President Muhmmadu Buhari has been advised to ensure that his administration aligns both monetary and fiscal policies in order to attract the much desired foreign direct investments (FDIs).
The Chief Executive Officer of Afrinvest West Africa Limited, Mr. Ike Chioke, who gave this advice in an interview with THISDAY, pointed out that there has been a decline in consumer confidence in the economy.
He argued that notwithstanding the massive drop in its income, the federal government has not adjusted its expenditure pattern.
“When you talk about government revenue, oil is the key input. There is a declining consumer confidence and it trickles down the system. But I feel government hasn’t done enough in cost-cutting,”Chioke said.
While noting that devaluation is important, the Afrinvest boss pointed out that it “is actually not the full answer.”
With the backing of the president, the Central Bank of Nigeria (CBN) has rejected calls to devalue the naira despite a plunge in oil prices that has slashed revenue in Africa’s biggest crude producer. The bank has instead effectively banned imports of some goods and restricted foreign currency supply, pegging the naira at N197 to N199 per dollar in the past year. That however has not stopped the black-market rate from soaring to about N320 against the dollar, adding to costs in the economy as businesses turn to the parallel market to access foreign currency.
But in reaction to this, Chioke said: “If I start from the point of view that my foreign exchange income has declined by 60 per cent, if I used to give out $1 billion in auction every week, now I only have $300 million or $400 million available, how do I allocate?
“So, the CBN is right in saying there are certain items that we shouldn’t be importing. But that actually is not the job of the CBN. The CBN should be focused on monetary. The fiscal authorities ought to design its policies by targeting growth enhancement in certain sectors. Government needs to get its act together.”
He stressed the need for the federal government to direct its fiscal policies to support critical sectos in the economy. This, according to him, would help guard the central bank in forex allocation.
“I feel like the CBN’s hands are tied in this (devaluation) matter because you have all manner of people above them that have said things that they were not best disposed in saying about where best the forex market should be doing.
“That has further dampened investor confidence. So, the president can visit all the foreign countries he wants, but when he comes back and fails to sort out the misalignment between monetary and fiscal policies, same foreign investors he is expecting to come will still be there waiting for him,” Chioke said.
He criticised the structure of the 2016 appropriation bill which has remained a subject of controversy.
“We have done a budget that is N6 trillion, with a deficit of over N2 trillion and a debt service of nearly N1.5 trillion. Why do you want to go to such an extreme level? I do a budget of N6 trillion, and I am going to borrow N2 trillion and out of the borrowing of N2 trillion, I will service debt of about N1.5 trillion! It doesn’t make sense!
“I would have looked at the old budget that was N4.5 trillion and they were paying debt service of between N800 billion and N900 billion. That means that incremental push from N4.5 trillion has not given me that additional cash benefit. I might have just gone from N4.5 trillion to maybe N5 trillion and look very seriously at my cost and recurrent expenditure.
“Then we still have 11 planes in our fleet. Do we need 11 planes? That is probably the biggest airline after Arik. Today, you still see many states that are suffering from paying salaries, where the governors’ convoy have 20 vehicles. That is unnecessary!,” he stated.