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As much as having more naira at hand naturally increases inflation, it also presents immediate opportunities. All levels of government now have increased naira cashflows, which must be immediately directed to productive use. My suggestions are that the states should look at clearing old contractor debts, wages, pensions and gratuities. They enjoy a major arbitrage now, because even though the value of the naira has fallen, these debts are not ‘marked-to-market’ and will still be paid at face value. States and the Federal Government could even use this opportunity to pay down a considerable portion domestic debts, so that their balance sheets improve. The improvement of state and national balance sheets would enable us to be more attractive for investments. Chances are that our ratings as a nation will improve. Some analysts have also suggested that we use the extra naira to reduce our budget deficit. That is also an option. Already, the 2024 budget is intended to halve the deficit. Perhaps we could achieve an 80 per cent drop in deficit from the 2023 figures. We must seize on the advantages of the naira surfeit and not only concentrate on the disadvantages.
Weak currencies are meant to attract foreign investors, especially the portfolio type. That is one of the advantages being targeted by this strategy. Nigeria has been having negative interest rates for a while on the investment front. This means that our interest rates are below our inflation rate. The CBN is trying to reverse this, in order to generate more investments, and portfolio investors are deemed desirable, to complement whatever comes in as foreign direct investment. Higher interest rates also encourage domestic investors in financial securities. Nigeria’s inflation is expected to trend down to 15 per cent by the end of 2024, according to the IMF, but economic managers at home believe we could prise down inflation to 21 per cent.
We must also look forward, with hope, to the commencement of operations at the Dangote and Port Harcourt Refineries. Whereas many people have argued that there will be no reduction of fuel price as a result of Dangote Refinery coming on board, but if it was only the cost of shipping, lightering, handling and so on from Singapore or Rotterdam that we save for the people, that is something. A reduction of N30 to N50 is something. But what is more important is that jobs will be created in the thousands, perhaps up to one million, ancillary activities, and the easy availability of the products would certainly be a plus for the economy. Whether Nigeria sells to Dangote in US dollars or not is immaterial. If that is the case, then we still get dollars into our position as a nation without selling to external parties. If we don’t sell in dollars, then that loss of extra dollars is compensated for by the fact that distributors are not scrambling for dollars to make payment to Dangote as well. I prefer that we try and sidestep all the dollar business and create demand for the naira – of which we already have a surfeit as discussed above. No matter what happens, it is great that we are saving over N10 trillion from the two reforms – bridging the naira-dollar gap and removing subsidies. The question is, how do we deploy this extra?
From the savings I mentioned in the point above, we can cycle back to the naira surfeit point. But the fact is that the revenue side of things has started to seriously improve for Nigeria. Not only are we getting more value for our resources – especially crude oil – with policies like the NNPC/CBN collaboration, rejigged Treasury Single Account (TSA) rules, more systemised revenue collection using technology and so on, the 18 per cent revenue-to-GDP ratio target will shortly be exceeded and economic managers will have more leeway to impact the economy with these new inflows. We can see already that Ministers Wike and Umahi are everywhere supervising projects that will have direct impact on the people. So, I envision a transformation of our infrastructure if this continues for a while. The seriousness with which we are blocking leakages to revenue and the culmination of the work of the fiscal policy and tax committee led by Mr Taiwo Oyedele as well as the Federal Inland Revenue Service headed by Mr Zach Adedeji, point to a glorious future, even in the short term. This is not a time to despair.
These two key reforms that the government has embarked upon are actually designed to remake an economy. Their success will also bring with it a total overhaul of public service, higher earning for all and sundry – including our artisans who are hardly organised these days, a new understanding in resource management, better compliance around government revenue, less corruption, and so on. However, there is a need to continually feel the pulse of the people (especially with the foreign exchange issue), so that we don’t exceed the optimal doses. The man on the streets may not understand a lot of the complexities discussed here. So, much care is needed. And no administration may solve all the problems of Nigeria at once. Only patriots – like Tinubu – will try. It must be recalled that the other two prominent candidates in the last elections promised to do exactly what Tinubu has done. But now, they can point fingers and criticise because someone has belled the cat.
In the end, I believe these policies will deliver massively. My only prayer is that we begin to see results early. But my duty is also to strive and point out where I think the benefits are and urge us all to be positive while getting government to move with alacrity and urgency. By the time we improve state and federal balance sheets, boost trade and industry, get our infrastructure running at par with other growing states, change mentality around government revenue and expenditure, reverse the japa syndrome or at least slow it down, while attracting good people from even our subregion, boost export of value-added products, Tinubu would have indeed created a new Nigeria. Renewed Hope is very much on course. Like Jesse Jackson used to say back then; Nigerians must KEEP HOPE ALIVE!
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