace of their developmental strategies through the structure of the State. This is a planned oriented market economy, which the President seems to be advocating with emphasis on giving hope to Nigerians; uniting our people; leveraging our diversity for growth; building of strong institutions; intimate relationship and support for the private sector and the public private partnership arrangement for infrastructure development.
These key deliverables imply that the President appears to favour a transition from a regulatory State to a developmental State, as epitomized by the nine (9) points recommendations he put forward as a private citizen to address the economic challenges that resulted from the emergence of coronavirus pandemic in 2019.
Reinflating The Economy During The Recession
The global lockdown did not only alter dramatically the patterns of social relationships in our world but indeed threatened the global economy on a scale much potentially larger than the 2008 global financial crisis. The IMF in its report on coronavirus had projected that the ‘Great Lockdown’ recession would not only drag the global GDP down by 3% in 2020, but would leave the GDP of 170 countries shrinking.
It was against the backdrop of the IMF prediction and the contractions in our economy in 2020 that the President in his recommendation canvassed for a massive spending as a way out of the economic crisis. His Excellency specifically recommended amongst others the need for government to support businesses to achieve mutually agreed goals; bridge infrastructure gaps; expand the school feeding programme and provide emergency sustenance payments to qualifying Nigerians to minimize the impact of covid 19 and the resultant job losses, for which most commentators and public analysts were in agreement.
Though, there were concerns with respect to the method of financing the expenditure, it should be noted that the President indeed recognised the downside impact of fiscal deficit monetization when he stated that “the only legitimate concern with deficit financing is inflation. However, in the present circumstance, the threat we face is more recessionary than inflationary. A bit of inflation is the cost we should be prepared to pay to avert a severe contraction”. The President simply wanted the recession halted, job losses minimized and business failure reduced through State intervention. His view indeed aligns with the views of other global leaders in the USA, the UK and a number of other Asian countries at the height of the pandemic in 2020.
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Transforming The Financial Sector
Another element of the President’s recommendation in 2020 was “financial sector measures to promote industrial development” as well as minimize the risks to the sector in an orderly fashion. The President, in advocating financial sector reforms wanted a comprehensive transformation of the financial sector through the adoption of modern technology; improvement in credit and financial services to the private sector businesses and individuals; increase in insurance penetration level to enhance risk taking as well as improvement in pension coverage. We feel that the President will put together a reform package that is aimed at strengthening and de-risking the sector as an engine of economic growth in line with the East Asian development experience. The ultimate goal is to promote the growth and development of a global financial Centre in Nigeria with solid financial infrastructure, which prioritizes financial inclusion and is capable of becoming a leading financial hub in Africa.
Debt Relief, Recheduling And Restructuring
The president had also recommended in year 2020 a diplomatic push for debt relief to free the country’s cash flows for investment in infrastructure. Sadly, the advice was largely ignored and this has culminated in the massive increase in Nigeria’s public debt, which currently stands at about N46.5 trillion. Clearly, this is putting enormous pressure on the Federal Government finances with over 90% of government revenue being used to service the debt. This is poor public financial management with significant negative implications for the citizen’s welfare, economic growth and development. To address this problem, the president has vowed to pursue a programme of debt relief, rescheduling and restructuring to give the new government the desired breathing space to allow for a reduction in our stock of debt, lower interest payments and longer repayment tenors. The proposed move by the President aligns with his vision of transforming Nigeria into a Developmental State that is capable of generating economic growth on a long-term sustainable basis.
Ease Of Doing Business
The President in the time past and more recently has frowned at the uncertain and the continuing negative conduct of public officials towards private capital and foreign investors as well as the regulatory bottlenecks, which have made doing business in Nigeria difficult. This implies that the business environment has remained largely uncompetitive and the ease of doing business not making the desired progress despite several pronouncements by government officials towards shortening the transaction cycles relating to business incorporation in Nigeria and the approval of necessary permits.
To address this problem, the president has pledged to improve on the ease of doing business in the most profound manner and within the shortest time possible. Nigeria is currently ranked 131 amongst 190 countries in the ease of doing business index. This position is clearly unacceptable and therefore requires urgent measures to smoothen relationships with prospective foreign investors. There is need to review the targets set for the National Competitiveness Council (NCC), establish a new Key Performance Indices (KPIs) and ensure the nation moves up quickly to within the top 50 in the global competitiveness ranking latest December 2024 to support the president’s visionary approach to industrial development.
Employment, Growth And Development
Over the years, the President has continued to advocate for a mutually rewarding partnership between the government and the private sector to promote the attainment of mutually agreed goals. The State in partnership with the private sector will set and agree on mutually reinforcing economic and social goals to be met annually under the supervision and guidance of the State through government approved incentive schemes. These goals would normally include production target, export target, employment target and foreign exchange target amongst others.
This strategy is in line with the East Asian development experience. The Japanese developmental State was pre-eminent in setting substantive social and economic goals for the private sector to achieve. Whereas the regulatory State merely establishes the framework for the private sector to set their own goals.
The President is particularly keen about re-industrialization and export promotion as a strategy for economic growth. In this regard, the President promises to stimulate economic growth through government intervention using aids and grants in the most profound way to revitalize, rejuvenate and modernize aging industries as well as encourage the establishment of new ones. In addition, we suspect a new regime of tariffs will be introduced that seeks to restrict the importation of non-essential products and locally made products to promote the growth of infant industries. In addition, the new government will need to review the international trade treaties to which Nigeria is a signatory.
The success of the East Asian countries in effectively promoting the growth of infant industries is well known and has been comprehensively documented in the literature. This was exactly the same approach adopted by most of the advanced economies to promote industrialization including the United States, which was the most protected economy in the late 19th and the early 20th centuries. In addition, export success is a vital element in successful infant industry promotion. It is important that the nation develops an export promotion strategy that is fully integrated with the infant industry development.
Policy Loans
The President has continued to emphasize the strategic role the State could play in promoting industrial growth and national development as well as helping to minimize the risks to the financial sector through the creation of special purpose banks and the strenghening of the existing ones to enable them fulfill their mandates. This strategy will free the CBN from commercial banking activities as well as ensure it remains focus on its core mandate of monetary policy management. The proposed banks will target critical sectors of the economy. We recommend for consideration as special purpose vehicles the establishment of Housing Construction Bank; Maritime Development Bank; Education Bank; Small and Medium Enterprises Bank and Tourism Development Bank.
The proposed banks will be used to implement policy loan programme to drive growth as well as steer the development of the critical sectors of the economy towards the desired direction. It is important to emphasize here that policy loans constituted the bedrock of the South Korea Industrial Policy, supported with effective monitoring to ensure efficient and proper utilization of intervention loans and the deepening of the inter sector linkage.
Infrasructure and Youth Employment
The President is desirous of bridging the infrastructure gaps through Public Private Partnership arrangements.
This is necessary to address the huge infrastructure gap, which over the years has continued to impede the nation’s development. Additional reforms in the power and transportation sectors have the potential to generate millions of jobs and thus, help to absorb a large pool of our youths that are currently unemployed.
Housing and Mortgage Programme
The President’s commitment to a large-scale affordable housing development programme through Public Private Partnership would not only help bridge the housing gaps but can lead the way in our economic recovery effort, with significant potential to create massive employment opportunities for our youths and professionals in the built industry. This should be complemented with the establishment of a special purpose Housing Construction Bank and the strengthening of the existing government owned mortgage institutions (FMBN and NMRC) to enable them deliver on their mandates.
Citizens Welfare
The President has promised to enhance the citizen’s welfare through the implementation of social security scheme. This will entail direct cash transfer to the poor old nigerians as well as provision of financial grants targeted at creating a pipeline of local entrepreneurs to help cushion the harsh economic conditions facing the vulnerable members of our society.
There is ample evidence of the positive impact social security schemes have had on people living with poverty as studies have shown that the schemes tend to increase spending on consumption as well as improve education and health outcomes.
For instance, the expansion of the school feeding programme will drive up school enrollment as well as help parents and guardians to return out of school children back to schools, and this currently stands at 16 million Nigerians. This programme has the potential to enhance agricultural production and households’ balance sheets and thus drive consumption as a recovery strategy.
Employees Loan Scheme
The president has given a firm indication to encourage the growth and development of a credit based economy to promote consumption and by extension reduce the propensity for corruption. Currently, the nation’s middle class is fast disappearing due to the harsh economic conditions, which over the years have significantly reduced households’ level of disposable income and the aggregate level of demand in the economy.
To address this challenge, we are inclined to recommend that governments at different levels, in partnership with banks should put in place policies and schemes to encourage retail credit schemes to make loans available to prequalified government and private sector employees to enable them access finance to acquire household items, cars and houses to enhance standard of living of Nigerian workers on a much bigger scale than it is currently obtainable. This will drive consumption upward, reduce corruption, help power economic recovery and promote development.
Conclusion
It is clear from the President’s economic prescriptions and pronouncements over the years that Nigeria is set for a complete transformation as a developmental State in the mode of South East Asia countries, and this will entail government intervention in key sectors of the economy, effective collaborations with the private sector on developmental goals and strategies as well as large scale partnership arrangements for infrastructure development.
Sir Ayobola Abiola, FCIB
An economist and Fellow of The Chartered Institute of Bankers of Nigeria, was Managing Director/CEO UBA Tanzania as well as Executive Director Federal Mortgage Bank of Nigeria.