The simple solution for Nigeria’s economic difficulty would be to stop doing dumb things, and start doing smart things as running a deficit is not inherently bad.
This was disclosed by Mr Bismarck Rewane, MD/CEO, Financial Derivatives Company, while speaking at Nairametrics Economic Roundtable themed “How to get out of the economic crisis” on Saturday, August 7, 2021.
Mr Rewane stated that the fact that the government is running a fiscal deficit is not a bad thing in itself because it could be a countercyclical move, which is in line with the Keynesian school of thought, meant to stimulate growth in a recessive period.
“Budget is a tool of economic management,” he said, drawing attention to the use of budget deficit in the U.S to stimulate growth evident in their economic recovery and low unemployment figures.
“The question is whether your deficit is giving you the economic outcome or is just a deficit in numbers,” he said.
Furthermore, he postulated that fiscal policy debate is centred on the revenue generated, which may be good, but more attention should be called to the way the revenue is spent on improving the welfare of Nigerians.
“Emphasis should be on how the government revenue is spent and its impact on the people,“ he said.
“What is the impact of the spending on unemployment, literacy and multidimensional poverty?” he added.
When considering an appropriate fiscal policy measure, stopping unnecessary overhead and leakages in the Nigerian economy is important. This is to ensure that the objectives of fiscal policy are achieved.
Mr Rewane also drew attention to the exchange rate, stating that Nigeria is moving in the right direction very slowly. Questions about the high exchange rate are not important but what should be the core issue should be the performance of Nigeria relative to its trading partners. “A market-determined exchange rate is possible,” he stated.
More importantly, mentioning the inevitability of cycle turns, he said Nigeria needs to learn more business cycle volatility and make the country less vulnerable to external shocks.
He concluded his remarks with a quote: “For Africa, Nigeria in particular, three things are important; Stop doing dumb thing, start doing smart things and start doing modern things.”