We have a problem.
1. Weak Fiscal Policy and political structure.
2. Executing good economic policies.
I will only touch on 2 because the ruling party does not have the nerve to dismantle the fiscal structure we have now. Also so unfortunate the last one could not. In the next elections, we should vote for the guy that will stop handouts to states. The gain of just this single decision is too enormous to mention in this thread. Will create another thread highlighting this
I will go ahead with number 2. Solutions to number 2 start with a good plan (budget). Unfortunately we have started off in the wrong foot. The growth rate of a country depends on rate of saving and investment. For this purpose, budgetary policy aims to mobilise sufficient resources for investment in the public sector. Therefore, the government makes various provisions in the budget to raise overall rate of savings and investments in the economy. what I have seen so far in this years budget is not impressive. Hopefully next year will be much better.
Another example as regards to policy is curbing inflation rate. Look around you, you can hardly find anything manufactured in Nigeria. So what it means is that inflation is going to be in double figures because of a devalued Naira at 310 to a dollar. It’s a bad policy to fix the Naira and not let market forces work. A good example to explain this bad policy is the way and manner we have handled our forex. Firstly, the entire policy to control our outflow was not carefully thought through. What we are doing is fixing the roof because of bad foundation. Or repainting the car and feeling good when your engine is about to knock. Bad precedence we have laid in the past 50 years. Keeping the right to set the dollar price exclusively to CBN is a recipe for disaster. It’s only a matter of time and that time will be when oil is worthless. Do you know that the CBN gathers all our dollars and print Naira equivalents of these dollars. They flood this Naira in the economy and because the GDP growth is not equivalent to the Flooded Naira, inflation starts to kick in, the CBN the go ahead to reduce to cash in circulation by raising interest rate, selling T bills and even borrowing from bank at huge cost. Imagine! The simple solution to this is to let it stand on its feet. Every body source for your dollars and let your customers buy it at any price.
But wait a minute, the decision to do that is not so simple, the dollar will reach 500 Nairas, so politically, it will be suicidal considering the fact that 1 Naira was suppose to be of equal value to the dollar.
A true devalued Naira may be a solution to our problems. It will reignite the real sector. Manufactured good in Nigeria can now compete with foreign goods In Nigeria. Thousand of Jobs will be created. We will get better at it and even start to export. There is hope people.
That’s the only way. For you to increase your outflow, you have to be able to sell manufactured products, resources like oil etc can not cut you in. To be able to manufacture competively with China, Germany etc, you will need
1. Technology
2. Fiscal policies, tax cuts import waivers on heavy duties etc
3. Most important, Infractructural development (1 Trillion US at least).This will include power, rail, roads, ports etc. unfortunately, we have squandered billions of hard earn forex that should have been used for this
4 Human Resource – STEM professionals, technicians etc
5. Strong Policing- strong police force, legal framework etc.
6. Strong Foreign policy
What do we do?
1. Can we as citizens reach out to our legislators that the budget should reflect the above and don’t be passed until it is changed.
2. Can we also push for a well laid out fiscal policy
3. Can we also push for a policy that will ban all forms of commodities except heavy duty equipment from accessing forex from the CBN
4. Can we set a hard target for the power problem to be fixed. (Milestones included). All projects in the world have targets
5. We consume 40 million liters a day of PMS. Dangote refinery will do 10 million liter max. Can we rigorously push for 4 Dangotes to build refineries especially from the oil majors in country.
6. With just a 10% increase in GDP and 30% increase in manufacturing, 2.2 million barrel a day of oil we produce will not be enough for local consumption.