Economy: The Approach of Prosperity

TOurhe structural model upon which our national economy has been based needs major reform. economy is unhelpfully designed to export raw material and import increasingly expensive finished products. Oil and gas provide over 90 percent of foreign exchange and 80 percent of governmental revenues. Over the long-term, the revenues from these natural resource exports will prove insufficient to meet the rising costs of imports let alone support the fiscal obligations demanded by modern democratic governance.

Agriculture has traditionally been the backbone of this nation and will continue to be. However, we must acknowledge the growing importance of our urban population. At independence, city dwellers represented less than 15 percent of the national population. Today, the urban populace exceeds 50 percent. Over 100 million people reside in our cities and towns.

Also, we must pay special attention to our young population. They are this nation. Youth aged 15-35, account for 65 percent or over 130 million of our 200 million people. Our youth unemployment rate as well as our overall jobless rate have always been too high. Many young people feel alienated and left out. Instead of their creative minds focusing on achieving their next goal in life, too many are worried about the basics of whether they will find a meaningful job, be able to marry or own a home or a car or simply have enough money for their daily bread. If our nation is to live up to its promise, our youth need to be given a fairer deal than this.

In my goevrnment, our cities and towns will witness a level of industrial activity unprecedented in our nation’s history. In this, our youth shall become a leading catalyst driving the economic resurgence. This goes beyond the provision of decent jobs. It speaks of empowering those who see their future as starting and owning businesses in the new economy. It goes to opening the economy in a way that encourages the best that the modern digital and IT-driven sectors have to offer.

We will improve existing industries and sectors. We will be brave and innovative enough to see how new economic vistas powered by today’s technology can create jobs, and provide goods and services that will propel us toward greater prosperity and development.

In helping to shape this more dynamic economy melding the best of the extant sectors with what is new on the economic horizon, my government will be fiscally active; yet equally prudent in the ‘how and why’ of public expenditure because public money is also a storehouse of public values and public trust.

The allocation of revenue between the federal and state governments will be adjusted to give states greater flexibility to foster grassroots economic development.

We will build an economy that produces more of the everyday items, both agricultural and manufactured goods, that define an individual’s and a nation’s standard of living.

Compelled by the unassailable fact that an economy cannot exceed the capacity of the available infrastructure to service it, we shall bring a National Infrastructure Plan to life, harmonising it with the National Industrial Plan to ensure optimal development of key sectors and rapid acceleration of our GDP growth.

FISCAL POLICY National Industrial Plan

We must encourage industries vital to national development. This means growing our industrial base to provide jobs to an expanding urban population.

Through the development of an industrial development master plan, we will:

(i) Extend tax and other credits such as power production and, in certain instances, even public utility consumption credits as well as urban youth employment incentives to domestic manufacturing entities. Tariffs and other measures will be implemented to safeguard such industries.

(ii) Encourage local manufacturers and producers to add value to basic products thus promoting domestic value-added industry and production. These incentives will include lower import tariffs on semimanufactured production lines such as the automotive and IT industries.

(iii) Develop major and minor industrial hubs in each geopolitical zone. Infrastructure in the form of affordable power and water will be fast tracked for industrial hubs.

(iv) Promote IT to boost industrial creativity while spurring the financial inclusion of larger segments of the population through innovative platforms like cryptocurrencies, provided they are well regulated.

(v) Provide Tax credits, holidays and reduced interest rate loans to businesses that hire a certain percent of youth in their workforce and provide genuine on-thejob training and mentoring for their young employees.

In Kano and Kaduna, new industrial hubs will focus on textiles. In Abia and Port Harcourt, a new hub and dry port will focus on labour intensive manufacturing from shoes to small appliances and other consumer goods.

In Ondo state, fine quality sand will be turned into the highest-quality glass items.

In areas with deposits of clay, household items such as dishes and pottery will be manufactured.

In Zamfara and Sokoto, clandestine, environmentally harmful gold mining will be ended. Regulated mining will be instituted such that environmental protection is maintained and local artisans and craftsmen can earn income turning raw gold into finished jewellery.

End The De Facto Dollar Peg

Budgetary custom bases our annual budget and fiscal policies on the dollar value of projected oil sales. This means our federal budget is effectively pegged to a dollar standard. This artificially restricts the government’s fiscal latitude.

To achieve optimal growth in the long term, we must gradually wean ourselves from this limitation. A more efficient fiscal methodology would be to base our budgeting on the projected level of government spending which optimises growth and jobs without causing unacceptable levels of inflation. As part of this prudent growth based budgeting, we will establish a clear and mandatory inflationary ceiling on spending. However, we must break the explicit link between naira expenditure and dollar intake.

Much like the European Union has done, we too must be realistic and temporarily suspend the operation of the three percent deficit limit on government spending during this protracted moment of global economic weakness.

National Infrastructure Campaign

With the fiscal latitude provided by the abovementioned budgetary reform, government can hire millions of unemployed Nigerians to modernise the national infrastructure.

A truly national highway system must be built to make road transportation faster, cheaper, and safer.

A national potable water campaign will be established. We must commit to a Nigeria where, by the end of this decade, no one lives more than five minutes away from a reliable source of potable water.

Major dams must be reticulated to ensure better power generation and provide water for agricultural purposes.

Small-scale irrigation and water catchment systems will be built in rural areas throughout the nation. Using technology and equipment easily maintained at the local level with minimal costs, these systems will boost agricultural production and employment while mitigating dangerous cycles of flood and drought in many areas.

The Great Green Wall of the North must be fully completed. By mitigating the effects of desertification and deforestation, this lessens forced economic migration and resultant social dislocation and instability in many parts of the country. Using commercially valuable yet environmentally viable flora to construct the green wall, the project will provide employment for tens of thousands of youths and farmers.

To encourage the use of Public Private Partnerships, a Tinubu administration will work with the CBN, federal ministry of finance and other relevant federal agencies to expand the availability and scope of credit guarantees to attract more private sector investment in needed infrastructure.

Import Substitution

We must curb our reliance on imported goods. Importation of non-essential products will be discouraged through policy measures including luxury taxes, higher tariffs, and higher processing fees.

At the same time, international brands will be incentivised with tax credits, rebates and other fiscal incentives to establish manufacturing plants in Nigeria both for export and to meet the needs of our large population of consumers.

Tax Reform

During times of economic weakness, increasing taxation is counterproductive. Higher taxes drain an already weakened private sector, inviting possible economic contraction and higher unemployment.

We shall review the corporate tax system. This will be enhanced by the use of technology and effective policies.

Reduce Fiscal Inefficiency & Waste

We will continue the work of the current administration in reforming the civil service to reduce bureaucracy, streamline agencies and decrease inefficiency and waste.

We will streamline the amount government spends on itself. A cap will be placed on fiscal expenditures for the construction of government buildings and on the salaries and related compensation packages of elected officials and senior personnel in the executive branch of the federal government. Such expenditures will have a low priority in my administration.

Bona fide hard working members of the civil service are to be commended for their public service and shall be protected. However, we will continue the process of weeding out ghost workers, as well as ghost projects and expenditures from the system.

My administration will strictly adhere to the principle that public funds are only to be spent on the public good.

Mortgage & Consumer Credit Reform

The various federal agencies meant to promote home ownership are too small and fragmented. To address this estimated housing deficit of 28 million units, we will ensure greater cohesion and efficiency by forming a new, more competent agency which will inherit the functions of existing housing authorities and shall be adequately capitalised by the federal government.

The agency will have a three-fold mandate to (i) grant low interest rate mortgages directly; (ii) guarantee qualified mortgages issued by commercial banks; and (iii) purchase mortgages from private banks.

The guaranteeing and purchasing of mortgages will encourage private banks toward mortgage lending and will deepen the secondary market.

Banks will also be encouraged to engage much more in the provision of affordable consumer loans for automobiles and high-cost appliances. A certain portion of bank lending must be earmarked for the consumer. All non-compliant banks will pay a penalty to government. Compliant banks will be entitled to tax breaks and credits as well as favourable treatment by the CBN regarding inter-bank transactions.

Home Ownership

Home ownership is a source of prosperity, social stability and individual pride. A vibrant residential construction industry is essential to a healthy modern economy.

In conjunction with the National Assembly and state governments, we will review and revise the Land Use Act. We need to streamline and rationalise the land conveyance process. In this way, we lower costs and delays. In this way, we promote more efficient allocation of land. This more efficient allocation will bolster the housing industry and lower costs.

Working with state governments, we will provide credits and incentives to developers of housing projects that set aside a significant portion of their projects to affordable housing.

We will establish a coherent federal program to provide eligible and meritorious civil servants with federal payment guarantees for fixed-rate, long term mortgages for their homes.

MONETARY POLICY

To achieve optimal growth and broadly shared prosperity, monetary policy must complement fiscal goals.

The efficiency of monetary policy in driving overall economic goals is limited. Fiscal policy has numerous channels and transmission mechanisms by which it can affect the economy. Unlike monetary policy, fiscal policy can be channelled directly and even exclusively toward the poorer segments of society. Monetary policy transmission mechanisms are largely limited to banks and other financial institutions. By itself, good and wise monetary policy is insufficient to produce the level of growth we seek. However, bad monetary policy is sufficient in itself to sink the best of our economic dreams.

Monetary policy must focus on the exchange rate, interest rate and price levels. This trio must serve the objective of fiscal policy, which is broadly shared prosperity.

In essence, money lends nominal economic value to anyone who owns it or anything to which a monetary price is attached. Idle people and resources are said to have scant economic purpose or value. They are wrongfully derided as “useless.” When money becomes attached to them either through a living wage or capital investment, what was once idle becomes valued and productive.

Our fiscal strategy is to spend public money in a way that maximises employment of people and resources, especially those previously idle.

Monetary policy must buttress this approach.

Exchange Rate Management

The exchange rate is perhaps the most evocative monetary issue of the day. It stirs emotions and feelings of national pride or embarrassment, depending on the rate of the day and the trend it suggests.

The exchange rate influences the costs of imports, competitiveness of exports, and net capital flows among other things. It cannot be ignored nor left to the vagaries of an unrestrained market.

Yet, we must be precise regarding economic cause and effect. The current dip in our exchange rate has much to do with global supply and production shortfalls that have caused prices of goods to rise across the globe. Our low production of oil and the modest capacity of our manufacturing sector serve to compound the pressure on the naira.

Further compounding our difficulty is the fact that we are tied to a regime of multiple exchange rates. This situation gives rise to currency arbitrage, as rentseekers can make inordinate profit simply by exchanging naira at one rate and trading it for dollars at another. This practice diverts much needed funds from productive endeavours that could employ hundreds of thousands of people and create products that improve average living conditions. Instead, the funds create virtual financial windfalls for already wealthy people who need no such assistance.

The multiple exchange rate regime creates a sort of welfare program for a segment of the elite.

Our exchange rate regime should be amended to promote the goals of widely shared growth and prosperity by ending the regime of multiple exchange rates and steadily converging them into one unified rate.

To achieve a unified rate, a managed float shall be implemented and maintained. In this way, we hedge against great surges of inflation while permitting sufficient leeway for market forces to establish the true value of our currency. Hopefully, this will spur export driven manufacturing and reduction of non-essential imports, particularly of luxury items.

Inflation Targeting & Management

The current surge of inflation is essentially driven by global supply and production disruptions beyond the control of any one government, including Nigeria’s. This is supply-driven inflation, not inflation caused by excess demand in an overheated economy.

To impose the usual anti-inflation medicine of higher interest rates and tighter money-supply will only serve to weaken the patient. The answer to supplydriven inflation is not to suppress normal aggregate demand levels. The better solution is to find ways to increase production and supply. To suppress demand will contract the economy, resulting in the overall loss of economic activity and jobs. Worse, since the inflation is grounded in supply side issues, placing this weight on the demand side will do little to answer the root causes of current inflation. In short, we punish the national economy and the people without deriving any meaningful benefit.

In this complex economic environment, we must more studiously assess the sources and causes of inflation so that we deploy the right mix of fiscal and monetary tools to contain it.

Limit Foreign Debt Obligations

We better protect our exchange rate, guard against inflation and preserve foreign currency reserves by limiting our exposure to large debt obligations denominated in a foreign currency.

My administration will engage in extraordinary prudence in contracting debt in foreign currency. Our policy will be such that new debt obligations will be limited to only those essential matters such as national security, health care emergencies and essential infrastructure that cannot be addressed by either naira denominated expenditures or debt obligations.