Nigerian Economy: The Challenge Before a New Advisory Council

Muhammadu Buhari

President Muhammadu Buhari has empanelled an economic advisory council to advise him on economic policy matters. While the idea has been warmly welcomed, how well the team performs will depend on the president. With a failing economy and a president not known for taking advice from outside his closed circle of family and friends, the economic advisory council will have a canyon to cross. Nosa James-Igbinadolor reports

On Monday, September 16, 2019, President Muhammadu Buhari constituted a new Economic Advisory Council to replace the Vice President Yemi Osinbajo-led Economic Management Team (EMT). The EAC, which is chaired by Dr. Doyin Salami, includes Dr. Mohammed Sagagi (Vice-Chairman);  Prof. Ode Ojowu;  Dr. Shehu Yahaya; Dr. Iyabo Masha;  Prof. Chukwuma Soludo; Mr. Bismark Rewane; and Dr. Mohammed Adaya Salisu (Secretary).

The new council, according to the statement by the Presidency, will report directly to Buhari and “advise the president on economic policy matters, including fiscal analysis, economic growth and a range of internal and global economic issues working with the relevant cabinet members and heads of monetary and fiscal agencies”.

The idea of an economic advisory council is not unique to Nigeria as it is a tool widely used by leaders of governments to harvest alternative understanding and views about the economy as well as gain clarity as to the progress of macroeconomic policies being implemented. Varied presidents of the United States of America since 1946 have always deemed to fit to constitute a council of advisers to offer “the president objective economic advice on the formulation of both domestic and international economic policy”.

The council bases its recommendations and analysis on economic research and empirical evidence, using the best data available to support the president in setting the nation’s economic policy.

In Canada, the constitution of an advisory council on economic growth is predicated on the government’s belief “that when you have an economy that works for the middle class, you have a country that works for everyone”. The minister of finance established the Advisory Council on Economic Growth in March 2016 to develop advice on concrete policy actions to help create the conditions for strong and sustained long-term economic growth. The council’s advice helps to inform future actions and policies.

It is not clear if the Nigerian government has a good understanding of the need to both grow a middle class as well as get the economy to work for the steadily depreciating corps of middle class in the country as the basis for renewed economic growth. It is hoped that the advisory council will bring to the knowledge of the president the poor fiscal management of the economy since 2015, the unprecedented job loses running into millions as well as plummeting manufacturing capacity that has resulted in poor investor confidence and capital flight.

An Expert’s Advice

The establishment of the EAC is also in line with the suggestion by Mr. Mustafa Chike-Obi, one of Nigeria’s prominent economists and former managing director, Asset Management Corporation of Nigeria (AMCON). Chike-Obi had in an interview with THISDAY advised Buhari to put in place an economic team which will be coordinated by a chief economic adviser.

According to him, if the economy is the president’s priority, he must hire a chief economic adviser, who will coordinate his vision for the economy.

Chike-Obi said, “I always say, unfortunately, a modern economy is very complicated. It is not something for amateurs to dabble into. What you do in one place affects another place. So, we need to sit down to figure out what are our economic objectives, and that comes from the president. President should say what my vision of the economy is and then hire people to help him achieve that ambition. I have not heard articulated any coherent economic vision by the president. I hear things like: I want foreign exchange stability. That is not an economic vision. Foreign exchange stability is just a tool for an economic vision. I have not heard any single coherent economic vision coming out of this government.

“And I think that is a problem because once you have a vision, then it is easy. You get people who buy into that vision and those who are competent to accomplish that vision, then it will not be difficult to execute. But once you don’t have a vision, people would do their own thing. CBN may do things that make sense to CBN, ministry of budget and planning may do things that make sense to them while Trade and Investment will anything that makes sense to them. But some of those things that make sense individually may not fit into a coherent plan.”

Speaking further he stated: “So, a tight fiscal policy would clash with a loose monetary policy and also a tight monetary policy may clash with a loose fiscal policy. All those things can be assembled and the only person who can assemble them is the president. But the president, I’m tired of saying this, does not have a chief economic adviser. Mr. Dipeolu, as competent as he may be, is the chief economic adviser to the vice president. His title is deputy chief economic adviser to the president because that is the way the presidency works. How can an economy be such a priority and he does not have a chief economic adviser who coordinates your vision? I think of all positions he should focus on this time around, he must hire a chief economic adviser that coordinates all economic matters.

“Somebody he trusts, somebody the nation trusts, somebody that the international community can trust. To me, that is more important than the appointment of a chief of staff. Let’s get a vision together so that what the CBN governor, Budget and Planning and Trade and Investment do all fit into that vision as coordinated by the chief economic adviser who speaks for the president on economic matters. I think that is a priority. So, that is one thing that has been done wrong by this administration and this cannot be blamed on the PDP. It is entirely the fault of the president. Once we have that vision, we can make projections. l know what l want.”

Poor Performance

The truth the Buhari administration does not like to hear is that it has failed woefully in growing the economy. According to the World Bank, between 2006 and 2016, Nigeria’s gross domestic product (GDP) grew at an average rate of 5.7 percent per year, and to a low of -1.5 percent in 2016.  The volatility of the country’s growth continues to impose substantial welfare costs on households. Poor economic management by the Buhari administration led the country into recession in early 2016.

Nigeria emerged from recession in 2017, with a growth rate of 0.8 percent, driven mainly by the oil sector. Growth was higher in 2018 (at 1.9 percent) and more broad-based; however, it still fell below the population growth rate, government projections, and pre-recession levels.

By the time the figures come out, it will not be shocking that economic growth will remain sluggish in 2019 and over the medium term. And as for unemployment which has become an albatross under this government, the figures are more than depressing.

More than a quarter of the workforce has remained unemployed since the beginning of 2019 and another 20 percent under-employed. With 3.9 million new entrants into the labour force (now 90.5 million people) during 2018, but virtually no growth in the stock of jobs, unemployment rose by 2.7 percentage points since end-2017, and more than doubled compared to the pre-recession levels (9.9 percent in Q3 of 2015).

According to the National Bureau of Statistics, 7.956 million jobs were lost between January 2016 and September 2017. More has been lost since then.

Agenda for EAC

These are the depressing figures the economic advisory council will have to deal with when they meet as a working team for the first time

It was why a former Vice President at the World Bank,  Dr. Oby Ezekwesili, counselled the economic team to begin their job by being very truthful with the president.

“I hope the first thing they do is to tell the president how he mismanaged the economy in the last four years,” Ezekwesili said.

She added, “A president, not the vice president runs the economy. All those bad monetary policies were made by him. All those strange fiscal policies were made by him. Both the CBN governor and the ministers of finance were not acting based on any Economic Management Team decisions.”

She noted out that the pretence about the vice president running the economy was now over, pointing out that the vice president was never in charge of the economy as the Economic Management Team “was in reality chaired by the vice president who had no power over core economic policy decisions. The other side of the presidency did not mind having him be the cannon fodder for all the extremely economic policy decisions”.

The former World Bank official and former minister of education under President Olusegun Obasanjo again urged the new advisory council to tell President Muhammadu Buhari “the truth that annoys them which must be heard for our economy to prosper”, adding that the Nigerian economy was currently stuck in a “steady state of low-equilibrium growth”.

An economist and CEO, Global Analytics Derivatives Ltd, Mr. Tope Fasua, told THISDAY that the influence and capacity of the economic advisory council will depend on whether the Buhari will listen to them and take their advice. He admitted that the council has a good number of economists who have excelled in their field, but posited that their ability to reach a consensus on advisory decisions to be transmitted to the president will go a long way in determining their success.

According to him, the problem with economists is that they hardly agree on any one thing based on their ideologies.

He stated: “All of them are big economists…So we’ll see how it goes. He will also learn and have a better understanding of his policy direction.”

On the expected areas of macroeconomic challenges that the advisory council should focus on, Fasua noted, “Their work is cut out for them, they should focus on real economic development, real growth, the ramping up of productivity, proper economic diversification. I hope they do not focus on monetary policy. I hope they do not give us the textbook stuff especially as many of them are liberal economists with World Bank and IMF background. They should give us ideas that work, ideas that are Nigeria-centric.”

A former deputy governor of the Central Bank of Nigeria and presidential candidate of the African Democratic Congress in the last general elections, Dr. Obadiah Mailafia, agreed that the economic advisory council should focus on proffering solutions to areas critical to economic growth and long-term economic development

He said, “Because right now the government has a revenue crisis on its hands and the debt situation is getting out of hand. They need to work on the expenditure framework. A lot of money is going down the drain and nobody knows what is going on there.”

He admitted that putting together a team of sound economists by the president will engender confidence in the economy by both internal and foreign investors because “confidence, reputation and image matter more than the nitty-gritty of figures. We need to be able to offer confidence to economic actors”.

Although the uncertainty of the elections has passed, economic risks remain high, with current macroeconomic outcomes fragile to external and domestic shocks. The oil sector continues to remain a necessary, but insufficient condition for growth. Mailafia asserted that there was an optimal need to diversify the economy from the dependency of petroleum and this should form a critical part of what the advisory council should examine and offer solutions to.

The Economic Recovery and Growth Plan (ERGP), a medium-term plan for 2017-2020, developed by the Buhari administration for the purpose of restoring economic growth is driven by the principles of tackling constraints to growth, leveraging the power of the private sector, promoting national cohesion and social inclusion, allowing markets to function and upholding core national values. Many analysts would agree that the ERGP is unlikely to work and deliver on its objectives as its underlying principles have been and are persistently being breached by the very government that designed the plan.

Constraints to growth such as insecurity and investor confidence remain high with the government showing a glaring incapacity to rectify these failures. In addition, while on paper the government says that it is keen to leverage the power of the private sector and allow markets to grow, the deliberate adoption of a two-tier foreign exchange system that has bred corruption in the management of the country’s foreign exchange policy as well as the use of state institutions like AMCON and EFCC to go after perceived enemies of the government portray a government unserious about meeting its obligations under the ERGP.

The work of the economic advisory council is indeed well cut out for them. It is very much expected that they will meet challenges from well-entrenched political and economic interests, but the goodwill and confidence that has been extended to them by Nigerians mean that they must do right to Nigerians