A chance to reset economic policy

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Nigerian President Muhammadu Buhari was sworn in for a second and final four-year term last week after being re-elected in February.

After the tensions that characterised the general elections period and euphoria that followed winners being announced and subsequent swearing in of State Governors and the President, it is probably time for sober heads to begin to come to terms with the difficult task ahead.

Between 2015 and 2019 in the first term of President Buhari, the economy entered a recession for the first time in 25 years, while Nigerians are on average poorer than they were four years ago.

A population explosion, amid dwindling fiscal resources available for the 3-tiers of government means the government is largely unable to make a dent in the numerous infrastructure and social issues (education, health) facing most Nigerians.

The barely growing economy has also led to a surge in unemployment (now 23%) or opportunities which in turn has brought about a new brain drain, with Canada, Australia, The United States, The U.K, Europe, South Africa, U.A.E, Malaysia and even Brazil now major destinations for disenchanted Nigerians who see no hope for a brighter future if they remain in the country.

Anyone making an objective analysis of the President’s economic scorecard in his first term would be hard pressed to give a pass mark, in light of the woeful outcomes.

However therein lies an opportunity for the President to take stock and reset his economic policy for a more positive outcome in his second term.

Some early signs and pronouncements have been encouraging such as acknowledgement by the federal government of its poor fiscal position and statements about possibly selling down stakes in Joint Venture (JV) oil assets.

My advice for the President would be to narrow his economic focus in the second term to 4 – 5 areas, which would be 1) energy sector reform (oil, gas, power), 2) Public Private Partnerships (PPPs) to unleash infrastructure investments, 3) an export led growth model 4) education reforms and 5) healthcare reforms.

These five areas would then feed into other sectors.

For instance getting a working PPP model in place that can attract billions of dollars in investments would immediately positively affect aviation (if a concession agreement is signed with private investors for the airports) and the railways.

Better rail connections will help open up the rural areas and impact farmers who could more efficiently transport agric produce with fewer losses.

A comprehensive reform of the energy sector, to make it more attractive for dollars to flow into exploration and production of oil and gas, would impact the nation’s economy and treasury.

An increase in Nigeria’s oil production to 3 million barrels a day (a long sought but unachievable target), will have impact of FX inflows to the economy, while investments that improve gas output will impact the power sector and gas for industries across Nigeria, especially where there are shortages today, such as in the North.

Solving the liquidity crises in the electricity sector, possibly through a movement in tariffs, will help improve supply and reliability for consumers and industries.

Total reform of the energy sector would also probably not be complete without a look at how to get out of the fuel subsidy mess.

The Asian tigers (South Korea, Taiwan, Hong Kong and Singapore) from the early 1970s began to grow rich through an export led growth model, which entailed further openness to international trade in the form of export promotion strategies.

The belief was that greater openness would encourage greater spread of productive technology and technical know-how and adopting foreign technology to build out their own domestic technological infrastructure, which some say was a case of just copying from the West.

Whatever the case, Nigeria’s 200 million plus population cannot grow rich by just exporting oil to the rest of the world, without embracing value added manufacturing and being integrated into the global supply chain of multinational companies.

This is particularly a once in a lifetime opportunity as wages rise in China, Vietnam, and other parts of Asia.

In that sense Nigeria’s hostility to the Africa Continental Free Trade Agreement (AfCFTA) looks absurd.

Education and Health care reforms are no brainers because no nation on earth can get rich by being poorly educated and sick.

Nigeria’s overall health care spend estimated at N2 trillion, has government spending about N600 billion, health insurance funding put at N100 billion while the larger chunk of N1.3 trillion is mostly paid out of pocket by up to 80 percent of the population.

Looking at these issues one thing is clear, the President needs to take some tough decisions as well be decisive in the coming days and months.

A small team of core, competent Ministers is also needed to make any progress on the listed reform items.

In the end Nigerians need this President to succeed, for the good of all.

 

Patrick Atuanya

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