20% of Currency in Circulation Fake – Mailafia

…. Warns against tax increase

Twenty (20) percent of the currency in circulation in Nigeria is fake, former Governor, Central Bank of Nigeria (CBN) Obadiah Mailafia has disclosed.

Speaking at a three-day public hearing of the 2017 budget Monday in Abuja, he warned that economic disaster looms over high interest rate.

In his presentation titled: “Public Finance in the Context of Economic Recession: Innovative Options”, Mailafia said it was saddening that the authorities appear to be oblivious of the gravity of fake currency circulation which he noted was highly detrimental to the growth of the economy.

According to him, when fake currencies of that magnitude circulate, original currencies become scarce, noting that “bad money chase away good money.”

He attributed the current economic recession in Nigeria to a myriad of factors such as global fall in the prices of crude oil, dwindling foreign reserve, weakening of the Naira, negative growth and existing gap in public policy.

Other factors, he listed, include poor banking practices, stock market crisis, speculations, regulatory failure, corruption and fraud and weak macro-economic management.

He described the American depression of 1929 as one of the worst in the world history, recalling that though the crisis was caused by stock market crash, it was compounded by government’s myopic nature of the then government which he said resulted in increasing interest rate instead of lowering it as he warned the federal government and financial regulators against toying with high interest rates, pointing out that it will further compounding the economic woes.

He also warned against increasing tax, suggesting that the Federal Government should rather drive for more income tax by getting more people to pay instead of increasing it because it will further compound growth and investment.

He also narrated how the succeeding government of Franklin Roosevelt rescued the situation by boasting consumption and building infrastructure as he warned the incumbent government of President Muhammadu Buhari of heaping up excuses that it did not cause the recession, noting that the bulk stops on the president’s table.

He therefore advised the legislature and the executive to deploy the current budget process to stimulate the economy, focus on factors that can rejuvenate growth, stabilise the exchange and interest rate and provide a stimulus package that will ensure a synergy between the economic growth and budget package.

He said it was unfortunate that CBN allowed the pizza scheme MMM to operate in Nigeria, a situation which he said could be further detrimental to an already crippled economy in view of Nigerians’ gross involvement in the ponzi scheme through withdrawal of monies in the bank and subsequent investment in the scheme. He described it as risky for banking business.

He further advised the government to reposition key institutions, invest in key infrastructure that can create employment to teeming youth on the streets, reinvent railway operations and reduce taxation.

In his submission, Minister of Agriculture, Audu Ogbeh, traced the forex crisis to 1986 when Naira was first devalued by the military regime of Ibrahim Babangida, saying since then, naira has been devalued annually. Ogbeh also supported views on lower interest rate, saying unless economists and bankers collaborate on a reduced interest rate, “disaster lies ahead for Nigeria and Nigerians”.

In her presentation on behalf of Udoma Udo Udoma, Minister of Budget and National Planning, Zainab Ahmed, expressed regret that the 2016 budget failed to meet its target.

According to her, GDP growth fell from below 4.39 per cent target to 1.55 per cent; production volume from targeted 2.2 million to 1.81 million; inflation rose from projected 9.8 per cent to 17.8 per cent; exchange rate depreciated from projected N197 to $1 to N305/$ while revenue target of 3.8 per cent only yielded 2.117 per cent.

She added that oil revenue declined sharply while fall in oil price and shortage in oil production compounded the situation.

She however, said the 2017 budget was designed to achieve economic recovery, stimulate growth, pull Nigeria out of the economy and sustain macro-economic growth, adding that the budget was planned to expand the frontiers of private-public partnership, create jobs through small and medium enterprises (SMEs), create wealth and foster social safety for the poor and vulnerable in the society.

She further explained  that this year’s revenue projection of N4.942 trillion is 28 per cent higher than than N3.85 trillion in 2016 with 11 per cent projection on recovered loot.

However, Udoma who later arrived the venue of the event, said in line with the submission of Mailafia, the government had no plan to increase tax and VAT rates but rather seeking to broaden collection base.

“I will like to talk about taxation. A view was expressed that we should not increase taxes. We should broaden the collection of taxes, that is, precisely what is in the budget. There is no increase in VAT, there’s no increase in company income tax, there’s no increase at all in taxes,” he said.