Why Nigeria needs tighter fiscal policies and a govt that saves – PROF. LAWRENCE

Trade and investment experts have said that Nigeria would require tighter fiscal policies and global competitiveness to overcome its current challenges.

One of those who made this pronouncement at the recent 2016 Punuka lecture, which held in Lagos, was Professor Robert Lawrence of the Harvard Kennedy School of Government.

Lawrence who spoke on the topic, ‘Growth & Trade Policy: Concepts & Implications for Nigeria, informed a large audience of business experts, legal practitioners, regulators, notable policy and development consultants and the media that Sustainable growth cannot be achieved purely based on commodity, noting that Nigeria was the perfect example of a commodity boom-led economy.

“Nigeria must recognise its position as a commodity boom-led economy and thus begin to understand how this affects the growth and the development of the nation.

“The real test for the country however, would be how it manages its wealth in the good times and in its season of plenty,” he said.

According to Lawrence’s classification, both foreign borrowing-led growth and Commodity boom-led growth are examples of bad growth.

While foreign borrowing-led growth is associated with current account deficits and the overvaluation of the currency (coming to an end when capital flows dry up); Commodity boom-led growth is in no way sustainable, largely due to a downward trend in the commodity terms of trade.

Lawrence said, “Sustainable growth comes from a convergence with the productivity levels (the “technology”) that prevail in the rich countries. This stock does not disappear or dissipate when rich countries grow more slowly or when world trade is less buoyant,” Lawrence pointed out.

According to experts at the event, the level of the real exchange rate is the main relative price that determines the profitability of tradables relative to non-tradables; thus determining investment demand in tradables.

This, they say is a key determinant of economic growth, as social returns to non-traditional export activities are high and typically exceed private returns.

In Lawrence’s views, “A trade regime such as Nigeria currently has is like strangling yourself. What Nigeria needs at this time are tighter fiscal policies and a government that saves.”

A Senior Fellow at the MasterCard center for Inclusive Growth and an Advisor to the World Economic Forum, Lawrence who has also served as a consultant to the Federal Reserve Bank of New York, the World Bank, the OECD and the UNCTAD, urged Nigerians to begin now to prioritise, with focus on high domestic saving relative to investment; a structural fiscal surplus (tight fiscal, easy money) and counter-cyclical regulations on capital flows, or restricting inflows in good times to ensure a competitive currency.

Former Head of State and Gen. Yakubu Gowon (Rtd.), who was the special guest of honour at the event, noted that one of the critical tasks before the government at this time is the need to balance the competing interests of foreign investors and indigenous investors.

“A recurrent difficulty for governments at all tiers has been balancing the competing interests of the indigenous industries and those of foreign companies seeking to do business in Nigeria,” he said.

“We must however decide whether to promulgate primarily protectionist policies that are aimed at cushioning Nigerian local companies from incursion by foreign multinational companies. With this type of strategy, one predominantly sees policies targeted at promoting exports and discouraging imports, tax incentives and tax holidays for indigenous companies,” he said.

The former head of state informed participants that it would take structural changes in government to set the nation on the right path again.

“These structural changes would have to cut across the arms of government – the executive, legislature and the judiciary,” he stated.

In his remarks, immediate past chairman of the Nigerian Economic Summit Group (NESG) and past chairman, Manufacturers Association of Nigeria, Mazi Sam Ohuabunwa explained that the only way out of Nigeria’s current economic challenges is to ensure global competitiveness.

“It is not in anyone’s best interest to have an economy under lock and key. The truth is, our demands as a society cannot be satisfied by what we possess locally,” he said.

Proffering solutions towards benchmarked competitiveness, Ohuabunwa outlined a number of factors that could enhance the nation’s competitiveness. This includes, more public-private partnerships, bridging the skills gap, entrepreneurship, innovation, amongst other things.

Earlier, the Chairman of the occasion, Dr. Sonny Kuku had noted how difficult it was to set up businesses in Nigeria.

“The processes are herculean with several hurdles to cross before one can establish a viable business in Nigeria,” the master physician decried, hoping that the lecture theme would address some of the challenges in the system.

The 2016 Punuka Annual Lecture took place at the Metropolitan Club in Victoria Island Lagos, with the theme, “The challenges of balancing the need for protection of developing economies and the provision of enabling environment for foreign investment.”

At the event were several notable guests including, Gen. Yakubu Gowon (Rtd); the chief executive officer of the Nigerian Stock Exchange, Oscar Onyema; former managing director of Bank PHB, Francis Atuche; former, company secretary of NNPC, Chief Sena Anthony; general counsel of the Nigerian Stock Exchange, Tinu Awe; general counsel of Seplat, Dr. Mrs Kene Kachikwu; whilst the Inspector General of Police was represented by, CP Ajani Fatai Owoseni.

Also spotted at the lecture were Former Kwara State Gubernatorial Aspirant, Dele Belgore, SAN, Tony Chijine of Dangote Group and Dr. K.U.K Ekwueme of Olaniwun Ajayi, LP.

THEODORA KIO-LAWSON