A former President of the Nigerian Bar Association (NBA), Dr. Olisa Agbakoba, has expressed concerns that Nigeria may continue to experience the current recession cycle till 2020, if the President Muhammadu Buhari-led Federal Government fail to immediately bounce the economy massively.
Agbakoba, who spoke in Lagos on Tuesday, lamented that having done a diagnosis of the nation’s current economic woes, it seems to be complicated by inflation, high interest rates, unemployment, weak infrastructure, lower oil price and no growth economy.
In a statement made available to journalists, the human rights and maritime lawyer, who had an analysis of President Buhari’s economic policy pointed that cohesion is needed at this point, noting that there is a need to develop a coherent fiscal, trade and monetary policy.
According to him, the tight liquidity operated by the Central Bank of Nigeria, CBN, where it jerked up its Monetary Policy Rate (MPR) to 14 per cent is ridiculous, adding that CBN’s focus on Forex management is rather encouraging round tripping and creating asymmetry in the system.
The legal practitioner advised the CBN to focus on productive value of the economy and not the numerical value of the naira, saying “the full deregulation of the forex market to allow level playing field and removing distortions such as round tripping, will ensure that at least $20 billion inflow will instantly occur.”
The former NBA Chairman, who listed a number of solutions for President Buhari to revive the economy said there is an immediate need for “a Presidential Proclamation at the National Assembly, switching from austerity to growth policy. The Federal Government needs to spend more to boost growth.”
Agbakoba, however, pointed that President Buhari doesn’t need the envisaged economic emergency powers, noting that former President Shehu Shagari had it in his time and still failed, adding that the so-called economic emergency powers is also not working in Venezuela.
Agbakoba, further said “President Buhari must reverse the anti-austerity and tight money, as the G-20 nations all now agree; use all policy tools and embrace fiscal stimulus; adopt the Keynesian economic model of massive government spending on public works; reducing the raging inflation at 17% in medium term; reduce the Monetary Policy Rate (MPR) to single digit- 5 per cent Quantitative Easing and effectively implementing the 2016 Budget to reflate the economy.”
He added that to revive the economy, “Nigeria must spend its way out of recession; establish a National Treatment Policy- Fiscal and trade Protection Policy, establish urgently a Development and Guarantee Bank; prepare Public Sector Borrowing Requirement, PSBR and borrow as our debt Ratio can sustain this, as well as develop Assets securitisation.”
According to Agbakoba, there is need for the Federal Government to pay-off the country’s domestic debt to inject liquidity in the system.
He suggested that FG must give the Treasury Single Account, TSA money back to the banks at single digit rates and supervise the banks, even as he recommended lending base rate of 5 per cent.
Prudential Regulatory Authority
Dr. Agbakoba added that to reflate the nation’s economy from recession, the Federal Government must create a Prudential Regulatory Authority, PRA, to supervise commercial banks to lend, as well as create a Financial Conduct Authority, FCA, to get banks to behave.
“Consequently, the Federal Government must limit the CBN to Monetary Policy and take away banking supervision to the new Prudential Regulatory Authority, PRA and banking ethics to the Financial Conduct Authority, FCA. If the banks focus on lending and not trading, money will flood the system for productive value. Moreso, there is need to create a debt factor market to soak up non performing loans of banks now at 12 percent and in excess of N20 trillion. FG must also create a robust mortgage private sector led market, by waking up dead capital trapped in it.
“Consequently, the Federal Government must limit the CBN to Monetary Policy and take away banking supervision to the new Prudential Regulatory Authority, PRA and banking ethics to the Financial Conduct Authority, FCA. If the banks focus on lending and not trading, money will flood the system for productive value. Moreso, there is need to create a debt factor market to soak up non performing loans of banks now at 12 percent and in excess of N20 trillion. FG must also create a robust mortgage private sector led market, by waking up dead capital trapped in the national housing stock valued at $7 trillion.
“Government must get out of business and enable the Private Sector led growth. It must also massively fund small businesses by Development and Guarantee Banks as this is the engine of economic growth. I have expected the government to by now implement massive social benefits such as the N5,000 it promised Nigerian youths,” said the legal icon.
Further suggesting the way forward, Agbakoba advised the current leadership to as a matter of urgency, “begin to communicate and give Nigerians hope with a clear vision, like former America President, Franklin Delano Roosevelt, FDR, during the American great Depression; urgently explore alternative income sources-Agriculture, Maritime, Infrastructure Power and support, as well as create efficiency in government and consider re-balancing Federal Power to bring in the States as economic enablers.”
“President Muhammadu Buhari must as a matter of urgency, carefully study Roosevelt’s new deal that got the US out of the Great Recession (Depression) in the 1930s.
“Roosevelt communicated hope; created massive public works programmes, especially the momentus Tennesse Valley Authority, a depressed 640, 000 square mile area in the Tennesse Valley; enacted the Glass-Stengall Banking Act, directing banks not to speculate or trade but to lend; enacted the National Industrial Recovery Act, to deal with massive employment and created the Works Progress Administration, putting back millions to work on the public infrastructure,” he said.
According to Agbakoba, despite the country’s current state of recession, “a recovery path is possible by the Second Quarter of 2017 (Q2 2017) with vigorous implementation of a new economic model, otherwise, this recession cycle may/will extend up to Fourth Quarter of 2020 (Q4 2020).”