Buhari and the economy: which way forward? By Henry Boyo

Expectedly, goodwill messages have deservedly, poured in from far and wide to congratulate the clear victor of the 2015 elections and President Elect, Mohammed Buhari, may not be unduly disturbed that President Jonathan’s inspirational and totally unexpected early acceptance of defeat, ironically, favorably raised the incumbent’s rating as a statesman beyond the pedestrian perception induced by his performance in governance.

Presidfent-elect, Buhari

Indeed, despite the complimentary economic growth rates gleefully presented by Ngozi Okonjo Iweala, sadly, more Nigerians joined the already bloated poverty ranks. Indeed, the horrid level of insecurity, apparently instigated by ethnic and religious divide, may infact find their true origin in the pervading level of poverty nationwide. Consequently, expectations are high that Buhari will provide an antidote to poverty and corruption; clearly, our poverty cannot be blamed on an inhospitable climate or a shortage of natural resources.

Infact, citizens from nations with considerably less natural endowments may be excused for decrying what they consider to be an inexplicable inequity by Providence. In reality, our inability to galvanise our resources to the greater benefit of the critical mass is actually caused by the application of fiscal and monetary strategies that are antagonistic to consumer demand, and job creation.

Consequently, if Buhari must succeed, he would need to quickly reverse the ratio between capital and recurrent expenditure, such that well over 60% of total annual revenue projections would be dedicated to the enhancement of social infrastructure and human capacity in place of the prevailing humonguos salaries and allowances of public servants.

Clearly, Buhari would need to also reduce the duplication of functions by various MDAS as per the recommendations in the Oronsanye report, but government must be careful to minimise the inflow of new entrants into a jobless market. Similarly, the new administration should be wary of increasing the current debt to GDP ratio, as this is a sure road to another oppressive debt burden.

A situation where a relatively stable nation like Nigeria with its immense reserves and resources borrows at Shylock rates of over 15% is totally unacceptable for what are clearly risk free soverign debts. Furthermore, Buhari must immediately interrogate why our foreign reserves earn minimal interest, while we inexplicably go cap in hand to borrow externally at over 7% interest rate.

Incidentally, the yet to be assented 2015 budget, accommodates about 20% deficit; consequently, government will borrow over N1Trillion Naira and pay between N100- N150bn as interest charges to fund part of its recurrent (consumables and salaries etc.) budget. It is ironical that such huge government borrowings will exist simultaneously with the unyielding ‘obstructive’ Naira surplus deliberately created by the CBN.

Buhari’s Team must therefore, hit the ground running and readily jettison Jonathan’s 2015 budget proposal, so that a fresh Appropriation bill can be presented to the National Assembly before July 2015. We may also consider 29th May to May 28th as fiscal year to align with our established Election Time Table and thereby prevent politically induced budget truncation on the advent of a new Leadership halfway into the year.

Furthermore, in view of the abysmal performance in the power sector, Buhari should take a closer look at how Nigerians were left with over N400bn debt after the privatization of the distribution Network of the former PHCN. It is equally curious that almost 2 years thereafter, government continues to breastfeed the Discos with selective interest waivers, which have not guaranteed low tariffs or improved performance.

In view of cost implications, the new dispensation should advisedly fast track the adoption of gas for generating power, as gas is considerably cheaper at below $3/cubit mitre and remains a much cleaner form of energy; besides our gas reserves are multiple times in excess of crude oil reserves.

Furthermore, Buhari will equally need to shine his eyes in the area of monetary policy and strategy. As a first step, his Administration should put a stop to the looting of public funds with the obnoxious Treasury Bills Scam. An arrangement where banks are positioned to make over N600bn in 2015 as interest on government loans, which are not applied to any productive or socially enhancing purpose, is clearly obscene.

In successful economies, Monetary authorities mop up or reduce any burdensome surplus cash in the system by borrowing at minimal rates below 2%. When government borrows at 10% and above for what are essentially risk free sovereign debts, banks expectedly become reluctant to lend to other borrowers, thus crowding out the real sector from the cheaper investible funds which could spur enterprise and industrial production and create more jobs.

Mangoes flood Zuba Fruit Market in Abuja on Friday (13/4/12). There Is Need to Preserve Our Seasonal Fruits. NAN Photo

The President Elect should not be hoodwinked by CBN’s usual propaganda that inflation, interest and exchange rates cannot remain harmonious; clearly, in several successful countries, the respective Central Bank monetary policy rate consistently remains below 3% rather the oppressive 13% currently adopted by CBN. Furthermore, inflation rates above 3% are also anathema to social welfare and therefore decried in more successful economies; regrettably, we shamelessly celebrate inflation rates which are nearer 10%, despite the reality that all static incomes would lose over 50% of purchasing value every 5 years in such event.

The income contraction caused by inflation is responsible for the apparent increasing poverty observed amongst pensioners and retirees as unjust reward for service to their fatherland. Additionally, high inflation rates also constrain consumer demand, which normally drives investment and industrial expansion decisions, to create those jobs, which reduce the unemployment rate.

Buhari is clearly aware that Naira devaluation only facilitates deepening poverty as clearly evident as the Naira steadily fell from its exalted exchange rate of a stronger Naira to a dollar; conversely, a stronger Naira will lift more Nigerians from poverty. Similarly, Buhari should interrogate why the Naira exchange rate steadily depreciated even when our reserves exceeded $60b.

Incidentally, weaker Naira rates will, irrespective of crude oil price level, also instigate higher fuel prices domestically and make the abolition of fuel subsidy very unpopular. On the other hand, stronger Naira rates will reduce fuel prices domestically, and ultimately eliminate subsidies, to make the imposition of a sales tax on fuel possible; furthermore, a stronger Naira will also make fuel smuggling unprofitable and unattractive and ensure uncontested deregulation of the downstream sector by civil societies.

Clearly, the excruciating burden of ever surplus Naira, also feeds the pool that facilitates corruption and is also responsible for abnormally high inflation and interest rates and is equally responsible for unyielding Naira depreciation. A disciplined investigation will surely reveal that systemic surplus Naira is primarily caused by CBN’s creation of fresh Naira values for monthly distributable dollar revenue.




  1. In all sincerity, Henry Boyo should be appointed as the Minister of Finance or the Governor of the Central Bank of Nigeria. This erudite man has been very consistent in offering solutions and alternatives to the workings of the economy as opposed to the ruinous experimenting of theoretical economics by IMF/World Bank proteges. Henry Boyo, take a bow!

  2. i’ve been following Henry Boyo since the 2012 fuel subsidy saga,his analysis of our economy has always been apt and consice.wish the incoming administration take a cue from his past write ups.imagine how do you expect to have meaninful development with the current recurrent-capital ratio of our yearly budget.you are appreciated sir.

Comments are closed.