My Big Issues for 2019

The 2019 elections are close and it’s difficult to know which party to believe and to vote for in the elections.  They have all made promises to Nigerians. Will they keep them?

I will attempt to identify some of the big issues and hope Nigerians find it helpful in deciding how to vote.

I will start with Political Governance. Some say Nigeria’s problem has to do with its structure. The F.G does almost everything while the 36 states and 774 LGs have little to do.

There are 98 items of power given to both the FG and state Governments under the 1999 constitution. The FG controls 68 of these items exclusively.  The remaining 30 are also controlled by the FG except it permits the state Governments to execute any of them.

As you can see, the FG is bogged down with many responsibilities which can be passed down to state Governments. This is the call for Restructuring or Devolution of Powers from the FG to the states.

For example, the F.G issues drivers’ licenses, marriage certificates; it controls primary, secondary and tertiary education, money, banking, business, water,electricity roads, bridges, employment, labour matters, mineral resources,agriculture, healthcare, insurance, railways, waterways etc. Is this not too much?

The over-concentration of powers in the hands of the FG to the exclusion of states has meant that the state governments are not politically and economically viable under the present structure.

This is why Political governance or RESTRUCTURING will be a very big issue in the 2019 elections.

There is a very strong view that the FG cannot continue to dominate Political Governance if Nigeria must develop.

The present governance structure has left the states cash strapped and running to Abuja for handouts.

The FG itself has built a huge inefficient civil service of about 5 million people,who consume 80% of our finances. Part of the over bloated workforce is the Prisons service run by the FG. This costs us about 6-8 billion every year and yet, FG has no prisoners. So why Federal Prisons?

The FG is over bloated and overwhelmed. As a result, it cannot harness all of our Natural resources except oil and gas which it is not even doing effectively.

Many believe that massive devolution of powers by the FG to the states will transform Nigeria. Let me give at least 4 examples; Ondo state sits atop one of the largest Bitumen deposits in the world yet the state is broke and cannot pay salaries!!

Next is the Sulphur free massive coal deposits sitting in the grounds of Enugu state worth billions and adding no value to our development.

Then, we have trillions of gas reserves in the Anambra basin doing nothing but worth billions of dollars. Northern Nigeria is full of rich solid minerals – gold,bauxite, ore etc and it also has one of the richest Agriculture farmlands in the world.

But all these states have no control over their resources and go begging an already poor FG for money.

It is suggested that massive transfer of power from the FG to the states will be a major issue in the 2019 elections. We need to work out a formula between the FG and the states to exercise and in some cases share power.

On he vexed Issue of State Police, States can be made to strictly deal with crimes while streamlining the present Nigeria police force to strictly federal duties. So a new legislative list can be as follows:

We can therefore share powers as follows:

–           Money, Currency: Federal

–           Defence: Federal

–           International Agreements: Federal

–           External trade: Federal

–           Interstate trade: Federal

–           Intrastate trade: States

–           Major physical infrastructure: Federal and also shared with States

–           Primary/Secondary education: States

–           Post-secondary education and research: States

–           Labour matters: States

–           Pensions:shared, Federal and States

–           Health care: States and Federal

–           Courts: Federal and State

–           Mineral resources: States

–           Agriculture: States

–           Environment: Federal and States

–           Municipal affairs: States

–           Court system”: Federal and States

–           Criminal law: Federal and States

–           Police: Federal and States

–           Customs/excise taxes: Federal.

–           Corporate taxes: Federal

–          Personal taxes: States

–           Arms, ammunition and explosives – Federal

–           Aviation, including airports, safety of aircraft and carriage of passengers and goods by air –Federal and States

–           Awards of national titles of honor, decorations and other dignities – Federal

–           Bankruptcy and insolvency – Federal and States

–           Banks, banking, bills of exchange and promissory notes – Federal

–           Borrowing of moneys within or outside a country – Federal and State

–           Census – Federal

–           Citizenship, naturalisation and aliens – Federal

–           Commercial and industrial monopolies, combines and trust – Federal

–           Control and Capital issues – shared

–           Copyright – Federal

–           Creation of States – shared

–           Currency, coinage and legal tender- Federal

–           Customs and excise duties – Federal

–           Deportation of persons – Federal

–           Designation of securities in which trust funds may be invested – shared

–           Diplomatic, consular and trade representations – Federal

–           Elections- shared

–           Evidence – shared

–           Exchange control – Federal

–           Export duties – Federal

–           External affairs – Federal

–           Extradition – Federal

–           Fingerprints, identification and criminal records – shared

–           Fishing and fisheries including fishing and fisheries in rivers, lakes, waterways, ponds and other inland waters – shared

–           Immigration and emigration – Federal

–           Incorporation, regulation and winding up of bodies corporate, including co-operative societies, local government councils and bodies corporate – shared

–           Insurance- shared

–           Maritime shipping and navigation, including-
(a) Shipping and navigation on tidal waters;

(b) Shipping and navigation on the River Niger and its affluent and other inland waterways or inter-State waterway- shared

–           Meteorology – Federal

–           Military (Army, Navy and Air Force) – Federal

–           Mines and minerals, including oil fields, oil mining, geological surveys and natural gas – usually shared, sometimes Federal

–           National parks – shared

–           Nuclear energy – shared

–           Passports and visas – Federal

–           Patents, trademarks, trade or business names, industrial designs and merchandise marks – shared

–           Posts,telegraphs and telephones – shared

             Prisons- States

–           Public holidays – shared

–           Railways – shared

–           Regulation of political parties – Federal

 In Conclusion, Nigeria has failed to grow to its potential simply because the FG is too large, does far too many things inefficiently and does not harness our natural resources enough to allow Nigeria to be a dominant Industrial nation.

 I believe restructuring Nigeria to be more efficient is a big issue for 2019 elections.

PRACTICAL SOLUTIONS TO SOME OF NIGERIA’S ECONOMIC CHALLENGES

I feel called upon to make my own contribution to the dialogue on a solution to the economic recession that Nigeria is undergoing.

It is evident now that the oil price shock was the main contributing factor causing the downward spiral in the economy resulting in the present recession.  

In any ailing economy the first step that must be taken is a diagnosis of the problem and in Nigeria’s case I would diagnose that it is suffering from malignant metabolic economic syndrome, complicated by inflation, high interest rates, unemployment, weak infrastructure and the results of the global fall in the price of oil.

It is indeed a gloomy state of affairs which if not treated with urgency by introducing strong fiscal, trade and monetary policy could well lead to depression. 

We know that Nigeria has experienced mismanagement for several decades but now is not the time to lament but to chart a clear economic policy direction that will give value to the economy. This will entail developing macroeconomic models tailored to stimulate all sectors of the economy and catapulting us out of recession.

On the issue of monetary policy there is a lot of confusion. There is the need for harmonization between CBN policy which is leaning towards tight liquidity in a bid to harness inflation and the Minister of Finance’s call for increased public spending on capital projects.

Note that CBN increased the MPR by 200 basis points from 12%to 14% to combat inflation and stimulate growth. The MPR is the anchor rate at which the CBN, in performing its role as lender of last resort, lends to Deposit Money Banks to boost the level of liquidity in the banking system.

If the apex bank intends to increase the level of liquidity in the economy, it reduces the MPR but increases it when it intends to tighten money supply.

By increasing MPR,CBN has unfortunately tightened lending. The banking sector requires strengthening and must be empowered to lend. I recommend that money from the Treasury Single Account should go back to the banks at single digit rates and that banks’ recommended lending rate should not exceed 5%.

I feel that the CBN should focus on productive value of the economy and not the numerical value of the naira. The recent devaluation of the naira by the introduction of a floating naira exchange rate has not yielded positive results as we see the naira spiraling downwards. In fact the new forex regime caused a drop in the GDP from $500billion to some $350billion by reducing per capita income to below $600.

In proffering a solution to this, I feel that Government’s monetary policy will be required to move from strict monetarism of the Milton Friedman School of thought to the Keynesian Model.

Milton Friedman promoted an alternative macroeconomic viewpoint known as”monetarism“, and argued that a steady, small expansion of the money supply was the preferred policy. His ideas concerning monetary policy, taxationprivatization and deregulation influenced government policies, especially during the 1980s.

His monetary theory influenced the Federal Reserve’s response to the global financial crisis of 2007–08.On the other hand Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions. Keynesian economics served as the standard economic model in the developed nations during the latter part of the Great Depression, World War II,and the post-war economic expansion(1945–1973).

I believe strongly that Nigeria can recover from recession and I recommend as a start the need for a Presidential Proclamation at the National Assembly, switching from Austerity Policy to Growth Policy,this will instill hope and form the basis for the way forward.

I am not sure if the Economic Emergency Powers requested by Mr. President would work. I recall that President Shagari had them and failed; the Venezuelan model has also not worked.  To boost the economy will require massive spending on infrastructure and public works which will also require manpower resources. This is the Keynesian economic model. This way we will spend our way out of recession with the objective of reducing inflation. The CBN should reduce the MPR to single digit of say 5%  and create a framework for quantitative easing.

Further, we need to consider a National Treatment Policy that will create the environment for real sector growth. We would need to establish a Development and Guarantee Bank to provide financing for national development which can be supported by asset securitization.

Considering all solutions, I will add the need for the government to prepare aPublic Sector Borrowing Requirement (PSBR) and borrow according to needs.

It may be possible to borrow against future oil receivables as was proposed with China by the last administration. It would also be necessary for the federal and state governments to pay off domestic debts to inject liquidity into the system,whilst retaining a clear debt ratio policy.

I have always advocated the need formassive legal and institutional reform in the financial services sector whichwill allow money to flow through the veins of the economy.

For banking

regulations I suggest we can adopt the UK model by creating a Financial Conduct

Authority (FCA) and a Prudential Regulatory Authority (PRA). The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom, but operates independently of the UK government,and is financed by charging fees to members of the financial services industry.The FCA regulates financial firms providing services to consumers and maintains

the integrity of UK’s financial markets. It focuses on the regulation of conduct by both retail and wholesale financial services firms whereas the

of conduct by both retail and wholesale financial services firms whereas the

Prudential Regulation Authority was created as a part of the Bank of England by the Financial Services Act (2012) and is responsible for the prudential regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms.

This model would limit CBN like the Bank of England to monetary policy and domicile supervisory functions in the PRA. The proposed new regulatory agencies will provide more effective supervision of the banks than is the case.

On the need for huge stimuli for business growth there will be the need to create a debt factor market to soak up non-performing loans presently on the banks’ balance sheets now standing at about 20trillion naira. 

Also medium and small businesses must be encouraged and enabled to access funds to grow their businesses as these businesses represent the engine of economic growth. Access to funds should be supported by a robust private sector led mortgage market by waking up dead capital trapped in the nation’s housing stock valued at over 7 trillion naira.

We will also need to urgently explore alternative income sources from Agriculture, Maritime, Aviation, Infrastructure, Mining etc. If Government’s efficiency is enhanced and the States are required to contribute as economic enablers, then there will be less strain on the national purse and States will be forced to generate income.

It will be encouraging for the government to give hope with a clear vision of how to tackle recession. For example Franklin D. Roosevelt’s ‘New Deal’ got the United States out of the Great Depression in the 1930’s. In the case of FDR’s New deal, massive public works programmes like the momentous Tennessee Valley construction were undertaken to generate employment and hope for the American people.

Several important laws were enacted to support the New deal among which two in particular impacted on the economy.The Glass-Steagall Banking Act was enacted to restore confidence in the banking system after thousands of bank failures in the first years of the Depression in the U.S. This Act prohibited banks that held government deposits from speculation and trading but compelled lending to the real sector.

Also the National Industrial Recovery Act (NIRA) was a law passed by the United States Congress in 1933 to authorize the President to regulate industry to stimulate economic recovery. It also established a Public Works Administration to put millions back in employment by massive public infrastructure development.

A more recent example in theU.S was the introduction of the Emergency Economic Stabilization Act, 2008commonly referred to as an Act to bailout the U.S financial system.

This law was enacted in response to the subprime mortgage crisis. The United States Secretary of the Treasury was thereby authorized to spend $700 billion to purchase failing bank assets under the Troubled asset Relief Program (TARP).

Under TARP, funds for the purchase of distressed assets were mostly re-directed to inject capital into banks and other financial institutions while the Treasury continued to examine the usefulness of targeted asset purchases.

Another innovative piece of legislation was the American Recovery and reinvestment Act signed into law by President Obama in 2009. This historic legislation stimulated massive job creation during challenging economic times by cutting taxes and investing billions of dollars in critical sectors such as energy, health care,infrastructure and education.

I have highlighted all of these illustrations to project how other jurisdictions have dealt with economic crises. I emphasize the need for immediate economic and macroeconomic policy measures to be put in place.

This will require setting up a council of economic advisers to advise Mr. President on economic policy by providing objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues.

This will provide a New Economic Model that when implemented and pursued vigorously can turn around Nigeria’s Economic decline.

African Lawyers’ Awards: OAL’s Ogwemoh emerges as 2016 Best Female Managing Partner

SAMSUNG CSC

L-R; Mrs. Funke Adekoya SAN presenting female managing partner award of the year to the managing partner, Olisa Agbakoba Legal, Mrs. Priscilla Ogwemoh, at the law Digest award in Lagos.

The Managing partner of Olisa Agbakoba Legal, OAL, Mrs. Priscilla Ogwemoh has won the best Female Managing Partner of the year award in Nigeria.

The award was presented to Ogwemoh by Mrs. Funke Adekoya SAN at Oriental Hotel in Lagos.

Ogwemoh was among the shortlist for this year’s Law Digest Africa Awards out of over 200 entries for the awards; an increase of over 50 per cent from last year’s entries, making this award the most recognized award for African lawyers. There were also entries from countries such as Egypt, Mozambique, Rwanda and Morocco for the first time.
Meanwhile, the category of the winners are: Managing Partner of the year, Female Managing Partner of the year, Young Managing Partner of the year (under 40), Law Firm of the year, Emerging Firm of the year, Litigation and Dispute Resolution Team of the year, M&A Team of the year, Banking & Finance Team of the year, Capital Market of the year, Property Infrastructure and Construction Team of the year, Power, Energy & Natural Resources Team of the year, IP & Technology Team of the year and Africa’s Strategic Partner of the year.
Ogwemoh of Olisa Agbakoba Legal (Nigeria) beat Eliane Bergenthuin of De Beer Attorneys (South Africa), to clinch the award.

AGBAKOBA RESPONDS TO DEBATE ON PROPOSED SALE OF NATIONAL ASSETS

I have followed with interest the debate on the propriety or otherwise of Federal Governments proposed sale of national

assets to deal with the recession. I will not make any comment on the propriety of the proposed sale.  However, I am of the view that the Federal Government needs to do two things:

First, an INVENTORY OF FINANCIAL REQUIREMENTS – How much money do we need?  Second, an INVENTORY OF NEED- Where do we put the money? Findings from these inventories will provide a guide for government.

I will also recommend President Obama’s approach to the American Recession. President Buhari should propose to the National Assembly a REINVESTMENT AND RECOVERY BILL and an EMERGENCY ECONOMIC STABILIZATION BILL to stimulate the economy and bailout the ailing financial system.

  1. Olisa Agbakoba SAN

23rd September 2016  

AGBAKOBA RESPONDS TO STATEMENT CREDITED TO FEMI FALANA BY NATION NEWSPAPER

I just read a story on today’s Nation Newspaper titled “The fight against anti – corruption agencies by NBA (1)” credited to my learned brother Femi Falana SAN stating that in 2007 I led a delegation of bar leaders to pay a courtesy call on the then Minister of Justice and Attorney General of the Federation, Michael Aondoakaa SAN with a view to divesting the Economic and Financial Crimes Commission (EFCC) of its prosecutorial powers. Nothing can be further from the truth. I never led any such delegation at any time to the then Minister of Justice and Attorney General, Michael Aondoakaa SAN.  I continue to hold the view that a debate on the propriety of the EFCC investigating and prosecuting financial crimes at the same time is appropriate. If the idea behind my learned brother’s insinuation is to stifle debate on the EFCC, this will not work.

Olisa Agbakoba SAN

20TH September 2016

RE: PRACTICAL SOLUTIONS TO SCALE NIGERIA’S RECESSION

September 15, 2016

 

President MuhammaduBuhari GCFR

Aso Villa

Abuja

Dear Mr. President,

RE: PRACTICAL SOLUTIONS TO SCALE NIGERIA’S RECESSION

I feel called upon to make my own contribution to the dialogue on a solution to the economic recession that Nigeria is undergoing.

It is evident now that the oil price shock was the main contributing factor causing the downward spiral in the economy resulting in the present recession.  In any ailing economy the first step that must be taken is a diagnosis of the problem and in Nigeria’s case I would diagnose that it is suffering from malignant metabolic economic syndrome, complicated by inflation, high interest rates, unemployment, weak infrastructure and the results of the global fall in the price of oil. It is indeed a gloomy state of affairs which if not treated with urgency by introducing strong fiscal, trade and monetary policy could well lead to depression.

We know that Nigeria has experienced mismanagement for several decades but now is not the time to lament but to chart a clear economic policy direction that will give value to the economy. This will entail developing macroeconomic models tailored to stimulate all sectors of the economy and catapulting us out of recession.

On the issue of monetary policy there is a lot of confusion. There is the need for harmonization between CBN policy which is leaning towards tight liquidity in a bid to harness inflation and the Minister of Finance’s call for increased public spending on capital projects. Note that CBN increased the MPR by 200 basis points from 12% to 14% to combat inflation and stimulate growth. The MPR is the anchor rate at which the CBN, in performing its role as lender of last resort, lends to Deposit Money Banks to boost the level of liquidity in the banking system.If the apex bank intends to increase the level of liquidity in the economy, it reduces the MPR but increases it when it intends to tighten money supply. By increasing MPR, CBN has unfortunately tightened lending. The banking sector requires strengthening and must be empowered to lend. I recommend that money from the Treasury Single Account should go back to the banks at single digit rates and that banks’ recommended lending rate should not exceed 5%.

I feel that the CBN should focus on productive value of the economy and not the numerical value of the naira. The recent devaluation of the naira by the introduction of a floating naira exchange rate has not yielded positive results as we see the naira spiraling downwards. In fact the new forex regime caused a drop in the GDP from $500billion to some $350billion by reducing per capita income to below $600.

In proffering a solution to this, I feel that Government’s monetary policy will be required to move from strict monetarism of the Milton Friedman School of thought to the Keynesian Model. Milton Friedman promoted an alternative macroeconomic viewpoint known as “monetarism“, and argued that a steady, small expansion of the money supply was the preferred policy. His ideas concerning monetary policy, taxation, privatization and deregulation influenced government policies, especially during the 1980s. His monetary theory influenced the Federal Reserve’s response to the global financial crisis of 2007–08. On the other hand Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions. Keynesian economics served as the standard economic model in the developed nations during the latter part of the Great Depression, World War II, and the post-war economic expansion (1945–1973).

I believe strongly that Nigeria can recover from recession and I recommend as a start the need for a Presidential Proclamation at the National Assembly, switching from Austerity Policy to Growth Policy, this will instill hope and form the basis for the way forward. I am not sure if the Economic Emergency Powers requested by Mr. President would work. I recall that President Shagari had them and failed; the Venezuelan model has also not worked.  To boost the economy will require massive spending on infrastructure and public works which will also require manpower resources. This is the Keynesian economic model. This way we will spend our way out of recession with the objective of reducing inflation. The CBN should reduce the MPR to single digit of say 5%  and create a framework for quantitative easing.

Further, we need to consider a National Treatment Policy that will create the environment for real sector growth. We would need to establish a Development and Guarantee Bank to provide financing for national development which can be supported by asset securitization. Considering all solutions, I will add the need for the government to prepare a Public Sector Borrowing Requirement (PSBR) and borrow according to needs. It may be possible to borrow against future oil receivables as was proposed with China by the last administration. It would also be necessary for the federal and state governments to pay off domestic debts to inject liquidity into the system, whilst retaining a clear debt ratio policy.

I have always advocated the need for massive legal and institutional reform in the financial services sector which will allow money to flow through the veins of the economy. For banking regulations I suggest we can adopt the UK model by creating a Financial Conduct Authority (FCA) and a Prudential Regulatory Authority (PRA). The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom, but operates independently of the UK government, and is financed by charging fees to members of the financial services industry. The FCA regulates financial firms providing services to consumers and maintains the integrity of UK’s financial markets. It focuses on the regulation of conduct by both retail and wholesale financial services firms whereas the Prudential Regulation Authority was created as a part of the Bank of England by the Financial Services Act (2012) and is responsible for the prudential regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms. This model would limit CBN like the Bank of England to monetary policy and domicile supervisory functions in the PRA. The proposed new regulatory agencies will provide more effective supervision of the banks than is the case.

On the need for huge stimuli for business growth there will be the need to create a debt factor market to soak up non-performing loans presently on the banks’ balance sheets now standing at about 20trillion naira. Also medium and small businesses must be encouraged and enabled to access funds to grow their businesses as these businesses represent the engine of economic growth. Access to funds should be supported by a robust private sector led mortgage market by waking up dead capital trapped in the nation’s housing stock valued at over 7 trillion naira. We will also need to urgently explore alternative income sources from Agriculture, Maritime, Aviation, Infrastructure, Mining etc. If Government’s efficiency is enhanced and the States are required to contribute as economic enablers, then there will be less strain on the national purse and States will be forced to generate income.

It will be encouraging for the government to give hope with a clear vision of how to tackle recession. For example Franklin D. Roosevelt’s ‘New Deal’ got the United States out of the Great Depression in the 1930’s. In the case of FDR’s New deal, massive public works programmes like the momentous Tennessee Valley construction were undertaken to generate employment and hope for the American people. Several important laws were enacted to support the New deal among which two in particular impacted on the economy. The Glass-Steagall Banking Act was enacted to restore confidence in the banking system after thousands of bank failures in the first years of the Depression in the U.S. This Act prohibited banks that held government deposits from speculation and trading but compelled lending to the real sector. Also the National Industrial Recovery Act (NIRA) was a law passed by the United States Congress in 1933 to authorize the President to regulate industry to stimulate economic recovery. It also established a Public Works Administration to put millions back in employment by massive public infrastructure development.

A more recent example in the U.S was the introduction of the Emergency Economic Stabilization Act, 2008 commonly referred to as an Act to bailout the U.S financial system. This law was enacted in response to the subprime mortgage crisis. The United States Secretary of the Treasury was thereby authorized to spend $700 billion to purchase failing bank assets under the Troubled Asset Relief Program (TARP). Under TARP, funds for the purchase of distressed assets were mostly re-directed to inject capital into banks and other financial institutions while the Treasury continued to examine the usefulness of targeted asset purchases.

Another innovative piece of legislation was the American Recovery and reinvestment Act signed into law by President Obama in 2009. This historic legislation stimulated massive job creation during challenging economic times by cutting taxes and investing billions of dollars in critical sectors such as energy, health care, infrastructure and education.

I have highlighted all of these illustrations to project how other jurisdictions have dealt with economic crises. I emphasize the need for immediate economic and macroeconomic policy measures to be put in place. This will require setting up a council of economic advisers to advise Mr. President on economic policy by providing objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues. This will provide a New Economic Model that when implemented and pursued vigorously can pull us from this recession by second quarter of 2017. However, if nothing is done the recession cycle may well extend up to Q4 2020.

Thank you for this opportunity to address you directly on this very crucial topic.

 

Yours sincerely,

Olisa Agbakoba SAN, OON

 

Cc:    Dr. Abubakar Bukola Saraki

Senate President

Cc:    Hon. Yakubu Dogara

Speaker of the House of Representatives

 

TALKING POINTS ON GETTING NIGERIA OUT OF RECESSION

SAMSUNG CSC

Dr. Olisa Agbakoba SAN

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

 

SOLUTIONS

  • 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.

 

COMMUNICATE

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;

  1. Communicated hope
  1. Created massive public works programmes, especially the momentus Tennesse Valley Authority, a depressed 640,000 square mile area in the Tennesse Valley
  1. Enacted the Glass – Stegall Banking Act, directing banks not to speculate or trade but lend
  1. Enacted the National Industrial Recovery Act, to deal with massive employment
  1. Created the Works Progress Administration, putting back millions to work on public infrastructure

CONCLUSION

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