My Take on the Fiscal Policy of the Buhari Administration - Yusuf Aliyu Ahmad

Many analysts seem to be very satisfied with the fiscal policy of the Buhari administration so far as contained in the budget 2016, with high spending and economic palliatives, especially with the right team already in place, and with the high positive reputations of Mr. President. As such the main issue to determine the success of the administration is the timely implementation of a generally acceptable and realistic Monetary Policy.
The response of the President on the issue of devaluation during his media chat, that '' i need be convinced...'' (10 months after winning an election) gave me the feeling that the problem now is completely that of philosophy and the solution in my opinion lies on how fast the president gets convinced on this important issue.
Recently two of our most respected economists in persons of SLS and Soludo both in the President’s camp tactically criticized the handling of some economic issues, which further raises fears that the President has not been listening to anyone serious on economic issues. This is more worrisome for the fact that the President is yet to have a single serious economist in his official team including the CBN governor and without an economic adviser yet.
The issue of Monetary Policy is paramount to any economy because of its effect on every sector, the impact of which we are living witnesses to the forex crises. For a foreign investor it is important because when he brings his dollars for investment he will have to change it to Naira and if the Naira is overpriced he will instantly lose a significant percentage of his investment before he even commences the business that he is not even sure of making profit, this lost on his books from day one materializes once he changes the Naira back to dollar for repatriation. For a local investor the fear is similar because of the effects of currency prizing on profitability.
About half of our 'individual wealth' has been eroded in relative value terms from 2014 to date due to hyperinflation and huge forex fraud. The investor skepticism caused by this kind of uncertainties if left for a longer time period will certainly lead us to an economic trap, a situation where economic sectors begin to work against each other indefinitely and every policy tends to make things worse.
Some of the agitations of investors on our Monetary Policy as rightly supported by HRH SLS recently during an award speech are to make clear policies that will reduce the atmosphere of uncertainty with regards to Reserve Management and Monetary Rate
a. On Reserve Management- ensuring a stable and well priced currency, preferably the return of market pricing such as the successful Dutch Auction System, while making policies to ensure minimal difference between CBN rate of exchange and Parallel Market rate
b. On Monetary Rate- ensuring a stable and optimized lending rate (lower lending rates will support businesses and economic growth generally but it will put more pressure on exchange rate). As such the lending rate should be as low as the Naira can withstand in order to encourage production.
A financial analyst on emerging markets was asked to comment on prospects of Nigerian economy in 2016 during the Aljazeera program ‘counting the cost’ under the topic ‘what does 2016 holds for the global economy’. The question was the concluding part of the program probably because of the significance of Nigerian economy to emerging markets in 2016. Her answer was as quoted;
“…Nigeria had a landmark election, it brought in a completely new government, that is first since its transition to civilian rule. So the key question for 2016 in Nigeria is HOW MUCH ECONOMIC REFORM IS GOING TO BE POSSIBLE. Will Nigeria be able to rise above this? There are challenges certainly with the weakness of oil prices but that might also be the opportunity for Nigeria. 2016 could well be the year while Nigeria focuses on longer terms structural reforms, addresses the issues of fuel subsidies, PERHAPS SOME ELEMENTS OF LIBERALIZATION IN THE FOREIGN EXCHANGE RATE THAT BRINGS BACK HER FOREIGN INVESTOR INTEREST. Nigeria’s potentials have ALWAYS been seen as an economy that is about a lot more than oil. It is Africa’s largest economy, it has the largest population, it has AMAZINGLY POSITIVE DEMOGRAPHICS to attract ANY investor, but it is this inability to get away from that perceived oil curse that rant her economy. This is where the governance reforms that should be put in place in Nigeria will be very important to outcomes in 2016 and perhaps for the much longer term as well”.