Editor's Note: In his latest epistle, Anthony Kila offers a candid and insightful look at Nigeria's current economic challenges to Minister of Finance and the Economy, Wale Edun. He provides a critical analysis of Nigeria's fiscal and monetary policies, arguing that the emphasis on monetary solutions to issues like forex and inflation is misplaced. Instead, he advocates for stronger fiscal policies to attract foreign direct investment, protect the naira, and drive economic growth.Dear Chief Wale Edun,
About a month before President Bola Ahmed Tinubu’s swearing-in on May 29, 2023, as the President of Nigeria, a group of us got together to preview the state and project the future of the country. The group that got together comprised a loose union of public affairs analysts, media leaders, political economists and business leaders.
In that rendezvous, I expressed my reasoned hope around what would happen if the President announced his cabinet within 24 hours of his swearing-in and his nominated ministers went to parliament with portfolios attached to their names; I called such moves very low-hanging fruits that would be the first legacy of the city boy that became president.
My analysis of the path to the presidency led me to make specific predictions. I confidently foresaw Yemi Cardoso as the Central Bank Governor, you (Wale Edun) as the Minister for the Economy, Dele Alake in a high-level role related to communication and strategy, and Nasir El-Rufai in a prominent position in the cabinet. Now, 13 months later, it is evident to any reader of this missive which of these expectations have been met, which have been disappointed, and which are yet to be realised.
Today’s epistle is directed to you, Chief Wale Edun, because you have ascended to the position of Minister of Finance and the Economy. Your official title is even more significant than I predicted: You are the Minister of Finance and Coordinating Minister of the Economy. It is not said enough, and it is worth clarifying here that your position and title genuinely mean that you are the de facto head of fiscal policies for this administration. Let us be clear: a cursory look at your academic and professional credentials and your public service profile would convince even the most skeptical and interested observer that you are worthy of being considered capable of filling the role for the job you have been given.
And therein lies the rub, dear Hon. Minister, to whom much is given, much is expected. Regardless of how people voted, many (reasonable and knowledgeable people) expected you to set the world on fire with achievements. Those who voted for your party hoped for such; those who voted against your party dreaded your imagined performance. Let us face it, and there is no other way to put it, dear Hon. Minister. So far, it’s not great. For very understandable but not entirely acceptable reasons (at least not acceptable to me), monetary policies have “stolen” the show in this administration so far. It is time to change that. Today, we play the drums for you, dear Hon. Minister, and say, “Wale, put on your dancing shoes, come out and dance”. The time for action is now; many still believe in your ability to make a difference. Dance for them.
It is easy to understand why the issue of forex can dominate the national discourse; after all, we import more than we produce, and many of those who make big money in Nigeria study, send their children abroad to study and seek medical attention abroad. Too many who can travel have seen and continue to crave to see more cities outside the country than in the country. Even those who try to produce must import many of their equipment and materials. All these put an incredible amount of pressure on the naira, and we have not yet included those in search of stability and would instead save their earned or looted bundle in dollars. When the problem is forex, the office to deal with it is the central bank, seems to be the prevailing mindset in the country or at least from the look of things.
The pressure on the naira, coupled with the increase in the cost of production and distribution of goods and services, has also contributed negatively to worsening the situation. We now have a general rise in the price of goods and services. The official figures reported for inflation rates in the country are currently between 31 and 33%, but I doubt those figures. A cursory look will show anyone who cares that we have an increase of close to 60% in the cost of goods and services in the streets and the mainstream market. So far, we seem to think that when the issue is inflation, it is the central bank that has to deal with the problem through monetary policies. I disagree, dear Hon. Minister.
My view is that in both cases of foreign exchange and inflation, fiscal policies can do more to help us than monetary policies. Let us be clear: I am not saying “only fiscal policies”; I am saying “more of fiscal policies”.
Those who say the naira does need protection against the dollar and other foreign currencies are wrong. The best way to protect the naira, though, is to increase our reserves by increasing the amount of dollars and other foreign currencies we earn. To increase our inflow of dollars, we need to put in place unambiguous, deliberate, and noticeable fiscal policies aimed at attracting foreign direct investments into our system. The emphasis on loans is too much, not that that loan is itself bad; one borrows because one is broke; if used judiciously, I argue loans can be good to build infrastructure that will aid development and create jobs and wealth. Loans are not to be used to fund religious tourism like Hajj today, and who knows what will happen tomorrow? Others might want their own 90 billion Naira, too…
The path to raising needed funds for infrastructure and other government expenditures is to make sure the government prioritises capital expenditure; every kobo spent must be an investment that generates more money than what is spent. You, dear Hon. Minister, must do your best to ensure that our new funding source is investment dominated in forex, not taxes in naira. My advice is that we go to the equity market for such funding. Let us go to the City of London and Wall Street to place some of our assets and offer a fraction of ownership for investment dominated in forex.
We need policies aimed at attracting investors who invest in dollars and other foreign currencies and who are looking for land, people, projects, and even the sun to build factories, refineries, roads, and hospitals. Not foreign investors that come with little to look for for funds in Nigeria. There is to be a clear message that says, “Nigeria is open for business”. That is a slogan; actions must, however, match words. Naturally, we need to start by keeping the investors currently in the country, not losing them.
To be continued…
Anthony Kila is an Institute Director at CIAPS. www.ciaps.org
He’s on X (formerly twitter) @anthonykila
