The populist approach of successive Nigerian governments since the 1970s is impoverishing the nation and holding the economy back, says Kingsley Moghalu, a lawyer and political economist.
Moghalu, in a statement, ‘Beyond Minimum Wage: The Limits of Populism and the Need for Fundamental Economic Reforms’, issued in Abuja on Thursday, congratulated labour and the Federal Government on the introduction of a new minimum wage.
Populism refers to a political approach that strives to appeal to ordinary people who feel that their concerns are disregarded by established elite groups.
He added, however, that while the new minimum wage of N30,000 will help tackle poverty, there was need to do more, saying 95 percent of Nigerians still live below $5.5 a day (approximately N170 or N49,500 a month) while 90 million (nearly 50 percent of the 200 million population) live below the “extreme poverty” line of $2 a day.
“Populism, resilient in our governance culture since the 1970s, has made us a poor country,” Moghalu, who contested and lost against President Muhammadu Buhari at the last general elections, said.
“It is the reason Nigeria failed to develop a strong savings habit,” Moghalu said.
“The political culture operates with the mind-set that all public income must be spent, including even what we have not earned.
“It is why we did not set up a sovereign wealth fund in the heyday of the oil price, and even when we did decades later, the project still faced stiff resistance from several politicians,” the 56-year-old added.
Nigeria’s populist mentality is also why the Federal Government bailed out profligate states “that carry on as if the only reason they exist is to pay the salaries of bloated bureaucracies”.
“Populism should no longer hold rational economic policy thinking hostage in Nigeria,” Moghalu said.
To get the economy on a path of sustainable growth, Moghalu said beyond immediate policy actions, the constitutional restructuring of Nigeria back to true federalism by transforming geopolitical zones into regions that will be the federating units and geo-economic zones remains the long-term path to prosperity for the millions of the country’s poor.
The Federal Government should develop and establish, in consultation with labour unions, a set of policies to mitigate the likely short-term inflationary impact of the removal of petrol subsidies and permanently end such subsidies as from the budget for 2020, he said.
He also asked the Federal Government to establish a moratorium on foreign borrowing alongside measures to improve taxation revenue.
FGN should commence a progressive reduction of recurrent expenditure by 10 percent every budget year from 2020, Moghalu said.
He further suggested that the Central Bank of Nigeria should abolish differential exchange rates and establish a uniform exchange rate for all transactions.
The apex bank, he said, should also abolish the ban on provision of foreign exchange for the importation of most or all of the “40 items” denied forex. Prior to this action, the Federal Ministries of Finance and Industries, Trade and Investment should establish appropriate tariffs for the imports of luxury and non-essential items while creating policy to give reasonable advantages for locally manufactured goods, including enhanced export incentives, in order to realign the Nigerian economy towards competitive manufacturing for domestic and export markets, he said.
Moghalu urged FGN to submit an Executive Bill for the abolition of the Land Use Act. According to a study by PwC, this legislation and policy action will liberate hundreds of billions of dollars of “dead” capital (potential but suppressed financial values in land and property-related transactions) that could lift off the Nigerian economy.
FGN should strengthen the policy environment to encourage mass production of innovation and a pipeline of the products of innovation into commercial markets, he said.
He said the government should as from 2020 turn the N500 billion budget for the Social Investment Programmes into a one-time equity contribution to a public-private venture capital fund of N1 trillion for innovation and small scale entrepreneurship aimed at helping the poor and unemployed escape poverty by creating wealth and inclusive economic growth.
The venture capital fund should be managed by the private sector, which will bring in the other N500 billion in capital, he said.
This reform will bring in equity capital into the lower strata of the Nigerian economy, complementing efforts by the CBN, such as the establishment of National Microfinance Bank that will lend at single-digit rates, to improve affordable access to credit.
It will also contribute to bringing in the informal sector, which contributes about 65 percent of Nigeria’s GDP, into the formal economy and thus expands the tax net.
It will further create millions of new jobs for unemployed or under-employed youth, he said.
ISRAEL ODUBOLA
