Last week Thursday and Friday, the Ministry of Budget and Planning organised a widely publicised and extensively attended Medium Term Expenditure Framework (MTEF) conference. It brought together some of the country’s most popular economic and policy makers and consultants, both in the private and public sectors. The gathering was a prelude to the planned economic recovery measures to be delivered by the President Muhammadu Buhari sometime next month.
The meeting, because of the inputs required for inclusion in the recovery plan to be presented next month by the President, went beyond the debate on expenditure estimates for 2017 – 2019.
And that is the context of this piece, because it provides a good basis to understand a number of dimensions of the government’s fiscal direction. The first is whether what the President is to deliver sometime next month is the economic recovery plan that follows the bad growth and unemployment figures of the half year 2016. If this is the response, the timing is not only late, but also poor and weak. It suggests, perhaps consciously, the administration has concluded that it is best to concentrate all its strategies, efforts, and plans for the two full remaining years of the administration. For those years, the bet is on huge expenditure on infrastructure through increases in foreign borrowing.
However, as great as this may seem, there is an unnerving feeling that the diagnosis of the economic crisis that we are in is wrong. For the sake of repetition, please permit me to reiterate my understanding of where we are. The immediate cause of the economic crisis of the last two years, preceding this administration, is the fall in oil prices. However, over the last forty years, period of high oil prices, such as in the decade to 2014, only masked huge and fundamental economic problems that we caused and perpetuated by seriously flawed fiscal structures.
Understandably, successive administrations, including this one, have narrowed the problem to that of our inability to diversify our exports, which I only consider a symptom. This thesis is wrong on many fronts.
Nigeria exports before crude oil consists of agricultural products. So, in the case, the symptom that we now see, and regarded as the problem was in response to a national economic policy that redirected all significant economic policy making to the Federal government by vesting all resources under the soil in the centre. That policy, inadvertently, but theoretically and economically predictable, reduced the regions then, and States now, to economic appendages of the centre. A worse dimension to this is that, a large and growing populated country like ours, continues to focus and rely on crude oil, an exhaustible resource, with very limited potential for growth.
To the extent that it was not always oil resources that this economy relied on for foreign income, we cannot divorce the economic consequences that followed from the poor, naïve, weak, and folly fiscal policy that arrogates all resources underneath the soil to the federal government. Economic dynamics teaches us that, while rich countries rely less on natural resources today, it is also true that natural resources provided the foundations and required capital that many countries have leveraged on for their wealth. However, Nigeria’s current fiscal structure seriously impedes the States from leveraging on the “capital” deposits underneath their ground.
Therefore, the attraction for me, and the fixation on fiscal policies in my writing is based on my understanding that this government promises to be different. This government came to power, underlined by the change mantra. However, the fiscal policy has been anything but change. The tweak here, incremental changes there will not bring about the long-term economic sustainability, wealth, and reduction in poverty that we desire. So far, there is nothing new.
To the extent that the MTEF and other economic policy considerations will not consider policies and reforms that could include measures that allow States to collect a percentage of corporate taxes, reduce the share of federal government revenues from FAAC, the liberalisation of our ports system and dilute the concentration away from Lagos, the reform of the value added tax to allow States receive all VAT receipts etc, we are still far from correcting the fiscal policies that got us here.
These are the reforms that will ensure that States are able to develop local economies, and in the process develop growth centres across the countries. Until then, all that the MTEF gathering in Abuja has done is provided economists and policy makers to back slap each other, congratulate each other on measures and policies that are as old as the Nigeria itself, while spending millions on meetings and the communiqués that follows. I tire. I thank you.
Ogho Okiti
