Economic challenge: If I were Buhari, I would pump N100trn into the system – Agbakoba

Olisa Agbakoba, a former national president of the Nigerian Bar Association (NBA), has said that the Federal Government missed the mark by believing that operating what he described as monetarism, would help the economy.

He defined monetarism as the policy of controlling an economic system by increasing or decreasing the money supply, especially in a gradual manner.

Agbakoba, who made the observation at a news event in Lagos, where he spoke on the state of the nation, with the theme ‘Moving the Economy Forward: Talking Points’, said the near-recession status of Nigeria needed more money to be pumped into the system to encourage spending. He added that if he were President Muhammadu Buhari, he would have pumped in N100trillion into the system.

“If an anaemic patient came to me, if I were a medical doctor, I would pump blood into him because he needed blood. But if a person with excess blood should come to me, I would drain away some blood from him. So, what I would do depends on the health condition of the patients,” he said.

“As we speak, our economy is anaemic, seriously needing blood. Government has been retrieving money, keeping money in TSA and the huge amount is not being spent. Why I cannot overtly criticise President Buhari for adopting monetarism is because we have to realise that the out-gone government was rather profligate. They spent money but we saw nothing. But at the same time, I will not align myself with the view that not spending money is the way to go. Buhari felt that restraint was what Nigeria really needs now. If we gather all the money and put in TSA, we may further go into recession. Government must urgently reflate,” Agbakoba said.

“Government is running a very stringent economic policy (strict monetarism). The highlight so far seems to be plugging leaks and cutting budget in order to boost the anti-corruption campaign. Treasury Single Account (TSA) is another definitive milestone. Over N3trillion has been saved so far. Anti-corruption is yielding results as huge monies are being returned. The challenge is how to move from austerity to stimulus,” the Maritime lawyer said.

According to him, critical nuggets include getting Financial Services Sector (FSS) right: “This would involve limiting the role of CBN and creating a Financial Services Agency (FSA). CBN is currently overburdened. It should focus on lending, interest rate and exchange,” he explained.

On what the role of the Central Bank of Nigeria (CBN) should be in relation to FSS in keeping inflation in check, adopting the policy of quantitative easing (QE), Agbakoba said: “Nigeria is technically in recession with her 10percent growth rate dramatically reduced to 3percent. To carry out QE, central banks create money by buying securities, such as government bonds, from banks, with electronic cash that did not exist before. The new money swells the size of bank reserves in the economy by the quantity of assets purchased, hence, ‘quantitative’ easing. Like lowering interest rates, QE is supposed to stimulate the economy by encouraging banks to make more loans. The idea is that banks take the new money and buy assets to replace the ones they have sold to the central bank. That raises stock prices and lowers interest rates, which in turn boosts investment.”

On job creation and stimulation of small businesses, he believes that “if we get the FSS right, job creation and stimulating small businesses would naturally fall in place. Jobs can only be created when we have a vibrant manufacturing and real sector. Currently, the manufacturing sector is in a comatose state with the Manufacturers Association of Nigeria (MAN) constantly complaining of the need to reduce the cost of doing business. Small businesses are hindered because of absence of capital: they cannot easily access loans from banks. Interest rates are high and banks are shy to lend because of the problem of bad debts, exacerbated by inefficient regulatory environment.”

The senior advocate of Nigeria (SAN) also canvassed review of public/private sector economy, as according to him, “public sector economy is not properly defined in Nigeria. Whilst Nigeria’s state-owned public enterprises are often ineffective, China’s Model appears very effective. The privatisation escape route that Nigeria is often eager to employ has not been successful. In fact, none of the privatised entities in Nigeria could serve as a model. It is urgent therefore, that Nigeria reviews her public/private economy. Government must control the overarching sectors of the economy.

“There is need for a strong public/private sector framework. It is important that despite current challenges, Nigeria is still rated as the 20^th largest economy in the world. Reviewing Nigeria’s public/private economy would go a long way in turning potentials into reality and move the economy forward.”

Speaking on meeting the funding gap in relation to devaluation and diversification, Agbakoba noted that the choice was between regulation and deregulation.

“The regulation logic would encourage the CBN to dictate the exchange value, in this case devalue it. This is the position favoured by the International Monetary Fund (IMF). The contrary view, which I feel is more reasonable, is to deregulate the environment and allow market forces to determine the exchange value. Also tied to this is that the CBN should allow free flow of forex. CBN should expand the space and allow all Nigerians to participate in this. Currently, the centralised system on this issue excludes critical stakeholders from Dangote to the ‘Mallam’ on the street. The problem with forex is that CBN does not have enough, but if we expand the space, we would be surprised that many Nigerians can participate and increase the stock. All that is needed is to create a legal framework to encourage this participation, subject to money laundering rules.”

“Diversification is already notorious in the face of the post oil economy that we are witnessing. The roadblock, however, is the massive infrastructural deficit to serve as a backbone. We must return to ‘Receivable Financing Option. The proposal that Nigeria pledges her oil to receive loan from countries like China, should be revisited. We need to fill our huge deficit gap by receivable financing. It is only such huge receipt of funds that could plug the serious infrastructural deficit that impedes diversification in Nigeria,” Agbakoba further observed.

Zebulon Agomuo