FIRST A DIAGNOSIS OF THE PROBLEM
MALIGNANT METABOLIC ECONOMIC SYNDROME; COMPLICATED BY INFLATION, HIGH INTEREST RATES, UNEMPLOYMENT, WEAK INFRASTRUCTURE, PRICE OIL SHOCK AND NO GROWTH ECONOMY.
BUT WE CAN GET OUT!!! ONLY BY HARDWORK AND STRONG LEADERSHIP.
ANALYSIS OF GOVT ECONOMIC POLICY – COHESION NEEDED
- Move from strict Monetarism of the MILTON FRI EDMAN SCHOOL to KEYNESIAN MODEL
- UNCLEAR ECONOMIC POLICY DIRECTION so need to develop coherent Fiscal, trade and monetary policy
- TIGHT LIQUIDITY – CBN MPR at 14% basis point, ridiculous
- HIGH INTEREST on Debt Instruments – Treasury Bill, money deposits, etc disincentive to real production, as paper profit is lucrative. High yield Treasury Bills has made banks unproductive.
- CBN focus on Forex management is encouraging round tripping and creating asymmetry
- CBN should focus on productive value of the economy and not numerical value of the naira.
- Full deregulation of forex market to allow level playing field and remove distortions such as round tripping. At least 20 billion dollars inflow will instantly occur
- A Presidential Proclamation at NASS – switching from austerity to growth policy. Spend more to boost economy.
- Implement Presidential Proclamation (like FDR). Adoption of supply side and not demand side policy. NOT SURE ABOUT ECONOMIC EMERGENCY POWERS. SHAGARI HAD IT AND FAILED. VENEZUALA ALSO NOT WORKING.
- Reverse Anti austerity and tight money, as G-20 nations all now agree,
- Use all policy tools and embrace Fiscal stimulus
- Adopt Keynesian economic model of massive government spending on public works,
- Reducing raging inflation at 17% in medium term.
- Reduce MPR to single digit – 5% – Quantitative Easing
- Implement 2016 Budget and reflate the economy
- Spend our way out of recession
- National Treatment Policy – Fiscal and trade Protection Policy
- Establish urgently a Development and Guarantee Bank
- Prepare Public Sector borrowing requirement, PSBR and borrow as our debt Ratio can sustain this. Develop Assets securitization
- Pay off domestic debt to inject liquidity in the system
- Give Treasury Single Account money back to the Banks at single digit rates and supervise Banks; recommended lending base rate 5%
- Massive legal regulatory and institutional reform in Financial Services Sector – money is oxygen to economy but not flowing as a result of bottlenecks.
- Create a Prudential Regulatory Authority – to supervise banks to lend
- Create a Financial conduct Authority – to get banks to behave
- Consequently limit CBN to Monetary Policy and take away banking supervision to new Prudential Regulatory Authority and banking ethics to new Financial Conduct Authority – if Banks focus on lending and not trading, money will flood the system for productive value
- Create a debt factor market to soak up non performing loans of Banks now at 12% and in excess of 20 trillion naira.
- Create a robust mortgage private sector led market, by waking up dead capital trapped in the national housing stock valued at 7 trillion dollars
- Government must get out of business and enable Private Sector led growth
- Massively fund small businesses by Development and Guarantee Banks as this is the engine of economic growth.
- Provide massive social benefits.
Government to give hope with a clear vision, like FDR during the American great Depression
Urgently explore alternative income sources – Agriculture, Maritime, Infrastructure Power and support
Create efficiency in Government and consider rebalancing Federal power to bring in the States as economic enablers.
FDR’S NEW DEAL
Study carefully FDR’s new deal that got the US out of the Great Recession (Depression) in the 1930’s;
- Communicated hope
- Created massive public works programmes, especially the momentus Tennesse Valley Authority, a depressed 640,000 square mile area in the Tennesse Valley
- Enacted the Glass – Stegall Banking Act, directing banks not to speculate or trade but lend
- Enacted the National Industrial Recovery Act, to deal with massive employment
- Created the Works Progress Administration, putting back millions to work on public infrastructure
Recovery path possible by Q2 2017 with vigorous implementation of a new economic model, otherwise recession cycle may/will extend up to Q4 2020.
Tuesday, September 6th 2016