By Omodele Adigun, Bimbola Oyesola and Merit Ibe
Last Thursday’s revelation that the Federal Government printed N60 billion to augment the federal allocation to the three tiers of government for March hit Nigerians like a thunderbolt.
According to Governor Godwin Obaseki of Edo State, who made the revelation who told his state transition committee stakeholders at a meeting in Benin on Thursday, the printing of the N60billion was an illustration of the poor state of the nation’s economy.
Describing the situation as posing serious macroeconomic risks for the country, the Director General of Lagos Chambers of Commerce and Industry (LCCI),Dr Muda Yusuf, expressed fears that the biggest of such risks are the inflation and currency depreciation risks. “All of these are taking a huge toll on production costs, operating costs and the welfare of citizens,” he said.
His words: “The Governor of Edo state has not said anything new. The situation is even worse than the picture he painted. CBN financing of government deficit has reached unprecedented levels in recent years. In 2020, it was in excess of two trillion naira. In monetary parlance, it is referred to as Ways and Means financing by the CBN.
“These are reflections of the weak revenue performance of government in the face of growing expenditure. The situation clearly poses serious macroeconomic risks, some of which has started to crystallize.
“The biggest of such risks are the inflation and currency depreciation risks. It is a contributory factor to the current uptick in inflationary pressures in the economy. Headline Inflation was 17.33 per cent as at February, the highest in recent times. Food inflation was even much higher at over 21 per cent.
There are also implications for the currency. Mounting ways and means financing increases money supply and invariably weakens and depreciates the currency.
All of these are taking a huge toll on production costs, operating costs and the welfare of citizens.
As for Dr Uju Ogubunka, the President of Bank Customers’ Association of Nigeria (BCAN), the Federal Government’s action would definitely spook the economy.
Hear him :“If we have got to this level, it shows that things are not normal and it has a lot of inflationary implications for the economy.It shows that we don’t have enough money for the government to share to get us going as we would like. Unfortunately, we have borrowed so much, both locally and internationally to the extent that if we should go out to borrow now, I am sure we would not get a thoroughfare.If it is really true that government printed money, prices of goods and services will jump and would never come down again. Debt servicing is another issue for us. We will not be able to service our debts.
“It also shows we can not generate revenue. Industries are not moving at full speed.There are a lot of unemployment and it means tax revenue is going to be down since you can not tax those who are unemployed.All these are going to affect not only the Federal Government, It will affect the states too.”
Members of the Organised Private Sector (OPS) yesterday said provision of enabling business environment for investors, both local and foreign, for the economy to come out of the present quagmire.
Nigeria Employers Consultative Association (NECA), in its own submission, advised that, in order to strengthen the country’s revenue projections towards achieving its developmental programmes and economic prowess, provision of enabling business environment for investors, both local and foreign to thrive is desirable. Its Director General, Timothy Olawale, noted that economies with little or no natural resources, however, with friendly business policies, tax regimes are always attractive to investors.
“Our industrial and trade policies currently are anti-investment, who ordinarily should be the sources of revenue generation through taxes and other means,” he opined.
Secondly, with the unpredictable nature of global oil prices and developments in usage of alternative sources of fuel and modern technology, it is more appropriate to hasten the process of diversification of the non-oil economy in expanding the revenue sources away from oil.
He stated that it is obvious that revenue from non-oil is more feasible than the oil revenue.
According to him, “Addressing the shock experienced from our mono-dependence on oil revenues and major foreign exchange (forex) earners, makes the economy vulnerable to the instability of the market forces, the country should implement policies to diversify further its export potential, mostly the huge stock of natural resources in order to reduce pressure on the foreign reserves.
“Nigeria’s diversification approach should cover production and export, including agro-processing, manufacturing and services.”