THE ECONOMY AFTER ONE YEAR OF BUHARI’S ADMINISTRATION
The Lagos Chamber of Commerce and Industry recognizes the fact that the current economic situation is challenging. The global economic reality, fall in global oil prices, economic policy shortcomings and insurgency all play a very critical role in the weak economic performance of the country. In realization of these challenges, government efforts at stabilizing the economy are commendable. We commend government’s efforts in fighting corruption which has become endemic in our system.
For instance, the level of impunity in governance has reduced drastically due to government anti-corruption stance. This is creating positive brand for the country globally. However, while the anti-corruption war is still on-going with emphasis on recovering looted funds from both onshore and offshore, it is our wish that government review its processes and implement reforms and frameworks that make corruption difficult to thrive.
The fight against insurgency has also yielded some good results. This remarkable success in containing insurgency also deserves commendation. We urge the government to pay more attention to the growing security breaches coming from groups such as the armed headsmen and the Niger Delta Avengers. This is very important because the economy can only thrive in a peaceful and secured environment.
ECONOMIC POLICY DIRECTION
The absence of well structured, broad-based and synergized economic blueprint with clearly stated goals, plans, policies and strategies to drive the economy is largely responsible for the current economic challenges and policy ambiguity the nation is undergoing. Economic policy space remains unclear. Policy conception is faulty, hence, policy coordination and implementation suffer serious setback. There is, therefore, urgent need for central policy strategy with detailed and well-designed policy direction. This is critical to effective and efficient coordination and implementation of policy.
While the policy goal of eliminating corruption is laudable, the need for concerted effort on the side of the government with respect to policy, legal and regulatory environments in order to boost private sector participation is highly desirable. Improving the ease of doing business through efficient business environment vis-à-vis effective infrastructure in all facets of the economy.
It is imperative to make very strong moves to resolve the weakening oil revenue and find creative ways of incentivizing forex inflow to Nigeria so as to boost liquidity and ease access to forex through alternative sources such as FDI in critical sectors of the economy and diaspora remittances.
We noted that inflation record is worsening. Policy attention should be focused on monthly developments in general price level. We also noted the negative trends in the general macroeconomic outlook such as GDP, interest rate, fiscal deficit (debt profile) and FDI and their consequences on business and the economy as a whole.
Given the critical role of adequate electricity supply to the development of nations, the abysmal situation of energy infrastructure (electricity, PMS and natural gas) in the country is of great concern. For instance, the current state of electricity generation, transmission and distribution calls for serious attention. The damning situation of electricity supply is traceable to epileptic performance of most key power plants in the country and the security challenge in the Niger Delta region. Hence, thereis need for government to get it right with respect to energy infrastructure and power/electricity situation in the country.
- Security of lives and property: We observed remarkable success in containing Boko Haram insurgency by pushing them from taking territories and local councils to the fringes of Sambisa Forest. As the final clearing of Boko Haram continues, we urge the government to extend its attention to the growing security breaches coming from groups such as the armed Herdsmen and the Niger Delta Militants. Businesses and the private sector can only thrive in a peaceful and secure environment.
- Fight against corruption: Anti-corruption war of the present administration should continue unabated and we are happy that emphasis is being placed on recovering looted funds both from within and outside the country. It is our wish that government reviews its processes and put in place reforms including frameworks that would inherently curb corruption.
Full Deregulation of the Downstream Oil Sector: We welcome Government’s recent removal of subsidy on kerosene and PMS. However, we call for full deregulation of the downstream petroleum sector. This will reduce distortions in the downstream oil industry, eliminate corruption that has marred the sector over the years, increase government revenue whilst empowering the government to fund infrastructure and other social interventions.
- Sustainable Exchange Rate Policy: We welcome the decision of the Central Bank of Nigeria [CBN] to adopt a flexible exchange rate regime which is desirable in the light of prevailing economic realities. There is however, a need for clarity on what the CBN describes as a special window for CRITICAL TRANSACTIONS for which preferential rates will apply. We would like to caution against possible abuse and distortions that such a
window could create. On the immediate, relaxing the impediments that will allow liquidity to flow into the autonomous forex market is desirable.
- Effective Implementation of the 2016 Budget: Budget has been signed into law after about four months of delay. We expect marginal recovery in economic activities as soon as disbursement of capital projects and social intervention programmes start. The 2016 budget assent and implementation should give rise to positive macro environment.
However, inflationary impact remains a concern as the presidency will become more practical in its quest to deliver on some critical electoral promises.