The Nigerian Senate resumed plenary on Tuesday, September 9, after recess, with how to pull Nigeria out of recession top on its agenda. Assistant Editor, CHUKWUDI NWEJE, looks at the issues on the lawmakers’ efforts to pull the nation out of its present crisis.
When the Senate reconvened on Tuesday, September 9, after its vacation, one agenda occupied the minds of the lawmakers; how to get the country out of the economic recession currently facing it.
Before the lawmakers reconvened, the Senate President, BukolaSaraki, had indicated that they would deliberate on the measures to pull the country out of its economic crisis. Saraki, in a welcome address to his colleagues, presented a 14-point plan on the measures the federal government must take to address the situation, stressing that if the recommendations were taken, the economic crisis in the country would be the shortest ever in history. The measures included steps the federal government must take and how the legislature will complement the efforts of the executive.
They include: the executive putting in place leadership level engagement platform with the private sector; government raising capital from asset sales and other sources to shore up foreign reserves; consideration on tweaking the pension funds policy within international best practice safeguards to accommodate investment in infrastructure and mortgages; and the government and Central Bank of Nigeria (CBN) agreeing on a policy of monetary easing to stimulate the economy and harmonise monetary and fiscal policies until economic recovery is attained.
Others are that the government re-tooling its export promotion policy scheme with incentives such as the resumption of the Export Expansion Grant (EEG) and introducing export-financing initiatives; engaging in meaningful dialogue with those aggrieved in the Niger Delta and avoiding an escalation of the conflict in the region.
The executive was also advised to consider the immediate release of funds to ensure the implementation of the budget for the near short term, to inject money into the economy.
Also on the plan of action is the need to support the agriculture sector and agro-allied businesses to boost value addition and jobs creation; the need for government to devise immediate strategies to ease the suffering of the ordinary people across the country while it worked on the medium to long-term plans.
Saraki also stressed on the need for the legislature and executive to co-operate and ensure the passage of the Petroleum Industry Bill (PIB) into law as soon as possible to stimulate new investment and boost oil revenue.
While the executive worked on the recommendations, the National Assembly would support with the necessary legislations and oversight activities, the Senate president added.
According to him, these will include accelerated bills aimed at reforming the mortgage sub-sector for growth and accessibility in a manner that deepens people’s access to housing, jobs and economic activities; working on the National Development Bank of Nigeria (Establishment) Bill 2015, which will provide long-term cheaper source of funds to the private sector; quick commencement of work on the amendment of the Nigerian Ports and Harbours Authority Act (Amendment) Bill 2016; National Road Fund (Establishment, etc); National Transport
Commission Act 2001; Warehouse Receipts Act Bill 2016; Review of the Companies and Allied Matters Act (CAMA), Investment and Securities Act (ISA) and Customs and Excise Management Act; Federal Competition Bill 2016; and the National Road Authority; as well as exploring the possibility of backing certain key government policies with legislations that have time limitations.
Saraki noted that this would help give confidence to investors to go into certain areas of the economy and invest without the fear that such policies will suffer reversals and loss of investment.
Africa’s biggest economy
What even the most enlightened economists are yet to come to terms with is the sudden drift of the country from its commanding height of Africa’s biggest economy to recession. They are really shocked at the development. And this is not without reasons.
In the last decade and half, Nigeria had made deliberate polices aimed at economic development. These included the Financial Sector Strategy (FSS) 20:2020, a national reform programme aimed at developing and transforming the country’s financial sector into a growth catalyst to fast-track the achievement of the Vision 20:2020 and engineer its evolution into an international financial centre.
FSS 20:2020 focused on strengthening and deepening the domestic financial market, enhancing the integration of the domestic financial markets with the external financial market, supporting the real sector and promoting sustainable economic development.
The programme launched in August 2009 was a deliberate effort to actualise extensive work done by Goldman Sachs in 2001, which projected that the economies of Brazil, Russia, India and China (BRIC) would surpass that of the G6 nations based on extrapolation of growth rates, demographic changes, capital accumulation, diminishing returns with development, exchange rates among others.
Goldman Sachs had further predicted that after the BRICs, there are the Next 11 (N11) countries, which have the potential to be ‘BRIC-like’ in the future. Among the N11 countries mentioned in the report were Nigeria and Egypt, which Goldman Sachs said would overtake Italy in Gross Domestic Product (GDP) size by 2015.
The programme appeared to be well-conceived because five years later in April 2014, Nigeria’s economy was reported to have overtaken that of South Africa to become the largest in Africa.
Nigeria’s economic growth to the largest in Africa followed the country’s “rebased” GDP data to include previously uncounted industries like telecoms, information technology, music, online sales, airlines, and film production which showed that Nigeria’s GDP for 2013 totalled N80.3 trillion (then $509.9 billion), compared to South Africa’s $370.3 billion, at the end of 2013.
Even with the statistics, some economists argued that the rebased figures changed nothing because at estimated population of 170 million people at the time, Nigeria’s population was three times larger than South Africa’s, which had a per-capita income put at three times larger than Nigeria’s.
Slide into recession
As if the scepticism trailing the figures was not enough, barely four years to the target date of 2020, the economic gains the country boasted to have posted in the past 15 years took a frightening nose-dive on Wednesday, August 31, when the National Bureau of Statistics (NBS) reeled out figures that showed the country had slid into recession.
The NBS figures showed that the second quarter 2016 GDP declined by -2.06 per cent, while annual inflation rose to 17.1 per cent in July from 16.5 per cent in June, and food inflation rose to 15.8 per cent from 15.3.
“The pace of the increase in the headline index was, however, weighed upon by a slower increase in three divisions, namely health, transport, and recreation and culture divisions,” the Bureau said.
It added that the onset of the harvest season was yet to significantly affect food prices, with food sub-index rising by 15.8 per cent (year-on-year basis) in July, about 0.5 per cent points lower from rates recorded the previous month.
NBS noted that energy prices accounted for the rise in inflation for the month, with energy and energy-related prices recording some of the largest increases reflected in the core sub-index.
“In July, the core sub-index increased by 16.9 per cent during the month, up by 0.7 per cent points from rates recorded in June (16.2 per cent). During the month, the highest increases were seen in the electricity, liquid fuel (kerosene), solid fuels, and fuels and lubricants for personal transport equipment groups,” the report said
Curiously, the NBS figures came weeks after government officials were reluctant to admit the situation.
Various government officials, notably the CBN and the Minister of Finance, Kemi Adeosun, had previously toyed with words and said the economy was in “technical” recession.
In fact, Adeosun was reported to have tweeted that recession was merely a word. She, however, later disowned the tweet and said she did not own a tweeter account.
What went wrong?
Analysts have attributed various factors to the economic recession. Many, for example, believe the glut and subsequent drop in global crude oil price contributed to the exercise.
Nigeria is a mono-product economy sustained by crude oil. Consequently, the fall in the price of crude oil meant less foreign exchange and revenue for the country.
Vice President, Yemi Osinbajo, seemed to have the same view, as he recently accused militants who have attacked oil facilities in the Niger Delta that resulted in the country’s production capacity dropping by over one million barrels per day of contributing to the recession.
The VP, who spoke at the maiden meeting of the Presidential Quarterly Business Forum with members of the organised private sector and other stakeholders in Abuja, said there was no way Nigeria would not be affected, given that “the nation now loses over one million barrels of crude oil on a daily basis”.
Osinbajo said: “Perhaps it is important for us to understand the nature of this recession in which we have found ourselves. In discussing this issue of recession, there is the tendency for people to generalise. A lot depends on what sort of recession and how we got here.
“If we did not have vandalism in the Niger Delta as we are currently suffering, we will not have this recession today. Moreover, in looking at the solutions, we should try to focus on the type of problem we have and what instigated it. Then, we can begin to come up with better solutions,” Osinbajo said.
Nigerians react
However, even as some analysts blamed militancy, drop in crude oil production and sales and subsequent shortage of forex for the severity of the recession, Adebayo Adeolu, a lawyer and economic analyst, traced the recession to the policies of Muhammad Sanusi II, the Emir of Kano, while he was CBN governor.
Adeolu said the policy that beneficiaries of Western Union money transfer should be paid naira discouraged Nigerians abroad from sending foreign currencies back to the country.
According to him, before the policy, Nigerians abroad remitted $12 billion annually, a figure he said has dropped to $2 billion.
“You must understand that when money is sent from overseas, Western Union takes a percentage and the Nigerian bank through which it was sent also takes a percentage. This builds lots of money for all the banks in Nigeria and the money so accumulated cushioned the effect of the drop in the price of oil. It served as a buffer.
“What Sanusi did was that he removed this buffer. Nigerians abroad are not remitting money because they feel cheated. When they send dollar, you give it to the recipients at an official rate that is different from the exchange rate at the black market.
“Apart from the forex coming from the CBN and crude oil sales, the Western Union provided another legitimate source of foreign exchange coming into the country. If that $12 billion had been coming, the Bureau de Change will have forex whether the CBN releases dollar or not,” Adeolu said.
He argued that the price of crude oil had always fluctuated, but that money remitted by Nigerians abroad had that kept the economy afloat.
Way out
As a way out of the recession, the CBN Governor, Godwin Emefiele, and President of the Dangote Group, Aliko Dangote, among others, had advised the government to consider the partial sale of its oil assets in the Nigeria Natural Liquefied Gas (NLNG) to augment the revenue shortfall and boost foreign exchange reserves.
The Senate President supported this position in his 14-point plan of action. However, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) kicked against it.
Acting Chairman of the Commission, Shettima Umar Abba Gana, in a statement, argued that it would be unwise for the federal government to dispose of its crown jewels that generate revenue and keep the Federation Account healthy over the long term.
He cited the Nigeria Extractive Industries Transparency Initiative (NEITI) 2013 audit and financial report of Nigeria’s oil and gas industry, which indicated that $12.9 billion was received by the Nigerian National Petroleum Corporation (NNPC) from the NLNG over an eight-year period, and which the corporation did not remit to the Federation Account.
The audit, according to the commission, also revealed that NLNG paid $1.289 billion as dividends in 2013.
“It is the considered view of the commission that Nigeria’s assets like NLNG and other strategic national resources should not be sold to meet short-term financial obligation,” RMAFC said.
RMAFC recalled that the CBN governor indicated that $10 billion could be realised from the sale of oil and gas sector assets held by the federal government.
It said: “The commission is of the strong opinion that the same amount could be borrowed from the International Monetary Fund (IMF) and the revenue from these assets could be used to amortise the loans over an agreed period.
“It should be noted that after the amortisation of the loans, those assets would still be owned by the federation in addition to their regular dividends and revenue.”
The Commission stressed that instead of selling off such vital assets, which generate funds for the federation, wealthy Nigerians should be encouraged to set up their own LNG projects, since Nigeria is ranked seventh in the World and first in Africa with natural gas reserves base totalling 188 trillion cubic feet as at May 1, 2015.
In addition, Nigeria’s natural gas is regarded as one of the best in the World, as it has low Hydrogen Sulphide (H2S) or Carbon Dioxide (CO2) impurity levels, the commission added.
Meanwhile, the Senate has rejected the proposal to sell national assets to raise money to fund the 2016 budget. The lawmakers rather asked the executive to prepare and send to the Senate an economic stimulus bill on how to address the recession.
Obasanjo’s panacea
Former President Olusegun Obasanjo has proffered three solutions to the present economic problems of the country: spend less, earn more and borrow.
Obasanjo, in his remarks at a two-day conference of the National Council on Finance and Economic Development, in collaboration with the Federal Ministry of Finance, hosted by the Ogun State government, at the Olusegun Obasanjo Presidential Library (OOPL), Abeokuta, on Tuesday, September 27, noted that the country needed to borrow money from its allies in reasonable terms.
The theme of the conference is ‘Enhancing Revenue Generation and Obtaining Best Value for Money in Expenditure’.
For the country to overcome the recession, government must focus on massive agricultural production and stop importation of goods that could be produced locally, the two-term president maintained.
“If you are spending more than you are earning, there are only three solutions. One, you spend less; two, you earn more; three, you borrow in the hope that you would pay back.
“For us, we have to do the three as quickly as possible. We must borrow, otherwise, we will just be deceiving ourselves.
“Borrowing may be the quickest and the good thing also is that, out there, there is money. I know that. Now, people will not part with their money unless they are sure that you are doing what is right for you to get yourself out of the hole that you find yourself.
“The issue of earning more; we are not in control of the price of oil. We can only pray that those who are in control will do what is right, so that the price will continue to go up. But what we are in control of is not what we can get overnight.
The former president backed the call for the sale of national assets to raise money, while identifying that assets of the Nigeria Port Authority (NPA) and NNPC could be partly sold to generate fund.
