Can Buharinomics pull Nigeria back from the brink? (1)

From an economic recovery prism, Abenomics is an aggressive set of monetary and fiscal policies combined with structural reforms geared towards pulling Japan out of its 20-year-long economic slump which she descended into after attaining soaring prosperity heights in the mid 1980s, buoyed by a property boom.

Like Japan (although to a far lesser degree), Nigerian economy has dropped from its lofty GDP heights of between 4-5 percent a couple of years ago arising from buoyant international oil/gas price, to its current position of a little over 2 percent, and like Abe of Japan, President Muhammadu Buhari, in a bid to give Nigerian economy a shot-in-arm following oil/gas price crash, seemed to be poised to ruffle the feathers of entrenched powerful political blocks that have ruled the country since her return to party democracy 16 years ago.

Despite not officially having a standing economic management team to reflate Nigerian economy and pull it out of the brinks, Quantitative Easing (QE) measures, like the actions taken by the Japanese president, are being introduced. And that has been coming by way of bailout ($2.3m) distributed by the FG to 27 state governments that had fallen behind in payments of salaries of public servants, in addition to the Debt Management Office conversion of short-term money market debts of ailing states totalling to long-term bonds to Deposit Money Banks. In a bid to reflate the struggling economies at the state levels so that Nigeria does not slide into recession, the CBN, like Bank of Japan, is also at the heart of the economic rescue mission. The CBN is also providing generous loans to the financially-challenged states up to the tune of N338 billion.

By way of comparison, at the end of the stimulus exercise, it is estimated that about N1 trillion would have been pumped into Nigerian financial system with a GDP of about $516 billion in less than four months, just as information gleaned from Reuters, Bloomberg, Business News Africa, and Financial Times indicates that Japan has injected up to $210 billion into her economy with a current GDP of $4.6 trillion in a space of about three years.

The aggressive infusion of massive funds into Japanese economy, which is a sort of shock therapy, initially produced the desired result of modest growths of about 1.7 percent GDP in the economy during first and second quarters, although it has slipped in the third quarter.

Unlike the Japanese situation, the jury is still out on the effect of the generous injection of funds into Nigerian economy by Buhari’s administration in a bid to jolt it into a return to impressive growth trajectory. Perhaps a few months gestation period may be required for results to kick in. Nevertheless, the administration appears not to be resting on it oars as other aggressive structural reforms are already being implemented to bolster the effect of the stimulus package. One of such bold initiatives is the newly introduced Treasury Single Account and the soon-to-be-adopted Zero Base Budgeting, which would be the flagship economic policies of the Buhari administration and represent a major paradigm shift in public sector governance.

While the TSA is aimed at streamlining the Nigerian revenue into a single account at the CBN to stem the financial leakages arising from maintenance of multiple accounts by MDAs, the ZBB initiative is expected to promote efficient and effective allocation of government funds saved through TSA by adopting a budgeting concept that is hinged on cost benefit analysis and facilitates optimum utilization of government’s scarce revenues, as opposed to building on historical experience which is currently the practice. In a nutshell, ZBB is performance-based budgeting as individual budget items are evaluated for their merits or demerits before funds are committed.

Recall that when the idea of TSA was first mooted, there was palpable fear by bankers that the exercise would result in about N1 trillion public sector funds being pulled out of the banking system which would negatively impact on the ability of banks to lend to customers, but at the end of the exercise, Nnamdi Okonkwo, GMD of Fidelity Bank, under the auspices of Bankers’ Committee, has revealed that less than N1 trillion was actually mopped up.

The good news is that although public funds have been withdrawn, it has had minimum impact on availability of liquidity, so the anxiety by bankers was hasty as the withdrawn funds are actually going to be re-injected into the financial system by way of payment to local contractors to whom, according to information from DMO, Nigeria owes in excess of N10 trillion. The fear of job lay-offs by labour activists has also been allayed.

Regarding the ZBB, which Nigeria is bracing up to adopt, it may be recalled that Jimmy Carter of the USA was the first to introduce the budgeting method into government when he was the governor of the State of Georgia at about 1971, and it had salutary effect in the allocation of funds in government, after Peter Pyrr first mooted the idea in a Harvard Business Review article in 1970. Subsequently, Carter introduced it at the federal level when he became president around 1977. His predecessors, Ronald Reagan, George Bush and Bill Clinton, retained it when they held sway as presidents of the USA until the 1990s when the concept was discontinued.