GIVING NIGERIA A NEW DEAL
Many congratulations on your success at the polls to be our next President. Now that the elections are over and the transition is on, I feel that the time is ripe to set out a framework to address broad issues concerning the nation.
I see strong parallels between the great economic depressions that occurred in American in the 1930s with the present challenges in Nigeria. I will urge that close attention is given to how President Roosevelt dealt with the challenges of the great depression that came to be known as “The New Deal”.
Nigeria needs its own New Deal in very many directions but I can only touch on a few.
NATIONAL ORDER AND CONSTITUTIONAL REFORM
Nigeria is in utter chaos and disorder. This greatly affects the nation.
The disease of disorder has eaten deep into our national fabric. The absence of order has badly damaged the national psyche. Love of country is absent. It is suggested that your government works out a framework to reverse disorder and instill discipline.
The issue of national order is closely linked with a new constitutional order. It is strongly recommended that priority should be given to the national question and resolved urgently. The Nation will not settle or move forward without solving the issue of disorder.
A NEW ANTI-CORRUPTION FRAMEWORK
Corruption is endemic in Nigeria and to reverse it requires strong new institutions. There has to be roots and branch reform of the anti-corruption agencies if we must succeed in slowing down corruption before even thinking of reversing it.
Salaries and emoluments voted to our legislators by themselves is about 25% of our national budget. This is unconstitutional because it is not approved by the Revenue Fiscal and Mobilization Commission. Stopping this outrageous conduct on the part of the legislators is, with respect the litmus test in assessing the sincerity of the anti-corruption agenda. It is strongly recommended that the NNPC be fundamentally reformed.
Corruption is also manifest in over bloated budgets for the presidential villa and government houses, corrupt/weak public procurement procedures and abuse of discretion of ministers in the award of contracts. All these have taken a major toll on our resources and encouraged corruption. The first crucial challenge is for you to stop these aspects of corrupt practices and introduce major spending cuts.
The priority must be to diversify the economy and make it less dependent on imports. Nigeria has long depended on crude oil as if it is the only hydrocarbon to the utter neglect of gas. The economy heavily relies on oil revenue and is vulnerable to price shocks in oil and the associated risk to national stability. The most recent volatility in oil prices suggest that we must start to diversify our revenue income streams by developing non-oil tradable sectors.
A clear strategy, model and plan for economic diversification both horizontally and vertically is necessary. Horizontal diversification should explore new opportunities in the same oil and gas sector. There are at least thirty-six value added products to be explored in the extraction of crude oil. Vertical diversification means a shift from the oil and gas sector to other sectors, Agriculture, Services, Maritime, Aviation/space, Manufacturing, Health, Sports etc.
Pursuing economic diversification will make the economy less vulnerable to the boom and bust cycles of oil and natural gas prices. A model we can follow is the United Arab Emirate that has successfully diverted out of oil into new revenue sources.
FINANCIAL SERVICES SECTOR
The Financial Services Sector (FSS) is the oxygen and life blood of a strong economy but it has to be supported by strong independent institutions. We have weak institutions in the FSS. This has made the economy weak; a new strong FSS is sine qua non for growth and development.
A strong FSS enables banks to provide credit not just to a few but to all Nigerians. Nigerian banks are mostly money lenders and traders. Banking regulators have failed to supervise them. As a result the economy is starved of badly needed credit. The proper role of banks is to lend money to the well over 100 million potential Nigerian customers. Now only the privileged few get bank credit. If Regulation forces banks to lend as banks and not just money lenders that they are, there will be massive jobs expansion. As I have said earlier, banks are the life and blood of the economy. But the Nigerian economy is anaemic because banks are not lending. But it is not sufficient to blame the banks. Fiscal policy has to be right to stimulate the banks to act as banks and not money lenders.
There are three vital missing links in the FSS. The first is that there is no fiscal credit policy that assures cash flow into the system to the benefit of Nigerians who are consumers of goods and services. If there are no consumers, goods and services remain unsold and investors are discouraged as there are no markets.
The second major institutional gap is the absence of a National Credit Guarantee Agency that should support viable business proposals. When viable business proposals are guaranteed, the economy gets stimulated and expanded and that gets converted to goods and services that are sold on to consumers.
The third institutional need is a Development Bank to lend to vital sectors of the economy. The CBN intervention Fund Policy must stop. The CBN is best suited to formulate monetary policy. The Development Bank should take over intervention lending from CBN.
If these three missing links are plugged the rate of expansion of the economy is to be imagined. It was this formula that helped China bring out 500million of its population from extreme poverty. There are many other ways to strengthen the FSS and fiscal policy but this is beyond the purview of this short letter.
The Aviation Sector requires major reform. Nigeria has no presence in the Aviation business. Nigeria Airways has been long comatose. Foreign aircraft dominate the Nigerian airspace and earn well over a trillion Naira to our exclusion. A trillion Naira is about a quarter of our entire national budget. The way forward is to redeploy all aircraft in the Presidential fleet to form the hub of a new national carrier. Business for this new national carrier is easy to generate. I have proposed a Bill, the Fly Nigeria Bill, to ensure that every government Naira used to purchase a ticket must originate and terminate on a Nigerian carrier. The Fly Nigeria Bill when passed into law will create an instant market for our national carrier.
On Space, it has been said that that the future of mankind is in Space. Space has many major applications for developing our economy. I will mention at least three examples.
First, space can be applied to the energy sector as remote sensing can tell us the quantum of our hydrocarbons. Second, it is the value of space applications to the Maritime sector. Third, it is the link between space and national security. Satellite technology intelligence gives us vital foot prints in the national security infrastructure. The growing threat of terrorism and the adverse impact on economic stability can only be checked by intelligence provided by space satellites. We must upgrade our space technology.
The legal and justice sector has suffered institutional failure over the last three decades. Comprehensive and radical reform of the legal and justice sector is overdue. The Rule of law is vital to economic development. But lip service is paid to this vital process. Investors, whether local and international will not invest in a lawless country. We must give urgency to this sector and reverse legal failure.
No country can afford to treat the elderly, vulnerable and disabled as societal outcasts. The standard operating model around the world is the creation of a benefits agency as it is called in England, and a social security agency as it is known in the US, to cater for those who are unable to look after themselves.
It is vital that your administration deals with this issue. Happily Chapter 2 of the 1999 Constitution provides a programme of action with which the proposed Social Security Administration can be charged.
There is a shortage of housing for low-income earners and constantly growing housing demands (due to increase in population) that are unmet. Unfortunately, banks are reluctant to provide mortgage facilities to low-income earners. In order to solve the housing/mortgage challenges described above the Nigerian Mortgage Refinance Company (NMRC) was established to promote home ownership and increase the availability and affordability of mortgage loans to Nigerians.
In spite of the incorporation of NMRC in June 24 2013, not much has changed. The apathy of banks towards mortgage transactions still lingers, understandably, because of the risk of default. To buttress this, 66,402 Nigerians applied for mortgages during the recent Nigerian Housing Finance Programme. Only 10,000 Nigerians were selected. However, the interest rates by primary mortgage institutions that participated in the programme were alarming (14.5% -19%).
It is suggested that a cue be taken from other Countries where the cost of mortgage for first time home buyers are low, with small down payments and easy terms especially, a single digit interest rate.
Three months after President Roosevelt’s inauguration, the United States Congress and the country was subjected to a barrage of ideas and programmes unlike anything known in American history. This is what is known today as the “100 days”, record.
As Roosevelt did, the President-Elect may consider a special session of the National Assembly to lay out a plan of Action for approval and urgent implementation. I wish you the very best.
Dr. Olisa Agbakoba (SAN)