The path to economic prosperity

By many accounts last year was a wasted year for businesses in Nigeria. And it could not have been better for the Federal Government itself with a more than 40 per cent collapse in her gross revenues. While the revenue position for the government may show no great prospects for the new year, the government must ensure that 2016 does not pass without taking the critical but painful steps required to cushion the collapse of the economy and begin the tentative steps back to economic prosperity.

Economic activities last year experienced a downturn in response to the declining petro-dollar inflow as Brent crude traded at below $50 per barrel. The impact of reduced economic activities is the continuous slide in the collectible federal revenue, as imports declined while corporate performance remained tepid, resulting in declining tax payment to the government. The economy has to be jump-started again through infrastructure financing for it to regain its vigour.

Arguably, it matters less whether this government is of a leftist bent or that its ideas are old-fashioned and out of tune. The Buhari-led administration has not been wanting in affirming its resolve to promote the welfare of the greater number of our people, a goal that must be shared by all well-meaning Nigerians irrespective of political or economic inclination. There also must be an understanding by all that not only is time running out, government revenues are also shrinking desperately and the government is no longer in a position to do all it desires to do.

Figures at the Central Bank show that the total revenue collection for the federation in 2012 was $40 billion by the NNPC, the Federal Inland Revenue Service (FIRS), the Directorate of Petroleum Resources (DPR), etc. A year later in 2013, that sum had dwindled to $37.5 billion and by 2014, the collections improved marginally to $38.6 billion. However, by the end of November 2015, only $14.8 billion or less than 40 per cent of the average for the preceding years’ had been received.

There are simple but practical steps Nigeria has to take without more delays and these can start from right signalling to basic steps many have been waiting for since May 29, 2015.

While we support the resolve of this government and its pro-poor stance, we are unrepentant about the need to canvass urgency in the resolution of the economic crisis Nigeria is in.

Whilst not against the principle of subsidy, we believe this government must be unequivocal about petrol subsidy and why it must give way to other more effective, less corrupt and focused mechanisms for cash transfer to the poor in our midst. It beggars belief that anyone can argue that petrol subsidy spending, as it is today, actually benefits the poor.

And with government revenues predicted to fall even as the economy shrinks further, this government needs to urgently chart another path. An end to petrol gas price fixing by government will open up the downstream sector to the private capital that has been waiting to come in and also begin the process of diversifying the sector away from crude oil. Nigeria can also be a giant in gas, refining, petrochemicals, fertilizers, etc.

There is also an urgent requirement for government to fully embrace privatisation as a means of raising revenues and, more importantly, as the tonic required to diversify Africa’s largest economy to get life back into it. Here, the first step should be in the government selling down its stake in oil joint ventures, the refineries, rail, airports, solid mineral and electricity, etc.

Nigeria needs to urgently free gas prices, resolve disputes with its mainly western joint venture partners on the terms for gas assets in PSC concessions so that the nation’s power stations can be better supplied with the fuel they need.

Nigeria must also cut the suffocating cost of running its government. Despite the best attempt, senior civil servants appear to have been able to smuggle into the 2016 Appropriation Bill several wasteful spending items and there are reports that the legislators will do their best to include the controversial “constituency projects” spending which has become quite simply a massive drainpipe.

Day by day, Nigerians are finding that there is something personal about an economy that is collapsing.

In the end, this administration will be one year on May 29, and undoubtedly, Nigerians will be demanding that it shows tangible results for its stay in power.