Before we sell public assets (2) -By Oby Ezekwesili

Continued from Tuesday

The record of the government for timely and right action on the economy is however so far not encouraging. For almost one year, the government delayed right action on the fuel subsidy regime despite its aggravating impact on fiscal imbalance. Over the same period, it delayed the right action on exchange rate policy despite its deleterious impact on foreign reserves, the value of the naira and the rate of inflation. The government finally retraced its steps on the wrong petroleum subsidy regime and fixed exchange rate policies some five and four months ago respectively.

But the design and implementation of those policy changes were half-hearted and therefore remain doubtful in their fiscal and monetary impact. The reluctance to fully embrace tested and sound policy options was what minimised the salubrious impact that the two highlighted key policy changes would ordinarily have had on stabilising the economy.

With inflation- nay, stagflation- now at high double digits of 18 per cent, with the decline of foreign reserve from $37.3bn at the end of 2014 to $25bn in September 2016, with an “administrative-floating ” exchange rate regime that still creates enormous opportunities for corruption and rent seeking arbitrage, with a high interest rate that poses a stress for the financial sector because of deteriorating bank asset quality as well as for limited access to credit by the real sector, with a continuously declining aggregate demand, with a shrinking Gross Domestic Product, with 2016 budget deficit level of $11bn that still has unclear sources of financing, what more do we need before citizens stepped up a demand for the government to retrace its steps from its string of unsound economic policies?

All the sobering data are indicators of hugely deteriorating macroeconomic indices. The more such indices deteriorate, the harder it is for growth to resume. The macroeconomic stability that poor choice of economic policy helped to unravel within one year had itself taken many years of arduous work to achieve. When therefore one hears the rather simplification of the economic recovery antidote being espoused by the government as “we shall spend our way out of recession”, it heightens anxiety. When one further hears that the sale of assets- especially some productive ones – is being proposed as key contribution to the Budget 2016 deficit financing options of the government, the immediacy of opposing such intention becomes self-evident.

For Nigeria therefore, the most critical challenge that needs resolving is how to convince the Federal Government to urgently retrace its steps back to what it failed to do since May 29, 2015. First, it failed to launch a deep fiscal consolidation programme. Second, monetary policies failed to adjust to reflect new realities. Third, the government failed to present the most ambitious structural reforms ever that can materially improve the productivity and competitiveness of all potential existing and new sources of economic growth.

The third action could achieve the four decade-long diversification goal and help build a resilient economy that is insulated from the volatility of oil prices in the future.

These three broad actions were and still remain the key things mandatory for the economy to regain the lost macroeconomic stability that will drive growth recovery, move us to economic development and shared prosperity.

It is good economics to stimulate economy through increased government spending in a time of recession. So, there is a place for the stimulus spending proposed by the government. However, the economic vision that will arrest the macro imbalance in the short run must be deeper than the proposed plan to “spend, spend and spend”. After all, if massive government spending were to be the solution that can fix our economic failures, then they should never have happened in the first place based on our public expenditure record. Government spending has been the albatross of our economy.

The current administration has not communicated any persuasive basis for assuming that it’s proposed spending will achieve a different set of outcomes without being anchored first on sound economic policies. The current language of “massive spending” is therefore very unnerving because it is not accompanied with a corresponding agenda for massive restructure of the behemoth and the governance system that easily widens its mouth to gulp the largest scale of public resources.

By the way, whatever happened to the report of the Presidential Committee on the Rationalisation and Restructuring of Federal Government Parastatals, Commissions and Agencies which found that the cost of governance in Nigeria is one of the highest in the world? Did the report not recommend the scrapping of 102 statutory agencies on which we continue to spend scarce resources? Where is the fierce urgency required to implement this game changing report that can help roll back one of the most unproductively expensive governance architecture in the world?

I have a simple message: The Federal Government should do the right first things, first. Change should begin with those who promised Change!

Ezekwesili is Senior Economic Adviser of The Africa Economic Development Policy Initiative