An Abstract To The Economic Advisory Council, By Umar Yakubu

September 28, 2019 | By Umar Yakubu

The Economic Advisory Council should keep in mind that Nigeria is one of five countries – alongside Bangladesh, India, Ethiopia and Republic of Congo – that harbours half of the world’s extreme poor. Its time to shift from macroeconomic slogans of GDP size, debt-to-GDP ratio and truly improve the living conditions of the people.

Economists usually say on one hand…, but on the other hand… just give me a one-handed economist. – President Harry Truman.

The appointment of the Economic Advisory Team last week was received with delight by progressive minds. Apart from the constant lot that has a problem ready for every solution, the announcement was well-received mainly because of the quality of the seven ‘eggheads’ who were selected to advise the government on matters related to the economy.

Learning from the culture of other countries such as the United States, their 15-member Council of Economic Advisers is fully embedded within the Executive Office of the President. In Germany, they have the five-member German Council of Economic Experts. Malaysia has a 16-member Economic Action Council.

All these councils are positioned to steer future economic direction: to coordinate policy-making for domestic and international economic issues, to coordinate economic policy advice for the president/head of government, to ensure that policy decision and programmes are consistent with the president/head of government’s economic goals, and to monitor implementation of the president/head of government’s economic policy agenda. Their composition is of full-blown economists and in a few cases, economic statisticians.

The closest Nigeria has had is the Economic Management Team, between 2003 and 2007. Apart from Professor Soludo, none of the members then had much knowledge about economics. Most were appointed on the basis of ‘loyalty’ to the administration and not due to professional, academic or intellectual competence in matters related to economics. They handled aspects of the economy but wouldn’t know much about the intricacies and dynamics of economics, which is why the team was not sustainable.

With the recent appointments, some are using political lenses to get confused about the roles of the National Economic Council and economic advisory councils. In countries such as the U.S., U.K., Malaysia, Israel and dozens of other developed countries, the National Economic Councils are headed by the president. The 1999 Constitution of Nigeria states that the vice president is the chair of the National Economic Council. However, that does not mean that the powers of the office are usurped by an advisory council.

Apart from security, there is nothing more important for any president than the economy. Moreover, 90 per cent of the security challenges in the country are caused by economic distortions across several sectors. Before making political appointments that drain the treasury, security and economic councils should be the first thing to be set up and gotten running by any president.

Anyway, the country needs economic direction. And badly too! Most citizens don’t know who the national economic adviser is or who the drivers of economic policy in Nigeria are. Nigerians are not sensitised about the economic direction we are taking and how long it will take to come out of the woods. Fuel subsidies are removed in one day and then replaced with “price modulation” on another day. We liberalise some areas of the economy and subsequently enforce price control in the same sectors. We join the World Trade Organisation (WTO) and sign Africa Free Trade Agreements and then close our borders with Republic of Benin. We want to boost exports but celebrate when the Nigeria Customs Service generates N1 trillion per year from duties collected from imports. We want to develop internal capacity and increase employment, but sign all manners of public- private partnerships with foreign countries and encourage illicit financial flows. We want to promote local production but provide foreign exchange and reduce tariffs for the same set of products being brought into the country. Our GDP is growing at 3 per cent per annum, while the poverty index is widening. We have almost half-a-dozen agencies within the maritime and ports industry, but 90 per cent of the vessels coming our way convey goods to us and but go back empty. I recall China donating about N600 million worth of rice, for which N800 million was spent on ‘clearing’ this. And being Nigeria, the donated rice never got to the intended destination.

...the first thing I recommend is that the Economic Advisory Team should stay away from monetary policy issues. Fiscal measures are essential in controlling inflation. However, matters of interest rates and money supply are within the purview of the Central Bank of Nigeria (CBN) and let egos not start hankering after control.

The government is pursuing many objectives that make its operations complex to execute. Implementing these policies at the same time could be counter-cyclical. In most cases, for one government operation to succeed, something else is lost.

The Economic Advisory Team will have to work out how to make the trade-offs between one government operation and another. They will advise the government on fiscal matters, like spending, taxes, savings, budgets and public debt. They will have to agree on the trade-off between Nigeria’s high-persistent inflation and the growth in national output. Such trade-off will impact the country’s productivity, employment and wages policies.

Thus, with inflation control in mind, the first thing I recommend is that the Economic Advisory Team should stay away from monetary policy issues. Fiscal measures are essential in controlling inflation. However, matters of interest rates and money supply are within the purview of the Central Bank of Nigeria (CBN) and let egos not start hankering after control. CBN has done well in the past decade, and its independence should be respected for long term economic stability. But, of course, synergy is required as monetary policy alone cannot control our high-persistent inflation rate.

Second, and most importantly, the Team knows that the country is fiscally irresponsible in the manner of government spending. This country can never grow with the present capital-to-recurrent expenditure. There is no way you will use 70 per cent (some analysts say 100 per cent) of revenues to spoon-feed public servants, who mostly start work at 10 a.m. and close by 2 p.m, and expect real economic growth. Even those who come to work for eight hours in a day do not add much value because what the see themselves doing is merely ‘government work’. I am not aware of any ministry, department or agency of government that measures its efficiency and effectiveness, and publishes it.

There is always a demand for more funding and more staff but will not tie these to productivity or positive outcomes. For example, what is the value of each naira that the taxpayer is spending on public servants? Government business should be business-oriented. The outcome may not be in naira and kobo, but once there is no economic justification, then it’s bad government business. Let us not forget that the system is designed to work with rent-seekers and politicians juicing the remaining 30 per cent meant for capital expenditure. 80 per cent of the projects in the budget have ‘real’ owners.

To solve this, the new advisers need not go far. They should simply dust the Oronsanye Report and update it. Despite the shortfall in revenues, government keeps creating bodies that are of little economic value. Why create the Nigeria Diaspora Commission when you have the Ministry of Foreign Affairs? The establishment of that Commission should be an embarrassment to the Ministry. You create a North East Development Commission, just like the Niger Delta Development Commission, when you have six governors in the region. Soon, one jobless legislator will move for a motion to establish commissions for each geo-political zone. Or are we agreeing that governors cannot deliver good governance and slowly ‘restructure’ their spheres towards regional governance?

A Ministry of Humanitarian Affairs was recently created to precisely do what, please? They would argue that it is to coordinate the National Emergency Management Agency (NEMA) and the National Commission for Refugees. The irony about the refugee issue in Nigeria is that it is not borne of natural disasters, but is purely Nigerian made. One would have expected that internally displaced persons (IDPs)’ camps should be wound up, but years on, billions of dollars have gone into them with no commensurate impact. People wonder why a small building in Maiduguri goes for over N20 million a year in rent. The IDP issue is a corruption-ridden cycle between public officials and NGOs, with the IDPs as pawns in the game. Government is falling for the trap, thinking that it can manage corruption that has local and international actors involved. To stop the inhumanity and corruption going on in those camps, the funds used for them should be diverted to provide adequate security, and there will be no need for IDP camps and certainly no need for so many government bodies.

...the advisers know better than all of us that using tax as a tool for economic growth is not a silver bullet. The complexities of tax policies cannot be contained in this piece, but my recommendation is to actually maintain or even lower the taxes but broaden the tax net to cover more categories.

The federal government should not have more than 12 ministries, since most of them are just ‘supervisory’ of departments and agencies, and we all know what supervision entails in Nigeria. To satisfy the constitutional provision of ensuring a minister from each state, let there be one senior minister and three junior ministers in each ministry.

The whole public sector, save a few subsectors such as the military and law enforcement, need to be driven like private organisations. With this measure, our recurrent spending must be cut down to a maximum of 25 per cent. There are too many ministries, commissions and agencies, and hence too much regulation and opportunities for rent-seeking to drive a free market economy towards sustainable growth.

Thirdly, the advisers know better than all of us that using tax as a tool for economic growth is not a silver bullet. The complexities of tax policies cannot be contained in this piece, but my recommendation is to actually maintain or even lower the taxes but broaden the tax net to cover more categories. Taxing a Dangote or Otedola more may be counter-productive because, in most neo-liberal economies, the private sector is the biggest employer of labour. Tax for a developing economy should be used as an incentive for investment and not as an income generator. The government is considering increasing taxes to basically fund consumption. They should remember that the president promised to take 100 million people out of poverty in 10 years.

Lastly, to create 10 million jobs in a year, for now, only the agricultural sector can deliver that elixir. You don’t need the Federal Ministry of Agriculture that only concerns itself with fertiliser distribution for this. The CBN has done more in that sector that the Ministry. It should be scrapped and turned into a department under the Ministry of National Planning.

As done recently with Benin Republic, protective policies need to be fully deployed. Close the borders, use taxes and other tools to unleash industrialised levels of commercial agriculture, and Nigeria will feed the continent and upturn our balance of payments.

Umar Yakubu is with the Centre for Fiscal Transparency and Integrity Watch. Twitter @umaryakubu