Tuesday, April 30, 2019
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London, UK

Continued from Part 1

conomy and Federal Ministry of Finance: Buhari should ensure that Nigeria does not emulate the extreme capitalism of the USA. An attempt by Nigerians to following the USA type of extreme capitalism in every sector of society is part and parcel and root of many problems in the country. The Federal Government should minimise privatisation and eliminate semi privatisation in the form of concessionary. There is no need for uncontrolled capitalism and privatisation in the country. Today's unnecessary privatisation create more problems, hardship and unemployment in the country.

There are key industries that must be fully in public ownership. There are those that must be fully in private ownership. There are few the public and private sectors can run side by side each other in silent competition. The industries that must be fully in public ownership are Water, Railways, Ports Authority, Natural Resources, etc. The failure of the privatisations by the PDP Governments of 1999 - 2015 shows that the private sector of Nigeria is not yet ready enough in terms of management, finance, efficient cash handling and cashflow management to running some heavy and critical industry to the economy of the country. Some of the privatised industries that failed are Electricity, Landline Telephone, Airline, Steel Companies, etc.

Therefore, privatisations of Electricity and Landline Telephone should be revisited. The Federal Government should take the Generation and Transmission aspects of Electricity and Cable aspect of Landline Telephone back into full public ownership. They are capital intensive. The huge amount of money the Federal Government sunk into the industries since their privatisation in the form of subsidies or grants are more than enough for the Government to have been running the industries in public ownership at full capacity usage for the country. Before their privatisation in 1999-2007 the country had electricity for at least 50% capacity usage. There were few electric generators in the country. From their privatisation till today the country hardly get electricity for up to 10% capacity usage. There are more electric generators in the country with their attendant environmental pollution hazard. For weeks, some of the places will not have electricity. Only the Distribution aspect of both Electricity and Landline Telephone should be fully privatised. Without adequate Electricity and Landline Telephone which today technology depend, the economy of the country will not improve.

Efficient management, which is today behind the drive for wholesale privatisation, is not the monopoly of the private sector but the choice of the right people to manage and the establishment of adequate systems of control. An example is France. Today many of the strategic and heavy industries in France are in public ownership. The French public establishments are well managed, efficient and successful. What we need in our public own establishments are the employment of the right managers which are chosen from every part of the country but not based on mere privilege, establishment of adequate systems of control and enforcement of the controls.

In Buhari's first term, the Federal Ministry of Finance and the Minister were the weakest link in his Government. Buhari appointed a relatively young, comparatively inexperienced and a non politician as the Minister of Finance. In our country, Nigeria, age matters, relevant education, professional training and experience are not enough. The right number and competent Ministers of State for Finance were not appointed. To add insult to injury Buhari removed budget department from the Ministry of Finance. He added it to Federal Ministry of Planning. Budget department is an integral part of the Ministry of Finance. Without budget department, the Ministry of Finance has no inhouse base upon which to relate to, gauge and run the economy. The Ministry of Planning is there for long-term planning which is generally quantitative for every sector of society and of a minimum of five years. The Ministry of Finance is for annual finance budget, which is about estimated income and expenditure of the Federal Government.

With all of these, it was not a surprise that the economy of the country never improved during Buhari's first term. This time; Buhari should return budget department to the Federal Ministry of Finance. He must appoint an experienced, matured, influential and formidable APC politician with relevant educational qualification as the Minister of Finance. The Ministry of Finance deals with every other Government ministry, department and agency. Within the Ministry you have big departments. These need individual close political supervision by Ministers of State for Finance. Therefore, Buhari should appoint three competent Ministers of State for Finance to assist the substantive Minister. The Federal Ministry of Planning and its Minister and Central Bank of Nigeria Governor cannot replace the Federal Ministry of Finance and its Minister. The Federal Ministry of Finance and its Minister cannot be weakened and neglected and for Buhari to expect economic miracle in the country.

The Federal Government's 2019 paltry budget expenditure of N8.83tr ($29bn, at exchange rate of N305 = $1) can be totally financed from taxation alone. Our economy at any level can accommodate budget financing from only taxation and without any borrowing. With this, the residue of the revenue from crude oil will not be a critical fund in the budgeted expenditure but would be available as extra fund to be saved, finance key infrastructure or pump in the economy in the form of credit finance generally through the Micro Finance Banks. The method of such sustainable taxation will not even increase tax burden on payers, corporate and individuals, more than what it is at moment. To do this, there must be a departure from the British pattern of taxation which we all along follow yet does not finance necessary budgeted expenditure, when the capacity to tax to our actual requirement without additional tax burden abound.

The budgeted expenditure is said to be a paltry sum because it is comparatively small. It shows the very low level of our economy and the very low economic position which we still are at this point in time. At the current level of our economy; we have only realised 20% of our economic potential. In terms of foreign exchange value nothing has changed since 2012 when the budgeted expenditure of the Federal Government was N4.648tr ($29.05bn, at exchange rate of N160 = $1). Between 2012 and 2018, the Naira depreciated against the US dollar by 90.6%. (N160 - N305 = -145/160 = 90.6%). Much of this occurred between 2015-2018. It is not the quantity of money in your pocket but the quality of money in the pocket, how much the money can buy.

The 90.6% depreciation of the Naira was generally because of Buhari Government's backdoor devaluation of the currency. The Government scrapped the official foreign exchange rate and adopted about 75% of the parallel or black market foreign exchange rate of the Naira. The aim was for the Government to have a single rate and single window for foreign exchange transactions. That the measure will eliminate the parallel or black market altogether. Today, the parallel or black market still exist but with slightly higher exchange rate than official rate. What changed was remittances or foreign exchange transactions are now conducted mainly through the banking system with both official and black market rates. What Buhari Government did not realise is that the answer to the low purchasing power problem of the Naira, thereby high inflation rate and poor economy lies elsewhere. That is, the redenomination and restoration of the Naira as a convertible currency at the foreign exchanges.

With only 20% economic potential realisation; this means we have unrealised 80% economic potential or 80% economically behind. According to Federal Government website, our GDP currently stands at N152.5tr or $500bn. Within 58years of our independence on 1st October 1960, if we had realised say 70% of our economic potential, which we had the means to have achieved, our GDP would have today been N534tr or $1.8tr (N152.5tr x 100/20 = N752.5tr x 70% = N534tr). At the exchange rate of N305 to $1, which the Government used, you will get N534tr/305 = $1.8tr. According to International Monetary Fund (IMF) 2018 data, with this GDP of $1.8tr, Nigeria would have been 10th largest economy in the world but our actual position is 30th with GDP of $397bn, which is IMF own estimation.

The main economic and monetary policy strategy of the Federal government should be the restoration of the purchasing power of the Naira as it was before 26 September 1986. This can happen if the Naira is redenominated and restored as a convertible currency at the foreign exchanges. It will strengthen the purchasing power of the Naira and improve the economy. Between 2012 and 2018 alone, the Naira depreciated against the US dollar by 90.6%. The main reason is; the Naira is domesticated. It is being auctioned. The Government should scrap the domiciliary bank accounts system in the country. In as much as the commercial banks can hold some of their funds in foreign currencies for small cash transaction, individuals and non-banking enterprises have not the actual need of holding bank accounts in foreign currencies.

On redenomination and restoration, the Government is free to set the economic and realistic foreign exchange rate of the Naira. Such method should be managed float with parameters within which the currency can freely float up and down. In the redenomination we could remove two noughts (00) from the current denominations. For example, N10,000 will become N100, N1,000 will become N10 and N100 will become N1. This will mean the current foreign exchange rates say of N300 to $1 will be N3 to $1 and N400 to 1 will N4 to 1. The capacity to redenominate and restore the Naira as a convertible currency at the foreign exchanges is there in terms of our economy, foreign exchange earnings, the way our foreign reserve is utilised and managed. Among the main economic issues the advanced countries hold against Nigeria are the poor purchasing power and non-convertibility of the Naira at the foreign exchanges. The value redenomination and the drive for a cashless society would hold will help to save the country a lot of money and allow us to improve the economy.

Federal Ministry of Treasury; As I wrote in the past; in order to have a firm control of the fund of the Federal Government, the offices of the Accountant and Auditor Generals should be scrapped. All the Federal Government payments etc should be maintained by the Federal Ministry of Finance. Alternatively, the Ministry of Treasury should be created. The Presidency, National Assembly, Judiciary, each Federal ministry, department and agency should each operates as a separate entity with its own Accountants and Internal Auditors. The Federal Audit Commission would be mandated to appoint private firm of auditors to audit their books and accounts every quarter. It is only the wholly owned indigenous Nigerian firms of auditor with a minimum of five active partners, which are considered to be within the level of medium or large firms, should be used.

It was in anticipation of creation of the Federal Ministry of Treasury, in 2012, I floated the idea on this platform that revenue from federally own establishments need to be consolidated in a single account. The then PDP Government did not set up the account. Buhari in 2015 bought the idea and named it Treasury Single Account (TSA) but could not operate it fully as it ought to operate. That, to this end, the Federal Government needs to establish the Ministry of Treasury. The main duty of the Ministry would be to collect public revenue. All the funds that are generated by the wholly owned Government establishments such as the turnover of the Nigeria National Petroleum Corporation, Nigeria Ports Authority, Central Bank of Nigeria, Customs and Excise, Agencies, etc, which TSA is meant for, would be sent on daily basis to the account. The Ministry of Treasury would monitor, control the sources and accuracy of revenue paid into the TSA.

These wholly public owned establishments would not be allowed to spend a kobo from their turnover or balance their books before accounting for the residue to the Federal Government. All their daily operational fund requirements would be allocated to them quarterly in advance in accordance with their individual budgets and cash-flow requirement from the centralised cash account (TSA). With this, they will not be able to steal or misappropriate much of their turnover at source, undetected on time or at all. None of them will be short of cash. They will always have the fund to pay staff salaries, creditors and contractors as the payments fall due.

Continued from Part 1