Rewane Calls for Implementation of PEAC Recommendations

Emma Okonji and Nosa Alekhuogie

A member of the Presidential Economic Advisory Council (PEAC) Mr. Bismarck Rewane, has called for the quick implementation of the recommendations of the council, saying it would help address the poor economic state of Nigeria.

Rewane who is also the MD/CEO of Financial Derivatives Company Limited, said this yesterday on the Morning Show of ARISE NEWS Channel, the broadcast arm of THISDAY Newspapers, while reacting to the $6.18 billion external loan President Muhammadu Buhari seeks to borrow to fund the deficit in the 2021 budget.

Rewane kicked against external borrowing, saying the government must ensure that borrowed monies are put into productive use in order to justify such borrowing.

He said: “Nigeria’s economy is faced with structural challenges, with potential GDP drop to about eight per cent, an indication that Nigeria is facing a recessionary gap. The economy is currently growing at almost zero per cent, even though the country recently came out of negative rating, a development that has set confusion among Nigerian investors based on policy issues.

“There is little hope for Nigeria at the end of the tunnel and these are very difficult times, both for investors, consumers and policymakers.”

He, however, listed three ways to address the economic challenges of Nigeria to include: debt management, sustainable reforms and investments, which will boost employment and productivity.

Rewane said debt management should remain key to revamping the economy, adding that the country’s total external debt, which was between $10 and $12 billion as at 2013, would further rise to $38 billion if the new loan is added to it.

He said this would put the country’s external debt per head on a high pedestal.

He, however, stated that creditors have conditions for loans that have compelled Nigeria to be discipline in debt management, compliance and repayment.

He added: “So as a country, Nigeria has to deal with the debt servicing challenge. Nigeria must ensure that what is being borrowed and invested in should be able to bring reforms that will increase productivity and output.

“There is, however, a number of economic recovery tools that can be used to address the economic situation of the country, which the Presidential Economic Advisory Council that I belong to, has presented to the government. The tools include fiscal tools, monetary tools, and security tools to deal with insecurity and economic disruptions.

“So, if the government implements the recommendations of the council, and ensures proper coordination between fiscal monetary investments and trade policies, it will address the issues and Nigerians will enjoy the benefits.

“The Presidential Economic Advisory Council has made it clear that the economy is still fragile and needs clear and impactful stimulus that will come in a combination of ways like debts, investments and economic reforms, that will boost the economy again in the areas of productive outputs, employment generation and price stability.”
Analysing the $6.18 billion external loan being sought by Buhari, Rewane listed the three major components of external loan as the multinational debt from World Bank; export credit financing and international capital market funding, which is Eurobond.

Giving details of different forms of loans, Rewane said Nigeria had some commitment from World Bank in financing loans in support of palliatives for pandemic the ravaged situation, and some forbearance under the international debt arrangement and that Nigeria had been a recipient of major investments from the Chinese government, in terms of some infrastructural projects like railway and airport projects that the Chinese government was part of in Nigeria.

“Nigeria, just like other African countries, will be approaching the international market to float a Eurobond of about $3 billion. In January this year, Nigeria repaid $500 million. So, looking at the situation of Nigeria, giving the record of her past borrowing, financial analysts are worried about the actual project that President Buhari wants to use the $6.18 billion loan to fund, in terms of output and productivity.

“The fact that Nigeria’s total factor productivity is currently at negative, Nigerians are afraid that the current move by President Buhari to borrow $6.18 billon could further plunge Nigeria into serious debt. But if the money will be used to finance and complete the ongoing railway construction, then it will boost productivity in the transport sector, and once productivity and output are increased, then the income per capital will get better, and hopefully, the insecurity that has led to political misunderstanding and conflicts in the country, will be addressed,” he said.

Rewane added that if there was increased investment in ICT in the area of broadband, Nigerians would benefit from the impact of the use of broadband for things like telemedicine, where patients could see their doctors even from remote locations without travelling to have physical contact with them.

“Again, Nigerians will benefit from e-commerce and online communication using internet data that are all driven by broadband. What government should be looking at when seeking external loans, is the impact and productivity. The gains from the projects can the be used to fund investments, finance education and healthcare, among others,” he said.

On the state of the economy, Rewane expressed concern that Nigeria currently has a five-year average growth rate of less than one per cent but in the past 10 years, the country’s average growth rate was about five per cent, which shows that the economy is performing sub-optimally and is fragile.

Giving details of the poverty reduction strategy of the PEAC, Rewane said the council once came out with a poverty reduction strategy for Nigeria, and three levels of poverty reduction was suggested.
He listed the three levels as removing people from poverty, preventing people from going into poverty and ensuring that those within the workforce, are productive.

He said: “In the area of investment in agriculture, for instance, only two per cent of the cultivatable land in Nigeria is irrigated and Nigeria has over 28 dams that are idle. Nigeria needs to invest in dams by using resources to reactivate idle dams so that people can become productive in the area of agriculture. When people are productively engaged, it will reduce the migration of people to urban areas and also reduce conflicts. Most of the investments will reduce the number of people in poverty.”

Discussing the consequences of subsidy removal in the oil and gas sector, Rewane described subsidy as reversed taxes, adding that subsidy would continue to distort the allocation of resources.
“The figure presented to Nigerians is that Nigerians consume 93 million litres of petrol daily. I do not know how they arrived at that figure, but the reality is that even five years ago, when the economy was still booming, and Nigeria’s had several cars registered to themselves that reached 200, 000 registrations in one year, the petrol consumption then was about 30 million litres. Now that the economy is declining, and there is a contraction of economic activities, it is expected that the country’s petrol consumption be less than what it is today, and what this means is that the consumption rate of petrol was able to reach 93 million litres per day today, because some people are smuggling petrol out of the country.

“So the removal of subsidy has become necessary, and when this is achieved, it will stop the distortion of the allocation resources and it will compel people to go into productive activities rather than unproductive activities. Removal of the subsidy must be strictly followed by efficient deployment of resources, such that the money will be used to finance projects that will have a direct impact on the economy and the people,” Rewane stated.