Doubtlessly, the past five years of President Muhammadu Buhari in office have been characterised by sundry micro and macroeconomic policies and funding initiatives aimed at strengthening all the institutional and legislative mechanisms for the purpose of reversing the economy’s recessionary trend and positioning it on the part of sustainable growth.
Apart from the yearly budgets that spell out in clear terms the economic projections of the administration for the economy, including the Medium Term Expenditure Framework (MTEF), as well as other policy frameworks, others like the Economic Recovery and Growth Plan (ERGP), debt management plans, the Treasury Single Account (TSA), have been churned out by the government as templates for various policies and programmes’ implementation to alleviate poverty, address unemployment, insecurity and other socio-economic problems.
Today, a cursory appraisal of the impact of the various initiatives from the context of micro and macroeconomic perspectives appear to signify that there are more hurdles to cross given the current state of the economy, particularly the inclement state of the environment to businesses, rising poverty and unemployment rates and its unpromising future prospects.
Despite all these worrisome socio-economic indices accentuated by the fiscal challenges associated with the country’s dwindling crude oil export earnings over the past few months, the President Buhari-led administration has not relented in its effort through sustained policy measures geared towards re-positioning the economy on the path of sustainable growth.
Finance and economic policy thrusts
While some economic watchers say Nigeria’s economy has not fared any better, others believe it has achieved some modest gains considering the not-so-impressive revenue position the Buhari government met.
Unlike the immediate past government that earned between $98/barrel to $125/barrel from crude oil exports for over uninterrupted four years, Buhari’s government came in with oil prices crashing rapidly in the past five years, with earnings from crude exports hovering between $85/barrel and $20/barrel, leading to a recessionary and stagflation trends of the economy from 2016 to early 2017.
However, this cannot account for non-performance, particularly when the government came into power with a mouthed promise of diversifying the revenue base of Nigeria into non-oil revenue sources with focus on agriculture, mining and exports.
To achieve its economic plans, the government implemented the Economic Recovery and Growth Plan (ERGP) programme it developed in 2017 to fast-track its diversification agenda.
To plug the holes in public finance, the administration also commenced the implementation of the Treasury Single Account (TSA) and constituted a team for its Presidential Initiative on Continuous Audit (PICA).
All these initiatives, particularly the latter, were reported to have saved the country N603.78bn from its inception in 2016 to 2019.
For instance, available statistical data on the country’s rate of unemployment reflected that while the unemployment rate stood at 7.8 per cent in 2014, the rate rose significantly to 23.1 per cent in 2018.
This is even as the poverty rate which stood at 33.1 per cent in 2016 jumped to 40.1 per cent in 2019. All these show that average incomes for Nigerians have been falling over the past years.
Also, as at December 31, 2019, Nigeria’s public debt stock had risen to $84.052bn (about N27.401tn) from the about $63.806bn or N12.11tn in June 30, 2015.
However, some areas the administration’s policy measures appear to have recorded some measure of success include the Gross Domestic Product (GDP) and foreign reserves management.
Here, available data show that in the face of all odds, the government’s monetary policy measures have helped in growing the foreign reserves from about $28.6bn in June, 2015, to about $40.3bn as at May 11, 2020.
Following exit from recession in Q2, 2017, the government achieved seven consecutive quarters of GDP growth. In Q4 2018, the economy grew by 2.38 per cent in real terms (year-on-year), representing an increase of 0.27 per cent compared to Q4 2017, and a rise of 0.55 per cent compared with the growth rate in Q3 2018.
Overall, GDP grew at an annual rate of 1.93 per cent in 2018 compared to 0.82 per cent in 2017. This represents an overall increase of 1.11 per cent year-on-year.
In 2019, the GDP growth rate peaked at 2.27 per cent despite the not-too-supportive environment for businesses.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, attributed the growth largely to non-oil sector growth.
Commenting on the performance of the public finance policy measures, a Professor of Finance and Capital Market and a former Commissioner for Finance in Imo State, Uche Uwaleke, said going forward, especially during the COVID-19 pandemic, government should be able to reduce the negative impact of the pandemic on citizens and minimise the knock-on effect through the right spending; targeting health, education, power and roads.
The finance expert also tasked monetary authorities to focus more on and possibly scale up their interventions in agriculture and Small and Medium Enterprises (SMEs) in order to halt the recessionary trend of the nation’s economy.
Similarly, a lecturer at the Lagos Business School (LBS), Dr. Bongo Adi, who is not too impressed about the current micro and macroeconomic indices of the economy, said the Federal Government must get the right policy tools to get the economy back on track, especially during post-COVID-19 pandemic.
The policies initiated by the President Muhammadu Buhari-led government were targeted at improved production of goods, to raise government revenues, create wealth for individuals and increase employment in both the public and private sectors on a sustainable basis.
Shortly after assumption of office in 2015, the president launched the Anchor Borrower Programme (ABP), which has resulted in the establishment of rice processing mills, foreign investment and employment generation in states like Kebbi and Kano.
In the manufacturing sector, President Buhari revived the Backward Integration Policy (BIP) for easy access of raw materials locally and in a way to boost production.
In June, 2015, the Federal Government, as part of its effort in encouraging local production, banned foreign exchange (forex) access to importers of key food items like rice, poultry and tomato paste, which led to significant investment in the production of those food items.
Many non-food items were also included in the forex access ban for imports: cement, textile, Indian incense, roofing sheets and furniture.
As a result of the policy, the National Horticultural Research Institute (NIHORT) estimates that Nigeria’s tomato supply gap now stands at 700,000 metric tonnes, saying, Nigeria now produces 2.3 million metric tonnes of tomato per annum, representing a 27.8 per cent growth in two years.
The Corporate Affairs Commission (CAC) had since the wake of the Buhari government in 2015 initiated some reforms, including 24-hour online registration of businesses, digitalisation of legacy records and partial automation of post-incorporation filings from state offices to reduce turnaround time and reduce costs.
In July, 2016, President Buhari set up the Presidential Enabling Business Environment Council (PEBEC), a policy which resulted in not just simplifying the processes of business registration in Nigeria, but also in pushing Nigeria 15 places on the World Bank ease of doing business index to 131th position in 2019 from the 146th in 2018.
The Central Bank of Nigeria (CBN) in 2019 approved a loan of N19.18bn to nine cotton-producing firms so as to guarantee steady off-take and processing of cotton lint and cotton seeds.
President Buhari also recently directed the Ministry of Industry, Trade and Investment to establish agro-allied industries in all the 36 states to further enhance growth of the textile industry.
To support local manufacturers and reduce the negative impact of smuggled goods into the economy, President Buhari, in August, 2019, ordered the closure of the nation’s land borders.
Top among the achievements of the present government in the real sector is the signing of the African Continental Free Trade Area (AfCFTA) agreement in 2019 after consultations with relevant stakeholders.
The Finance Bill 2019 was also a key policy for the real sector’s survival, especially for SMEs.
The bill indicates zero Company Income Tax (CIT) for SMEs with less than N25m and only 20 per cent CIT for businesses below N100m, but above N25m.
Speaking on the ABP, an expert and senior economist with SPM Professionals, Paul Alaje, said businesses stood a chance of expanding their enterprises from profits they would have shared with government.
On the Finance Act, Alaje said, “This has impacted businesses positively. SMEs stand to gain a lot from the new Finance Act 2019. Without the act, they were mandated to pay 30 per cent of their profits as CIT. Apart from that, they were required to file for VAT, but the new Finance Act has exempted businesses with less than N20m revenue. They are to pay 0 per cent as CIT and no filing is required for VAT.”
The President of the Abuja Chamber of Commerce and Industry (ACCI), Prince Adetokunbo Kayode, told Daily Trust that the real sector of the economy would benefit immensely from AfCFTA based on the country’s population and productive capacity.
The National Vice President (North Central) of the National Association of Small and Medium Enterprises (NASME), Engineer Auwal Ibrahim Bununu, said government policies for the real sector should focus on supporting businesses to survive COVID-19.
In her assessment of the government’s MSME policies and programmes, the National Coordinator of the Association of Women in Micro, Small and Medium Enterprises (AWIMSME), Mrs. Nancy Nathaniel, said the impact of the five per cent downward review of interest rate on intervention schemes by the CBN would encourage MSME operators to thrive with the economic challenges which had come with COVID-19.
Similarly, the President of the NASME, Prince Degun Agboade, called on the CBN to make all the intervention funds available to MSMEs.
Prince Agboade said, “We at NASME hope that CBN will see to it that the funds are released to MSMEs, and it will not only be pronouncements, but getting the funds to the end-users.”
The insurance sub-sector of financial services can still be rated largely as under-performing when compared to banking, capital market and pension sub-sectors of the financial system.
Although the regulator, the National Insurance Commission (NAICOM), has worked hard for over a decade to grow the sector, economic factors and socio-cultural/religious factors have contributed in stunting growth.
Of course, this is not to discountenance the relatively poor awareness of insurance benefits which has also been the bane of the industry. Currently, the insurance sector contributes just about 0.5 per cent to the GDP. It has been its contribution annually for over a decade.
To change the narrative, NAICOM in the last five years, sustained the implementation of series of policies and programmes aimed at improving the sector’s contribution to the GDP. Some of these include the re-launching of the Market Development and Restructuring Initiative (MDRI), risk sharing agricultural insurance, capital verification and recapitalisation programme for the industry.
The re-launched MDRI focuses on enforcement of compulsory insurances, diversification of distribution channels, increase in access points for insurance services, micro insurance, Takaful, improvement in data collection and promotion of financial literacy.
The commission undertook a verification of the capital resources of all insurance companies in Q1 2017. The exercise entailed a verification of the assets and liabilities of all insurance companies. This exercise gave rise to the need to recapitalise the industry.
Thus, in May, 2019, NAICOM released a guideline on capitalisation. The exercise should have been concluded by the end of 2020, but it has been extended due to the outbreak of COVID-19.
However, the new capital base does not apply to micro-insurance and Takaful insurance companies.
NAICOM also launched the Nigerian Insurance Industry Development Plan (NIIDP) which has financial inclusion as one of its major components. To this extent, it launched four specific product lines as a bottom-up approach for the excluded and low income members of the society: the Micro-insurance, Bank assurance, Takaful insurance, and Index-Based Agricultural Insurance (IBAI).
Some analysts have rated the administration’s insurance industry policy measures as fairly good, even as they noted that more effort should be committed to strengthening the risk underwriting companies in order to grow them, increase insurance penetration and by so doing raising the sector’s contribution to the GDP to higher rates.
Commenting on the state of the industry, the President of the Nigerian Council for Registered Insurance Brokers (NCRIB), Dr. Bola Onigbogi, said Nigerians needed to embrace insurance for it to grow.
Dr. Onigbodi clarified that, “I want Nigerians to embrace insurance. Insurance is the only business that exists for other businesses to thrive. So, we are taking it to that state where Nigerians will appreciate the value of insurance. We are trying as much as possible to educate the public about the benefits of insurance.
“Insurance is last on the priority list of Nigerians because they believe insurance does not perform. But I want to assure Nigerians, that was before, it doesn’t happen now.”
The administration’s foreign debt plan is encapsulated in the Medium-Term External Borrowing Plan (MTEBP) 2016 – 2018, involving $22.718 billion submitted to the senate for approval.
Analysis of the debt stock in the past few years reflect a worrisome trend with borrowings increasing while the nation’s re-payment capacity appears to be waning on yearly basis. For instance, the total public debt stock increased by 5.1 per cent, from $81,274.1m to $85,390.82m within six months between March 31 and September 30, 2019.
At these rates, the nation’s debt service/revenue ratios are between 50 and 60 per cent.
Only a few days ago, the government secured another loan of $3.4bn from the IMF under the Breton Woods institution’s Rapid Facility Intervention (RFI), even as discussions for another loan request of $1.5bn from the World Bank and $500m from the African Development Bank (AfDB) are ongoing.
This is aside the N850bn approved by the National Assembly for borrowing from the local market.
The Minister of Finance, Zainab Ahmed, had repeatedly maintained that the government had no choice given the decreasing oil revenue.
While economists believe that borrowing is healthy for the economy and may help to maintain economic growth and development, they have warned that the consistent increase in borrowings within these years was worrisome.
In his assessment of the government’s borrowing plans over the past five years, a Professor of Economics at the Yobe State University, Binta Yahaya, pointed out that “more worrisome still is the lack of evidence that the borrowed funds are being properly utilised.”
Binta explained that the declining external reserves and rising foreign debt profile spotlighted the fragile state of the nation’s economy to external shocks.
While noting that the rising debt stock undoubtedly might have negative implications for human development and the economy, the don recommended that the tax system should be made more effective to increase revenue generation.
She said, “After the pandemic, a high proportion of the government’s debt within the coming years should be external; the Federal Government should borrow only to finance capital projects that will over time generate enough returns to pay off the debts.
“Also, the government should adopt alternative financing measures such as Public-Private Partnerships (PPPs), and above all, the Federal Government should comply with the Fiscal Responsibility Act requirements in borrowing.”
Taxation and revenue
Apparently worried by the enormous revenue problems in the public finance system, particularly the lopsided structure of the sources, President Buhari assumed office with a vow to diversify the economy and boost non-oil revenues to meet growing expenditure demands in governance.
This explains why since 2015, the administration has been rolling out policies to improve non-oil tax revenues, and by so doing, address the perennial problem of huge deficit gaps in yearly budgets.
Some of the fiscal policies rolled out by the government include the TSA in 2016 to capture the domiciliary accounts in foreign missions and those linked to government-owned enterprises locally such that all remittances to the Federation Account are streamlined.
Over the years, the Buhari-led administration revised some of the major legislations comprising CIT, VAT, customs and excise duties and mining with a view to boosting revenue accruals from the non-oil sector.
The government also introduced the Voluntary Assets and Income Declaration Scheme (VAIDS) on July 1, 2017.
The scheme provides non-compliant taxpayers with a nine-month window to regularise their tax status relating to historical periods. In return, overdue interests and penalties will be forgiven. In addition, no investigation or criminal charges will be brought against participating taxpayers.
Similarly, through the just enacted Finance Act 2020, the government also increased the VAT rate from five to 7.5 per cent.
Analysing the government’s fiscal policy regime over the years, an MSME owner in Abuja, Mr. Emeka Uzo, who although lauded the effort to increase non-oil revenue, complained about the multiplicity of taxes, levies and fees without enjoying the services for which such payments were made.
Uzo said, “When they started with increase in VAT, we were told it does not include food items. I deal in provisions, I noticed little increase in prices on so many goods when I buy from the market; so also on transportation, electricity and others.”
On her part, Prof. Binta Yahaya said, “Part of the reason why government is not making enough revenue through tax is because a huge part of Nigeria’s economy is informal.
Prof. Yahaya pointed out that SMEs and the average masses were not confident that their taxes would be judiciously used, because over the years, there had been no improvements in services being provided by government, even when higher revenues were being collected from taxpayers.
To improve the rate of tax compliance, she advised that government should ensure that taxpayers’ money had value in terms of provision of socio-economic services and improvement in the nation’s infrastructure base and quality to make the environment more conducive for businesses.
Capital market regulation
The Securities and Exchange Commission (SEC) in the past five years has focused more on strict market regulations aimed at eliminating fraudulent schemes and promoting good corporate governance, deepening the equities market and driving a vibrant commodities exchange market.
The hub of the effort is the 10-Year Capital Market Master Plan initiated a few years ago.
For instance, from a low N7.030tn capitalisation in 2009, the equities market today, primarily through regulatory measures by the market’s authorities, grew steadily to N25.728tn by June, 2019.
The SEC also ramped up effort in building a strong commodities trading ecosystem to address the issue of standardisation in the agricultural value chain.
SEC said issues such as lack of storage, poor pricing, non-standardisation, as well as low forex earnings affecting the nation’s agriculture and other commodities sub-sectors would be history with a structured commodities market.
SEC commenced the process of aligning its 10-year plan with current economic realities, as well as ensures the planned review is concluded in record time.
The acting Director General of SEC, Ms. Mary Uduk, had stated that the review was intended to align the master-plan with current realities on macroeconomic, political and market development fronts.
Ms. Uduk said out of the over 90 initiatives outlined in the Capital Market Master Plan, 66 initiatives had commenced since 2015 out of which 13 had been successfully completed.
Some of the concluded initiatives include dematerialisation of shares, recapitalisation of capital market operators, setting up of a National Investment Protection Fund (NIPF) and the establishment of the West African Securities Regulators Association (WASRA). 55 initiatives are at various stages of implementation and it is hoped that many of them will be concluded soon.
Other achievements include e-dividend mandate, Direct Cash Settlement, roadmap on commodities ecosystem, new listing, financial literacy, law reviews and non-interest capital market products.
Following a rise in network marketing programmes, most of them offering ridiculous incentives, the SEC also clamped down on cash-based network marketing programmes across the country.
Commenting on the market regulation effort recently, the Chairman of the Senate Committee on Capital Market, Ibikunle Amosun, during a meeting with the management of SEC, said the Nigerian economy, as it remained today, was in dire need of investments from both local and international investors, adding that there was need to support SEC in that direction.
To ensure this, the lawmaker pointed out that SEC laws needed to be amended for it to function better.
He said, “We are aware some of the enabling laws were made many years ago and probably no longer meet present day realities. The capital market can help fund a lot of our infrastructure deficit, and that is why we are here.”
Under the Buhari-led administration, the banking sector has witnessed aggressive policy redirection in the last five years following the CBN’s effort towards ensuring macroeconomic and financial system stability, as well as effort to spur growth through development finance interventions.
The CBN became even more visible in its effort geared towards supporting job creation, reducing the high level of Treasury Bill rates, improving access to credit for MSMEs, deepening the intervention programmes in the agricultural sector, building a robust payment system infrastructure that will help drive inclusion, in addition to key macroeconomic concerns such as exchange rate stability, financial system stability and maintaining a strong external reserve.
Given Nigeria’s dependence on crude oil revenues for close to 86 per cent of its forex earnings and over 60 per cent of government expenditure, the drop-in prices led to heightened inflationary pressures, depreciation of exchange rate, significant drop in external reserves, and eventually, a recession set in during the Q2 2016.
Concerted effort by the monetary and fiscal authorities led to the recovery of the economy from recession by Q1 2017.
Building on these efforts, the external reserves rose from $23bn in October, 2016, to over $45bn by June, 2019. Inflation dropped from 18.72 per cent in January, 2017 to 11.98 per cent in December, 2019.
With improved inflow of forex, the naira exchange rate has remained stable around N360/$1 for over 38 months until the recent technical devaluation in the face of the COVID-19 pandemic.
The monetary authorities also opened the investors and exporters window which allowed exporters and investors to inflow and sell their forex at the prevailing market rate, as well as closed access to forex on 43 items, while deploying intervention funds to support growth and productivity in the agricultural and manufacturing sectors.
Similarly, the CBN deployed several measures to support the government’s ERGP implementation, including the tightening of the monetary policy rate in order to rein in inflation as policy directives to the commercial banks on improved lending to key sectors of the economy.
The CBN launched the Anchor Borrower Programme (ABP) with a view to improving access to finance for over one million small holder farmers to improve cultivation of rice, tomatoes, fish, cotton and palm oil.
It also deployed other intervention facilities such as the Commercial Agricultural Credit Scheme (CACS) and the Real Sector Support Fund (RSSF). These funds were used to channel single-digit interest loans through the Deposit Money Banks (DMBs) and other participating financial institutions to beneficiaries.
Another initiative worthy of mention is the recent apex bank’s directive to the DMBs requiring them to increase their Lending to Deposit Ratio (LDR) to 65 per cent as part of effort to improve lending to needy sectors.
In 2019, CBN noted the appreciable growth in the industry’s growth credit, which increased by N829.4bn or 5.33 per cent from N15.56tn at the end of May, 2019 to N16.39tn as at September 26, 2019, following its directive on the LDR policy initiative.
Commenting on the effectiveness or otherwise of the Buhari administration’s monetary policies over the past years, Damilare Asimiyu, an economic and investment research analyst at GTI Capital, said, “The monetary authority has well-stated policy focus and strategy to achieve it.”
Despite this, the finance expert noted that the focus of the CBN was faced with lots of bottlenecks as the fiscal authorities in the last five years had failed to align the fiscal policies with the monetary policies thereby mitigating the positive impact of the monetary policy measures on the economy.
He explained that, “For instance, the CBN is currently trying to grow the economy through an expansionary policy targeted at increasing capital flows (or credit) to the real sector of the economy, but the fiscal authorities on the other hand are raising taxes on many items that affect the activities of the real sector players.”
The past few years of dwindling crude oil earnings by the country have resulted in forex liquidity challenges with the supply side of forex into the CBN dropping by over 70 per cent despite heavy domestic demand in 2016.
The implications of this for the investment markets’ performance were largely negative on fixed income and equities markets.
However, after declining by 21.60 per cent to a low of 22,456.32 in Q1 2016, the Nigerian Stock Exchange (NSE) All Share Index (ASI) rebounded by 19.68 per cent from its January low to close the year down by 6.17 per cent; mirroring the 6.12 per cent decline in the equity market capitalisation (approximately 40.8 per cent in dollar terms).
In 2017, the NSE’s banking index emerged as its top performing index of 2017.
Buoyed by strong corporate earnings reports by the sector’s key players, the index posted returns of 73.32 per cent.
Similarly, equity market activity skyrocketed from 2016 as market turnover increased by 121 per cent to N1.27tn. For the second consecutive year, domestic investment flows outweighed FPI flows, albeit marginally.
Demutualisation remained a chief strategic focus for 2017.
In 2018, the NSE equity market started the year on a promising note, with the ASI reaching a 10-year peak of N45,092.83 in January.
This was largely driven by the positive performance of the ASI in 2017 which emerged the best in Africa.
The market also witnessed the listing of a N100bn Ijarah Sukuk designed to finance critical road infrastructure across the country.
But then, despite the effort of the regulatory authorities to deepen the market capitalisation sustainably, in 2019, the market turnover decreased by 20.03 per cent year-on-year from N1.2tn recorded in December, 2018, to N0.96tn in December, 2019.
Commenting on the performance of the market, Sola Oni, a chartered stockbroker, said the market remained fundamentally a reflection of the economy in that other determinants as the microeconomic indices also largely influenced the market.
Oni said, “There are factors that affect the market that are beyond the market such as microeconomic conditions, uncertainty and the issues of insecurity.
“We must always remember that the companies quoted in the exchange operate in the economy.
“So if the performance of the economy is not strong, it will reflect on the shareholders’ value.
“It is difficult to, therefore, conclude on the ratings of the market, but in terms of peer review done by rating agencies and international media like CNN, the Nigerian market is adjudged one of the best in Africa.”
Oni, who is the Chief Executive Officer of Sofunix Investment and Communications, noted that despite the positive indices of the market, there was some level of concern by analysts about how the government was utilising it.
He clarified that, “When properly utilised, the market should serve as a buffer for government to source funds.
“We have a market that has absorptive capacity, the government is looking to borrow N800bn, it should use the market.
“The market was built on the strength of raising funds for state and local governments.”
The President Muhammadu Buhari-led government has in the past five years initiated sundry regulatory policy measures that are targeted at growing the Information and Communication Technology (ICT) sector and improving its contribution to the GDP, employment creation and other benefits to the country.
For instance, apart from strengthening the Nigerian Communications Commission (NCC) in terms of investments and regulatory roles, the government has consistently stated its commitment to use the sector as the driver of the nation’s gradually evolving digital economy.
The Executive Vice Chairman of, NCC, Prof. Danbatta, said effort was ongoing by the administration to leverage the Television White Space (TVWS) technology to extend aff ordable broadband services to Nigerians in the digitally excluded areas.