Buhari and the economic imperatives

Nigeria’s economy is in dire need of structural reforms to jumpstart growth. Growth in the first quarter of 2015 slowed to about 4 percent compared with 5.9 percent a quarter earlier as the oil sector shrunk by 8.2 percent, according to the National Bureau of Statistics.

The manmade fuel scarcity still rages in most cities of the country, while firms are retrenching and Foreign Direct Investments (FDI) are plummeting. The firms that are not cutting jobs are slowing down investments in plants, machinery and equipment which are also a drag on future consumption. Most Nigerian companies, especially those in the consumer goods sector, have seen slower sales compared to a year ago, according to first-quarter results released by listed firms.

The slide in oil prices which provides 70 percent of the federal revenue and 95 percent of exports has meant a squeeze in the Nigerian government’s ability to fund capital expenditure.

In the face of this, we urge President Muhammadu Buhari to move swiftly. We would like to remind the president of the high hopes reposed on him by Nigerians. But Nigerians are growing impatient, and rightly so. Already, apprehension is rising that the promised change may after all be all sound and fury and no substance.

President Buhari and his economic advisers could take a leaf from the first term of United States President Barack Obama. Obama’s American Recovery and Reinvestment Act of 2009, commonly referred to as the Stimulus or The Recovery Act, was signed into law on February 17, 2009, less than a month after Obama was sworn in. Because work on the Bill started before Obama officially took office on January 20, 2009, top aides to the then president-elect held multiple meetings with committee leaders and staffers. On January 10, 2009, Obama’s yet-to-be-inaugurated administration released a report that provided a preliminary analysis of the impact to jobs of some of the prototypical recovery packages that were being considered.

It is, therefore, our considered view that President Buhari and his aides must immediately begin to craft an economic plan for Nigeria and release same to the public even before ministers are sworn in, as Obama did. Given the artificial fuel scarcity of the last few weeks that almost crippled the economy, there is need to end fuel subsidies and work towards a new oil policy.

Furthermore, there is an urgent need to diversify the economy away from oil and boost non-oil taxes. The slide in oil prices has negatively impacted the government’s ability to fund capital expenditure, leading to delay or outright cancellation of most public construction projects. That the FY15 budget presented to the National Assembly in December 2014 proposed slashing capex by two-thirds to N387 billion is evidence of this.

But there are also other quick wins the new administration could pursue in the interim before unveiling a big economic plan. The president could, for instance, increase VAT rates to between 7.5 and 10 percent to increase FG and states’ revenues. Similarly, the long-drawn Geometric vs. Interstate Electric imbroglio could be resolved in less than a week if the president moves to call the BPE to order and carve out Aba and its environs from Enugu Disco’s operations. It is believed by experts that Aba could enjoy uninterrupted power supply in less than a month if this is done.

All said, we remind President Buhari, once again, that the campaigns are over and the difficult task of governance has begun. He must now show that he understands the problems of the economy and has a plan to tackle them.