Funmi Ekundayo, President of Institute of Chartered Secretaries and Administrators of Nigeria, ICSAN met with some journalists recently in Lagos and shared the institute’s thought on various aspects of the economy. Daniel Obi was there and here are the excerpts;
It is an interesting season in the general economy and Nigeria has just transited into a new government. We can also see that the new government is doing all its best to hit the ground running.
There are some areas that we as institute would like to comment and advise the new administration. There are key governance challenges we face as a nation and I will touch on a few of those issues and offer some kind of perspectives that would also help government as ICSAN prides itself in providing useful advice and perspectives to government on key policy issues.
Let’s start with the issue of inflation. What is the inflation rate in Nigeria today? It is about 22.7 % as at June, 2023. That is high. The CBN has over the time tried to control inflation by increasing interest rate. From what the text books tell us, that ordinarily should have had an impact in reducing inflation but what we see is not working. This year alone, the CBN has increased MPR about 4 times that is huge but has it had any real impact on the inflation? I would say no. it is therefore important for CBN to look beyond the orthodox method because it doesn’t seem to be working for us. I believe CBN should look beyond management of interest rate to curb inflation. There are so many areas that government can look into to make the economy more efficient.
For CBN, economic policies should be made, taking into consideration our own peculiarities and what will work for us. The generally believed notion is that when you increase interest rate, this will incentivise savings and borrow less and perhaps reduce spending and so inflation can also be reduced but we have seen this working against us both ways.
The high debt profile is an issue. There is no gainsaying that the servicing of this external debt has been a huge burden on the government. The current position of our external debt is not healthy for the economy. Debt in itself is not bad thing, but the utilisation of that debt is what is key.
In a situation where major percentage of the fund raised is used for recurrent expenditure, that is definitely not healthy but if government tailors it into critical and key sectors of the economy that can become a revenue generating asset, we would be sure that the revenue would be adequate enough to take care of servicing and paying the debt.
DMO recently told us that the current service ratio of nation’s debt as at 2023 is about 73.%. While the threshold should be about 50%. And this tells us that government has to find ways to increase revenue and therein lies the real work that government needs to do.
Revenue beyond oil
Governments at states levels have huge natural and human resources. Some are lying docile and some not effectively utilised, while some are not tapped at all. The time to begin to look outside and beyond the oil revenue is now to diversify the economy. We are advocating that to reduce the huge debt burden, government should with matter of urgency quickly diversify its revenue generating potentials.
Nigeria being a developing nation, we do require huge infrastructural development looking at our population of over 200 million. In a situation those debt are not channeled in the right direction, we will be taking the fund for taking sake without finding the tangible projects for the debt to translate into revenue.
Public Private Partnership
Government can utilise PPP to address infrastructural gaps. In that way the private sector is brought in to fund infrastructure projects it will reduce the capital required under the budget to fund those projects and therefore free some funds for government to use for other things. This will checkmate budget deficit.
I don’t think we are using PPP enough. Government can do much more to have a handshake with the private sector to embark on massive infrastructural development in the country. Again, government should look into the areas of honouring contracts. Government is a continuum and successive governments should be able to continue with projects of previous governments. A situation where investors in PPP are jettison by any government is not encouraging.
Corporate governance in public sector
That is one huge area of importance we are also focusing on as an institute. The thing is that once people hear corporate governance, they just assume it is only for corporate entities. But the truth of the matter is governance is across sectors. For us as an institute, we will continue to disseminate information about good governance across board.
Where we require good governance much more is in the public sector because everything done in that space affects everybody. It is a key area of focus for us and we would continue to pursue that so that even the public sector has sense of sticking strong corporate governance ethos which involves accountability, transparency, integrity and probity.
Cost of governance
It is a sticky part of democratic experience. This is because everybody believes that democracy is too expensive because of processes. There is no denying the fact that high cost of governance hinders development. There is clear connection between high cost of governance and the country’s sub-optimal developmental outcomes in real terms.
However, government can do something about over bloated aides, and huge salaries. If government asked its citizens to tighten their belts, government should be seen doing the same. We also find duplication of functions in MDAs and there is the need to restructure MDAs to be more effective. If there are overlapping functions, we can merge ministries and MDAs to reduce costs of governance.