It has been five months since the elections and three months since the inauguration, and finally we have ministers. I think it is problematic that it took so long to pick ministers and assign them their portfolios, especially for a president who is in his second term and should have been looking to keep things moving. A lot could have been done in five months. Still, it is what it is and there is no point crying over spilled milk.
If the new ministers needed any reminding of the gravity of the situation they have been thrust with then here it is. A slow burning security crisis seems to have taken hold across the country with many Nigerians now scared to travel on highways.
The economy is sluggish, at slower rate than population growth. In fact, the last quarter for which data was published showed a slowdown in growth. The less said about the state of the education sector the better. Unemployment continues to rise with poverty rising as well, although we do not know for sure how bad it is as funding constraints continue to delay poverty surveys. All these challenges must be tackled in a fiscally challenging environment.
It has been in the news recently, and should come as no surprise, that the federal government is fiscally constrained. Based on the third quarter 2018 budget implementation report – unfortunately the latest report thanks to the absence of a finance or budget and planning minister for months – the federal government generated only enough revenue to service its debt and pay 47 percent of its recurrent expenditure.
The debt burden continues to pile up with debt servicing allegedly now accounting for near 70 percent of all actual revenues. The federal government’s liabilities also continue to increase with new wage demands from labour and ever-increasing fuel and electricity subsidies, or under-recoveries.
To make matters worse, the country is hopelessly exposed to dangers from a crude oil price shock with the excess crude account virtually empty and the sovereign wealth fund not holding up to two billion dollars in liquid assets. The foreign reserves are also not great; once you remove the liabilities to foreign portfolio funds the balance is probably only somewhere between $25 and $30 billion. For context, that is the range it was during the peak of the foreign exchange crisis in 2016 and 2017.
To add insult to injury, as the popular saying goes, the ministers have essentially only two years to propose and implement any policies and start to show results before the political cycle starts. As we know all too well once the political cycle starts the space for policy simply shrivels. Anything that is going to be done, especially if it is unpopular, needs to be done now.
If the ministers thought they had time to relax and enjoy the trappings of their office then they had better wake up and smell the coffee. The situation is dire, the funding options are constrained, and the time to implement is limited.
So, what do I hope to see in the next few weeks? On the fiscal front I hope to see a path towards the removal of fuel and energy subsidies. It would also be good to have an agreement with labour that does not lead to a big jump in the recurrent liabilities of the federal government and that includes labour’s buy-in on the closure of redundant federal agencies.
A plan to hedge against a potential collapse to crude oil prices probably needs to be put in place in lieu of an empty excess crude account. A legislative agenda for more fundamental tax reform would be in order too. In case we have not figured it out yet, telling FIRS to work harder is unlikely to yield results given the current tax structure. On education I hope to see a comprehensive reform plan that shifts the focus to basic education and learning and away from the federal government’s current focus on higher education.
On infrastructure, a legislative agenda to remove certain items from the exclusive legislative list and allow for private investment. There is no technical reason why seaports, airports, and even land border posts need to be the exclusive preserve of the federal government. On security, a pilot experiment on formal state police. It does not have to be everywhere, but we can certainly test it out in a few states we think can handle it.
No doubt there are countless other areas which require urgent policy attention. But for me, as one of the 180 million Nigerians, these are the things I hope to see in the next few weeks. Oh, we also need to plan a census too. Are we really 180 million people? If we don’t know then how can we even start to implement policy?
NONSO OBIKILI
Dr Obikili is Chief Economist of BusinessDay
