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Buhari And The Economy: Which Way Forward? By Henry Boyo - Politics - Nairaland

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Buhari And The Economy: Which Way Forward? By Henry Boyo by Sweetguy25: 2:18pm On Apr 20, 2015

By Henry Boyo

Expectedly, goodwill messages have deservedly, poured in from far and wide to congratulate the clear victor of the 2015 elections and President Elect, Mohammed Buhari, may not be unduly disturbed that President Jonathan’s inspirational and totally unexpected early acceptance of defeat, ironically, favorably raised the incumbent’s rating as a statesman beyond the pedestrian perception induced by his performance in governance.
Presidfent-elect, Buhari

Indeed, despite the complimentary economic growth rates gleefully presented by Ngozi Okonjo Iweala, sadly, more Nigerians joined the already bloated poverty ranks. Indeed, the horrid level of insecurity, apparently instigated by ethnic and religious divide, may infact find their true origin in the pervading level of poverty nationwide.

Consequently, expectations are high that Buhari will provide an antidote to poverty and corruption; clearly, our poverty cannot be blamed on an inhospitable climate or a shortage of natural resources.

Infact, citizens from nations with considerably less natural endowments may be excused for decrying what they consider to be an inexplicable inequity by Providence. In reality, our inability to galvanise our resources to the greater benefit of the critical mass is actually caused by the application of fiscal and monetary strategies that are antagonistic to consumer demand, and job creation.

Consequently, if Buhari must succeed, he would need to quickly reverse the ratio between capital and recurrent expenditure, such that well over 60% of total annual revenue projections would be dedicated to the enhancement of social infrastructure and human capacity in place of the prevailing humonguos salaries and allowances of public servants.

Clearly, Buhari would need to also reduce the duplication of functions by various MDAS as per the recommendations in the Oronsanye report, but government must be careful to minimise the inflow of new entrants into a jobless market. Similarly, the new administration should be wary of increasing the current debt to GDP ratio, as this is a sure road to another oppressive debt burden.

A situation where a relatively stable nation like Nigeria with its immense reserves and resources borrows at Shylock rates of over 15% is totally unacceptable for what are clearly risk free soverign debts. Furthermore, Buhari must immediately interrogate why our foreign reserves earn minimal interest, while we inexplicably go cap in hand to borrow externally at over 7% interest rate.

Incidentally, the yet to be assented 2015 budget, accommodates about 20% deficit; consequently, government will borrow over N1Trillion Naira and pay between N100- N150bn as interest charges to fund part of its recurrent (consumables and salaries etc.) budget. It is ironical that such huge government borrowings will exist simultaneously with the unyielding ‘obstructive’ Naira surplus deliberately created by the CBN.

Buhari’s Team must therefore, hit the ground running and readily jettison Jonathan’s 2015 budget proposal, so that a fresh Appropriation bill can be presented to the National Assembly before July 2015. We may also consider 29th May to May 28th as fiscal year to align with our established Election Time Table and thereby prevent politically induced budget truncation on the advent of a new Leadership halfway into the year.

Furthermore, in view of the abysmal performance in the power sector, Buhari should take a closer look at how Nigerians were left with over N400bn debt after the privatization of the distribution Network of the former PHCN. It is equally curious that almost 2 years thereafter, government continues to breastfeed the Discos with selective interest waivers, which have not guaranteed low tariffs or improved performance.

In view of cost implications, the new dispensation should advisedly fast track the adoption of gas for generating power, as gas is considerably cheaper at below $3/cubit mitre and remains a much cleaner form of energy; besides our gas reserves are multiple times in excess of crude oil reserves.

Furthermore, Buhari will equally need to shine his eyes in the area of monetary policy and strategy. As a first step, his Administration should put a stop to the looting of public funds with the obnoxious Treasury Bills Scam. An arrangement where banks are positioned to make over N600bn in 2015 as interest on government loans, which are not applied to any productive or socially enhancing purpose, is clearly obscene.

In successful economies, Monetary authorities mop up or reduce any burdensome surplus cash in the system by borrowing at minimal rates below 2%. When government borrows at 10% and above for what are essentially risk free sovereign debts, banks expectedly become reluctant to lend to other borrowers, thus crowding out the real sector from the cheaper investible funds which could spur enterprise and industrial production and create more jobs.

Mangoes flood Zuba Fruit Market in Abuja on Friday (13/4/12). There Is Need to Preserve Our Seasonal Fruits. NAN Photo

The President Elect should not be hoodwinked by CBN’s usual propaganda that inflation, interest and exchange rates cannot remain harmonious; clearly, in several successful countries, the respective Central Bank monetary policy rate consistently remains below 3% rather the oppressive 13% currently adopted by CBN.

Furthermore, inflation rates above 3% are also anathema to social welfare and therefore decried in more successful economies; regrettably, we shamelessly celebrate inflation rates which are nearer 10%, despite the reality that all static incomes would lose over 50% of purchasing value every 5 years in such event.

The income contraction caused by inflation is responsible for the apparent increasing poverty observed amongst pensioners and retirees as unjust reward for service to their fatherland. Additionally, high inflation rates also constrain consumer demand, which normally drives investment and industrial expansion decisions, to create those jobs, which reduce the unemployment rate.

Buhari is clearly aware that Naira devaluation only facilitates deepening poverty as clearly evident as the Naira steadily fell from its exalted exchange rate of a stronger Naira to a dollar; conversely, a stronger Naira will lift more Nigerians from poverty. Similarly, Buhari should interrogate why the Naira exchange rate steadily depreciated even when our reserves exceeded $60b.

Incidentally, weaker Naira rates will, irrespective of crude oil price level, also instigate higher fuel prices domestically and make the abolition of fuel subsidy very unpopular. On the other hand, stronger Naira rates will reduce fuel prices domestically, and ultimately eliminate subsidies, to make the imposition of a sales tax on fuel possible; furthermore, a stronger Naira will also make fuel smuggling unprofitable and unattractive and ensure uncontested deregulation of the downstream sector by civil societies.

Clearly, the excruciating burden of ever surplus Naira, also feeds the pool that facilitates corruption and is also responsible for abnormally high inflation and interest rates and is equally responsible for unyielding Naira depreciation. A disciplined investigation will surely reveal that systemic surplus Naira is primarily caused by CBN’s creation of fresh Naira values for monthly distributable dollar revenue.

SAVE THE NAIRA, SAVE NIGERIA!!
- See more at: http://www.vanguardngr.com/2015/04/buhari-and-the-economy-which-way-forward/#sthash.qnvs06YK.dpuf
Re: Buhari And The Economy: Which Way Forward? By Henry Boyo by Sweetguy25: 2:20pm On Apr 20, 2015
Buhari’s Team must therefore, hit the ground running and readily jettison Jonathan’s 2015 budget proposal, so that a fresh Appropriation bill can be presented to the National Assembly before July 2015. We may also consider 29th May to May 28th as fiscal year to align with our established Election Time Table and thereby prevent politically induced budget truncation on the advent of a new Leadership halfway into the year.

This is exactly what I was saying on an earlier thread but foools thought I was blabbing.
Re: Buhari And The Economy: Which Way Forward? By Henry Boyo by Sweetguy25: 2:34pm On Apr 20, 2015
@lalasticlala; ishilove; obinoscopy;

frontpage please
Re: Buhari And The Economy: Which Way Forward? By Henry Boyo by EmoBoy(m): 11:53am On Apr 21, 2015
Infact, citizens from nations with considerably less natural endowments may be excused for decrying what they consider to be an inexplicable inequity by Providence. In reality, our inability to galvanise our resources to the greater benefit of the critical mass is actually caused by the application of fiscal and monetary strategies that are antagonistic to consumer demand, and job creation.

This is excellent. I totally understand what he means. Our fiscal and monetary managers (the FMF and the CBN) are doing an awful job towards stimulating employment in Nigeria.

Employment in Nigeria goes beyond human unemployment(labour), land(including natural resources) and capital are also unemployed leading to very high margins of non-productivity. Our monetary managers, especially the central bank of nigeria should be blamed for our economic problems.

Consequently, if Buhari must succeed, he would need to quickly reverse the ratio between capital and recurrent expenditure, such that well over 60% of total annual revenue projections would be dedicated to the enhancement of social infrastructure and human capacity in place of the prevailing humonguos salaries and allowances of public servants.

This is logical but however, I think we tend to forget that we need more revenues. This is the most important. Our revenue projections are very low and this is not adequate to finance the development of the much needed capital projects around the country. We should be critically thinking of brilliant ways to increase our non debt funding by over 200 to 300 percent.

Clearly, Buhari would need to also reduce the duplication of functions by various MDAS as per the recommendations in the Oronsanye report, but government must be careful to minimise the inflow of new entrants into a jobless market. Similarly, the new administration should be wary of increasing the current debt to GDP ratio, as this is a sure road to another oppressive debt burden.

Supported.

A situation where a relatively stable nation like Nigeria with its immense reserves and resources borrows at Shylock rates of over 15% is totally unacceptable for what are clearly risk free soverign debts. Furthermore, Buhari must immediately interrogate why our foreign reserves earn minimal interest, while we inexplicably go cap in hand to borrow externally at over 7% interest rate.

This is thought provoking. The CBN is surely killing our economy.

Incidentally, the yet to be assented 2015 budget, accommodates about 20% deficit; consequently, government will borrow over N1Trillion Naira and pay between N100- N150bn as interest charges to fund part of its recurrent (consumables and salaries etc.) budget. It is ironical that such huge government borrowings will exist simultaneously with the unyielding ‘obstructive’ Naira surplus deliberately created by the CBN.

I have no problem with the borrowing but where I feel bad is when we borrow to fund discretionary expenses. If this borrowing was used to finance investment vehicles or capital projects, then I'll have no problems with it because they'll in turn generate revenues for the government in the long run.

Buhari’s Team must therefore, hit the ground running and readily jettison Jonathan’s 2015 budget proposal, so that a fresh Appropriation bill can be presented to the National Assembly before July 2015. We may also consider 29th May to May 28th as fiscal year to align with our established Election Time Table and thereby prevent politically induced budget truncation on the advent of a new Leadership halfway into the year.

This is the most important thing Buhari should propose if he wants to have a successful tenure. The 2015 budget does not favor or align with the campaign promises of the APC in the first place and if it's implemented or passed, this will ultimately mean that Buhari will running on GEJs budget for the next one year.
Re: Buhari And The Economy: Which Way Forward? By Henry Boyo by EmoBoy(m): 12:02pm On Apr 21, 2015
Henry Boyo is the only person(in the whole of Nigeria) that talks anything sensible about the Nigerian economy. The only person. Every other person talks trash

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Re: Buhari And The Economy: Which Way Forward? By Henry Boyo by EmoBoy(m): 12:18pm On Apr 21, 2015
Its funny how everybody blames Okonjo Iweala for our problems without pointing fingers at the CBN. They don't know that the decisions of the CBN impacts on the economy as much as the decisions of the minister of finance. Everybody thinks Okonjo is responsible for everything, even for the depreciation of the naira and depletion of our forex reserves. There's so much ignorance in this country.
Re: Buhari And The Economy: Which Way Forward? By Henry Boyo by Sweetguy25: 12:26pm On Apr 21, 2015
EmoBoy:
Its funny how everybody blames Okonjo Iweala for our problems without pointing fingers at the CBN. They don't know that the decisions of the CBN impacts on the economy as much as the decisions of the minister of finance. Everybody thinks Okonjo is responsible for everything, even for the depreciation of the naira and depletion of our forex reserves. There's so much ignorance in this country.

You're absolutely correct. The minister of finance controls our fiscal policy while the CBN controls our monetary policy. Nigerians don't seem to understand that.
Re: Buhari And The Economy: Which Way Forward? By Henry Boyo by PassingShot(m): 12:28pm On Apr 21, 2015
Yet some m0r0ns spearheaded by Mr. protection will have us believe that GEJ's failure at the polls was a result of ganging up against their region.

F00ls they are!

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