Mr. Walter Ahrey, a former Director of Strategy and Performance at the Central Bank of Nigeria, also served as the Deputy Coordinator for the Financial System Strategy 2020 (FSS2020). In this interview with Ibrahim Apekhade Yusuf, he proffers useful tips on how the incoming government can turnaround the economy. Excerpts:
What fiscal, monetary policy and economic policy tools would be preferred by the incoming government?
Well, for me, it’s common sense economics. If you are building revenue, the first thing to look at is your cost. You have to look at the areas of leakages and waste to be able to cut down the cost. Secondly, don’t just have a budget with numbers alone. Our budget should be such that would be investment-oriented. We have to invest in the right infrastructure, build the right capacity and have the right institutions that would promote growth.
The next thing is the diversification of your income. You must have diversification. We must have diversification with a sense of purpose. We should be able to invest in the real sector of the economy. We must be seen to be promoting business activity nationwide. There have to be concerted efforts towards building our revenue base. The best of investors are those in the bottom of the pyramid.
To what extent should the incoming administration devalue the currency in its quest to increase government oil revenues and rebuild foreign currency reserves?
If we are doing devaluation now because of indiscipline, let’s deal with that first. Just because you can just wish a change for devaluation of the naira is not good enough. To shore up the local currency, all hands must be deck. There is no magic about it. Good fiscal policy promotes discipline and effective budget implementation. It is not rocket science at all.
Devaluation has to be based on the dynamics of the market. You have to wake up to the reality of what is causing it, you can’t do it artificially. What happens presently is that we don’t know the dynamics or what is the thing causing us to devalue the naira. We have to get that straightened out first of all.
How to tackle the challenge of interest rate
If all we are doing is artificially driving interest rate rather than managing inflation, that’s not good enough. So for me, we need to know what those things driving these headwinds in the economy. The biggest challenge for me is the cost of doing business, poor infrastructure and wastefulness generally.
So until that discipline comes and for me, you must make people work for every naira they get. All the monetary policy tools will not work without the necessary political will on the part of government. It would be as if you are dealing with the symptoms and not the cost of the problem in the first place. At the moment, government expenditure is way too high. There is low level of productivity, high risk, issue of poor credit administration. If the cost of doing business is humongous and it is further compounded with wrong tax and the investing public whether in the public or organised private sector is not productive, government borrows and allows others to borrow and there is default from both ends, things won’t work.
We must encourage a system where the organised private sector and the public institutions have the same kind of values, shared vision. That way, things can get better.
Cost-cutting measures inevitable
As I said on cutting cost, we must know how much is coming in and how much we have to spend. Government needs to be run like a private business. You can’t have five people doing the work of one person.
Is borrowing an option?
The traditional sources of borrowing are the international and external government debts instruments. You can equally borrow from outside sources such as international organisations that provide such avenue. But I would advise that as a government, you only borrow for what is essential. If what we are borrowing is to produce and repay, then it is okay. If you borrow only so that you can meet your bloated way of living, then it doesn’t make any economic sense. How much can you put to the price of comforts? You can’t really quantify such.
If we must borrow, we must back it up with the ability to pay back. Of course, it is very easy for a government to borrow especially as a sovereign. As a sovereign, you are considered not to be broke. But such reassurance mustn’t provide the leeway for you to go a borrowing because you may incur a lot of deficit at the end and that’s not good for the economy.
All revenue that comes to government must be efficiently utilised. Most successful countries live on taxes. You have your eye on your revenue, have your eyes on cost, tackle the over bloated civil service. There is no way you can have an efficient civil service or get the best as it is if you pay scant regard for meritocracy. Currently, nearly all our processes and policies are so crude. A lot of things need to be revolutionised with a desire to succeed ultimately.
Need for new work template in the civil service
Unlike in the organised private sector, work implementation is not purely performance-based in the civil service. In my considered view, if you have a performance-based service sector, have the right people for the right job in the right quantity and not that they just come and waste, that is the only way to achieve the desired efficiency in the system and if this percolates down, it is all well and good. To get a performance-based structure, it must start from the top. Now, we have a situation where even the president himself has a retinue of support people. It only happens in Nigeria. Such culture breeds a complacent and lazy system.
Finally, to recap, we must have monetary and fiscal policy that work hand in glove. There must be accountability by all stakeholders in the payment system, in interest and exchange rate. People should be held accountable for making this happen. People should be held accountable for performance. If we are going to create a system that works, everybody should be held responsible for doing their job.
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