Nigerian economic think-tank, the Center for the Promotion of Private Enterprise (CPPE), has proposed an economic agenda for the incoming administration of Bola Ahmed Tinubu, including the need to eliminate foreign exchange subsidy to unlock a minimum of N3 trillion revenue annually from the sale of CBN forex to the official foreign exchange window.
The CPPE said this has become necessary at a time when the Nigerian economy is in a stumbling and fragile state and dire need of a new direction. It added that the political transition offers a great opportunity to chart a new course.
The think-tank, whose Chief Executive is Dr Muda Yusuf, said the incoming administration should establish quality economic governance consistent with tested economic principles and empirical evidence, contextualized within socio-economic peculiarities.
Need for good economic framework: Dr Muda said this is critical from the onset of the administration in order to signal investors’ confidence. He stated that a good economic governance framework would entail the following:
- Setting up a Transition Committee on the economy to come up with propositions of what needs to be done differently and ensure the delivery of quick wins in the first month of the administration.
- Setting up a technically sound economic team to give guidance and direction on general economic policy direction, policy conceptualization and urgent reforms.
- An economy where there is a level playing field for all players with a transparent economic policy formulation process.
More recommendations for Tinubu: He also pushed for setting up a competitive economic environment with minimum monopoly dominance that would:
- Expand the role of markets for value delivery and boosting of private enterprise in the economy, noting that state institutions cannot manage enterprises.
- Robust monitoring and evaluation framework to regularly review the effectiveness and impact of economic policies and regulatory practices.
- Robust and regular stakeholder engagement by key government agencies to ensure proper alignment of policies with investors’ sentiments.
- Government institutions that play technical roles should be headed by tested technocrats.
Prioritising macroeconomic stability: On macroeconomic issues, he said the incoming government should prioritize macroeconomic stability with emphasis on moderating inflationary pressures, stabilizing the exchange rate and boosting economic growth.
On fiscal consolidation, the CPPE said there should be a Reform Tax regime to ensure efficiency in tax administration, reduce tax evasion and tax avoidance and eliminate multiple taxations.
He said the government should eliminate foreign exchange subsidies to unlock a minimum of N3 trillion in revenue annually from the sale of CBN forex to the official foreign exchange window.
- Unlock more income from revenue-generating agencies through enhanced efficiency of their operations,
- Initiate budget reforms to ensure fiscal discipline, curb budget padding, curb duplication of projects and review the service-wide votes to ensure transparency,
- Ensure value for money in government expenditure and procurement, and
- Commit to a reduction in the cost of governance.
More on the need to stabilise forex: On the current foreign exchange conundrum, Yusuf said there should be:
- Foreign exchange policy reform to unlock inflows of capital into the economy, reduce arbitrage in the forex market and improve transparency in the forex allocation,
- Ensure a market-reflective exchange rate to eliminate the distortions in the forex ecosystem,
- Ensure a level playing field in forex transactions, and
- Remove impediments to market mechanism in the allocation of forex. This will boost inflows from a foreign direct investment [FDI], foreign portfolio investment [FPI], export proceeds and diaspora remittances.
Need for oil and gas reform: On oil and gas sector reform, Yusuf said the incoming administration must
- Demonstrate unmistakable commitment to the implementation of the Petroleum Industry Act. This would attract more investment into the oil and gas sector.
- Remove the petrol subsidy with minimum shocks to the economy and the citizens.
- A substantive minister of petroleum resources should be appointed to promote professionalism and transparency in the sector. The practice of the president assuming the role of Minister of Petroleum should be discontinued.
- The current impressive momentum to tackle oil theft should be sustained to boost oil production
Trade and tariff reform: Ensure a tariff regime that adequately protects local industries.
- Import duty on intermediate products and critical industrial inputs should be reviewed to reduce production costs.
- Tariff review processes should be more inclusive and transparent.
- The administration should prioritize trade facilitation and ensure the removal of all non-tariff barriers to trade.
- Removal of all customs checkpoints within the country
The CPPE said the practice of intercepting cargoes that have been duly cleared at any of our ports should be discontinued. The practice has been proven to be an extortionist.
- “The practice of appointing non-career persons as Comptroller General of the Nigeria Customs Service should be stopped. It is detrimental to the professionalism and morale of career officers in the customs service.
- “There should be a balance between the revenue objectives and trade facilitation objectives of the Nigeria customs service. There is currently a disproportionate focus on revenue generation,” it said.
Agriculture: The CPPE said the policy on agriculture must be holistic, focusing on the entire value chain. It said due attention must be given to cost and availability of inputs, production and productivity, application of technology, logistics and marketing, processing and storage.
- “There is an urgent need to transit from subsistence farming to mechanized and commercial agriculture driven by technology. There is a need to attract the youth into agriculture as the farming population is rapidly ageing. This would only happen if the sector is technology driven.
- “Strengthen the linkage between agriculture and industry within a sustainable backward integration framework. Agriculture policy should cover activities in crop production, poultry, livestock and forestry. There is a tendency among policymakers to focus disproportionately on crop farming to the neglect of other segments of agriculture,” the think tank said.
Industrialisation: It said the following urgent steps need to be taken to address the concerns of the manufacturing sector by doing the following:
- Ensuring liquidity in the foreign exchange market to guarantee access to foreign exchange for the procurement of raw materials and machinery for industry,
- Attracting rapid investment in core industries to support backward integration aspirations of the government. Such core industries include iron and steel, petrochemicals, an aluminium smelter, pulp and paper and refineries,
- Scaling up investment in infrastructure through the injection of more funds and the attraction of private capital into the infrastructure space. This would reduce production costs and boost productivity in manufacturing, and
- Creating more industrial parks across the country and improvement in the facilities in existing ones.
He also said there is a need to strengthen current development finance to support the real sector with appropriate financing – single digit facility with a minimum of five years tenure.
- “We desire a regulatory environment where regulatory risks and regulatory shocks are at the barest minimum. This is necessary to boost investors’ confidence. Regulatory institutions and economic players must relate as partners, without necessarily compromising regulatory effectiveness.
- “We should put an end to the culture of regulatory intimidation, coercion and undue harassment. There should be regular consultative forums between industry players and regulators,” the think tank said.
Finally, on financial institutions reforms, the CPPE said the banking system must be repositioned to play its fundamental role of financial intermediation for the benefit of investments in the economy.
It said some key regulatory instruments of the CBN should be interrogated to ensure their appropriateness and impact on the economy. The CRR regime is one such policy instrument that would require a review. The current CRR of 32.5% is one of the highest globally. It has serious implications for financial intermediation.
- “The imperial and intimidating disposition of the current leadership of the CBN needs to be moderated in the interest of the development and stability of the financial system.
- “The development finance operations in the economy have had some positive impact for a few beneficiaries in the real sector. But it needs to be streamlined to minimize loan losses and ensure effective targeting of deserving investors.
- “There is a need to ensure full compliance with the recent ruling of the Supreme Court on the currency redesign policy of the CBN,” it said.
