Things are very dire in Nigeria, and the current APC government is beginning to realise that. As May 29, gets closer the incoming government is now unraveling the rot of an economy that will be handed over to them and they now understand how much of a negative impact this will have on them when they eventually takeover power.
To imagine, that the honeymoon period of the incoming Buhari led government will not even last a month is one they perhaps never envisaged. Now reports in the media is suggesting the APC is now ready to bite the bullet and will recommend very tough economic policies that may not go down well with a lot of Nigerians. The party believes this is perhaps the only way out of the economic dungeon that we find ourselves in. Here are some of the policies we understand they may be starting out with.
- Reduce size of Government – The Oransanye report comes in handy here as we expect the APC government to implement a large part of the recommendations contained in the report. The report amongst others recommends a smaller government and collapsing some parastatals and agencies of government into one. However, carrying out the recommendations in the report will attract a backlash considering the number of jobs that might be lost in the civil service. Labour for one will make a meal of this.
- Increase taxation – The incoming government will also be looking for ways to increase and diversify government revenues. Already the APC government in the South West is quite unpopular for its aggressive tax drive with many accusing them of multiple taxation. This could even get worse with this government as many tax loopholes typically exploited by tax payers will be tightened. We won’t be surprised to see people go to jail more often than ever for tax evasion crimes. One area that is sure to be affected will be the Value added tax. Already, there has been a clamour in some sections of the economy for an increase in Vat to 10%. In addition to that, the state governments may also introduce higher taxes that fall within their legislative list. Already, current government officials are at logger heads with each other over granting of waivers and tax holidays long after money has been shared by corrupt government officials. So, rather than grant tax waivers, the government will ramp up its tax drive activities. Areas where tax collection has been poor will be targeted and defaulters will have to face the music. Perhaps a lot of government agencies will be more self-reliant piling on more pressure on companies to spend more on servicing government fees and taxes.
- . End of fuel subsidy – If there was ever a best time for the government to end fuel subsidy, then perhaps this may just be that time. Most Nigerians are tired of periodically jostling for fuel and even many more are tired of the corruption in the fuel subsidy management. The last time the government tried to remove fuel subsidy, they encountered a nationwide protest that many still feel was the seed of discontent sowed against President Jonathan. Things might be different this time, as a lot more people are favourably disposed to taking out fuel subsidy. However, to underestimate the impact of this on the wider economy will be foolhardy. People will surely grown, when they start to buy fuel at over N200 per litre. This may just be another seed of discontent for this government.
- More borrowing – The current government has already announced it has already borrowed about half of what it planned to borrow in the 2015 budget. To make it worse, the money was spent on recurrent expenditure. The government indeed is broke and things are not expected to immediately get better when the new government resumes. So, as expected the new government will have no choice but to borrow to the high heavens to at least ensure the government has the needed cash flow to stay afloat. If it doesn’t then it will have to face up to unrest in some states that are already finding it hard to pay salaries. With more borrowing comes higher interest rates for the government and to a larger effect small businesses and individuals. Those expecting single digit borrowings may have to wait a bit longer
- Selling more government assets – another way to augment the government’s falling revenues will be to sell more assets. The government will have to part way with a lot of juicy assets along the way in a move that will be mostly unpopular in many sections of the country. To make it worse, the same folks who have benefitted from this economy despite its malaise will end up buying these assets even stoking a lot more discontent amongst many Nigerians.
- Austerity – With the current government already in austerity mode, many doubt the APC government will soften on this path. In fact, analysts believe austerity will be introduced on a wider scale. It is expected that the government will cut cost on recurrent and capital expenditure. They will prioritize on capital projects, eliminate popular government programs that are non productive all in a bid to spend wisely. For example, not all intercity roads needing urgent attention will be built. Pilgrimages may also be stopped from being funded from the government. Traveling, training and other recurrent government expenditure will be adversely affected. Austerity brings along wanton hardship as when the government stops to spend the economy is negatively affected at least in the short term.
So brace up Nigerians, this could be a very long ride