2017 Outlook: Why Buhari’s Stand On Economic Policy is Tricky
Nairametrics|None of the problems plaguing the Nigerian economy in the buildup to the last general elections has disappeared.
Africa’s largest economy is plagued with series of economic challenges including a bunch of disoriented policy formulators; The business climate impoverishes workforce, a politically induced tariff system, a congenitally deformed banking system and an atmosphere of resentment.
The tailwind pushing the economy along for the greater part of the last decade, crude oil, lost traction in 2014. Market and Investors began to mark down their forecasts on signs that the then President, Goodluck Jonathan lacked the “will power” and economic “know-how” required to steer the country out of the meltdown.
Fiscal authorities in 2015 introduced ‘austerity measures’ including capital spending cuts, new tariffs on import and luxury tax. In contrast, the then opposition party in the urge to attract “unsuspecting” voters threw away caution and Nigerians caved in.
The Party adopted a populist disposition which is no different from what Donald Trump and the BREXIT movement used in 2016 – milling out policies that seek to represent the interests of “working poor” and “have-nots.
The market for the greater part of 2015 was sanguine about President Buhari’s lack of a firm actionable development plan directed at steering Africa’s biggest economy back into the growth tunnels.
Many of the economic trends that is now shaping our world were spotted by few prognosticators ahead of time but the uncontrolled excitement around General Buhari in the build up to the election silenced most.
Fast forward, the optimism has since run flat. The economy is now neck deep in a “policy-induced” recession. Monetary policy has since been reduced to a “bowl of rice” offsetting the natural order of things.
Mr President, in his urge, to shame critics, continue to introduce whole new sets of problems that may take decades of hard work to solve. Recession should have huge political ramification.
The economy is in a recession because the business environment is tight. The Business environment is tough because people are not spending. People are not spending because people do not have the income to spend.
A starting point – one will hope – is to lower tax rates, deliver a 5-year development plan, align fiscal, trade and monetary policy, design a realistic expenditure plan, fix the exchange rate policy, help up manufacturers, push for efficiency, get into trade deals and begin massive mechanization in farms.
Cutting tax and levies could induce businesses and individuals to spend more. Ironically, the government at the Local, state and federal level are now very aggressive, pushing to increase tax receipt and government revenue at any cost.
Raising tariffs on used cars popularly known as Tokunbo, from 10 per cent to 35 per cent may sound out of order but what is government hoping to achieve by compelling the “working poor” and “have nots” to pay tax for depositing money in a savings account?
Why raise the price on anti-malaria’s and antibiotics drugs?
For how long will Nigeria continue to raise tariffs on products that politically linked people find desirable?
Why is the president pilling the ground for politically linked industries? Why do we force consumers to pay higher prices for everything?
2017 promise to be exciting by all calculations and President Buhari can, of course, hope that the market will follow his lead.
Nigeria may miraculously avoid a bigger crisis in 2017, but the place Mr President stands on policy is increasingly tricky.