Monday, September 19, 2016


Bothered by the biting economic recession cycle in the
country, former President, Nigerian Bar Association, NBA, Dr.
Olisa Agbakoba, has advised President Muhammadu Buhari to
stop lamenting but to chart a clear economic policy direction
that will give value to the economy.
Agbakoba, who has since the emergence of President
Muhammadu Buhari, in the March 28, 2015 Presidential
election, been making his voice known on how the President
can save Nigeria, Thursday, penned an Open Letter to the
President. The letter was also copied to the Senate President,
Dr. Bukola Saraki and Speaker of the House of Representatives
, Rt. Hon. Yakubu Dogara. The letter read:
September 15, 2016
President MuhammaduBuhari GCFR
Aso Villa Abuja
Dear Mr. President,
I feel called upon to make my own contribution to the dialogue
on a solution to the economic recession that Nigeria is
undergoing. It is evident now that the oil price shock was the
main contributing factor causing the downward spiral in the
economy resulting in the present recession. In any ailing
economy the first step that must be taken is a diagnosis of
the problem and in Nigeria’s case I would diagnose that it is
suffering from malignant metabolic economic syndrome,
complicated by inflation, high interest rates, unemployment,
weak infrastructure and the results of the global fall in the
price of oil. It is indeed a gloomy state of affairs which if not
treated with urgency by introducing strong fiscal, trade and
monetary policy could well lead to depression. We know that
Nigeria has experienced mismanagement for several decades
but now is not the time to lament but to chart a clear
economic policy direction that will give value to the economy.
This will entail developing macroeconomic models tailored to
stimulate all sectors of the economy and catapulting us out of
recession. On the issue of monetary policy there is a lot of
confusion. There is the need for harmonization between CBN
policy which is leaning towards tight liquidity in a bid to
harness inflation and the Minister of Finance’s call for
increased public spending on capital projects. Note that CBN
increased the MPR by 200 basis points from 12% to 14% to
combat inflation and stimulate growth. The MPR is the anchor
rate at which the CBN, in performing its role as lender of last
resort, lends to Deposit Money Banks to boost the level of
liquidity in the banking system. If the apex bank intends to
increase the level of liquidity in the economy, it reduces the
MPR but increases it when it intends to tighten money supply.
By increasing MPR, CBN has unfortunately tightened lending.
The banking sector requires strengthening and must be
empowered to lend. I recommend that money from the
Treasury Single Account, TSA should go back to the banks at
single digit rates and that banks’ recommended lending rate
should not exceed 5%. I feel that the CBN should focus on
productive value of the economy and not the numerical value
of the naira. The recent devaluation of the naira by the
introduction of a floating naira exchange rate has not yielded
positive results as we see the naira spiraling downwards. In
fact the new forex regime caused a drop in the GDP from $
500billion to some $350billion by reducing per capita income
to below $600. In proffering a solution to this, I feel that
Government’s monetary policy will be required to move from
strict monetarism of the Milton Friedman School of thought to
the Keynesian Model. Milton Friedman promoted an alternative
macroeconomic viewpoint known as “monetarism”, and
argued that a steady, small expansion of the money supply
was the preferred policy. His ideas concerning monetary
policy, taxation, privatization and deregulation influenced
government policies, especially during the 1980s. His
monetary theory influenced the Federal Reserve’s response to
the global financial crisis of 2007–08. On the other hand
Keynesian economics advocates a mixed economy –
predominantly private sector, but with a role for government
intervention during recessions. Keynesian economics served as
the standard economic model in the developed nations during
the latter part of the Great Depression, World War II, and the
post-war economic expansion (1945–1973). I believe strongly
that Nigeria can recover from recession and I recommend as a
start the need for a Presidential Proclamation at the National
Assembly, switching from Austerity Policy to Growth Policy,
this will instill hope and form the basis for the way forward. I
am not sure if the Economic Emergency Powers requested by
Mr. President would work. I recall that President Shagari had
them and failed; the Venezuelan model has also not worked.
To boost the economy will require massive spending on
infrastructure and public works which will also require
manpower resources. This is the Keynesian economic model.
This way we will spend our way out of recession with the
objective of reducing inflation. The CBN should reduce the
MPR to single digit of say 5% and create a framework for
quantitative easing. Further, we need to consider a National
Treatment Policy that will create the environment for real
sector growth. We would need to establish a Development and
Guarantee Bank to provide financing for national development
which can be supported by asset securitization. Considering
all solutions, I will add the need for the government to prepare
a Public Sector Borrowing Requirement (PSBR) and borrow
according to needs. It may be possible to borrow against
future oil receivables as was proposed with China by the last
administration. It would also be necessary for the federal and
state governments to pay off domestic debts to inject liquidity
into the system, whilst retaining a clear debt ratio policy. I
have always advocated the need for massive legal and
institutional reform in the financial services sector which will
allow money to flow through the veins of the economy. For
banking regulations, I suggest we can adopt the UK model by
creating a Financial Conduct Authority (FCA) and a Prudential
Regulatory Authority (PRA). The Financial Conduct Authority
(FCA) is a financial regulatory body in the United Kingdom, but
operates independently of the UK government, and is financed
by charging fees to members of the financial services industry.
The FCA regulates financial firms providing services to
consumers and maintains the integrity of UK’s financial
markets. It focuses on the regulation of conduct by both retail
and wholesale financial services firms whereas the Prudential
Regulation Authority was created as a part of the Bank of
England by the Financial Services Act (2012) and is
responsible for the prudential regulation and supervision of
around 1,700 banks, building societies, credit unions, insurers
and major investment firms. This model would limit CBN like
the Bank of England to monetary policy and domicile
supervisory functions in the PRA. The proposed new
regulatory agencies will provide more effective supervision of
the banks than is the case. On the need for huge stimuli for
business growth there will be the need to create a debt factor
market to soak up non-performing loans presently on the
banks’ balance sheets now standing at about 20trillion naira.
Also medium and small businesses must be encouraged and
enabled to access funds to grow their businesses as these
businesses represent the engine of economic growth. Access
to funds should be supported by a robust private sector led
mortgage market by waking up dead capital trapped in the
nation’s housing stock valued at over 7 trillion naira. We will
also need to urgently explore alternative income sources from
Agriculture, Maritime, Aviation, Infrastructure, Mining etc. If
Government’s efficiency is enhanced and the States are
required to contribute as economic enablers, then there will be
less strain on the national purse and States will be forced to
generate income. It will be encouraging for the government to
give hope with a clear vision of how to tackle recession. For
example Franklin D. Roosevelt’s ‘New Deal’ got the United
States out of the Great Depression in the 1930’s. In the case
of FDR’s New deal, massive public works programmes like the
momentous Tennessee Valley construction were undertaken to
generate employment and hope for the American people.
Several important laws were enacted to support the New deal
among which two in particular impacted on the economy. The
Glass-Steagall Banking Act was enacted to restore confidence
in the banking system after thousands of bank failures in the
first years of the Depression in the U.S. This Act prohibited
banks that held government deposits from speculation and
trading but compelled lending to the real sector. Also the
National Industrial Recovery Act (NIRA) was a law passed by
the United States Congress in 1933 to authorize the President
to regulate industry to stimulate economic recovery. It also
established a Public Works Administration to put millions back
in employment by massive public infrastructure development.
A more recent example in the U.S was the introduction of the
Emergency Economic Stabilization Act, 2008 commonly
referred to as an Act to bailout the U.S financial system. This
law was enacted in response to the subprime mortgage crisis.
The United States Secretary of the Treasury was thereby
authorized to spend $700 billion to purchase failing bank
assets under the Troubled Asset Relief Program (TARP). Under
TARP, funds for the purchase of distressed assets were mostly
re-directed to inject capital into banks and other financial
institutions while the Treasury continued to examine the
usefulness of targeted asset purchases. Another innovative
piece of legislation was the American Recovery and
reinvestment Act signed into law by President Obama in 2009.
This historic legislation stimulated massive job creation during
challenging economic times by cutting taxes and investing
billions of dollars in critical sectors such as energy, health
care, infrastructure and education. I have highlighted all of
these illustrations to project how other jurisdictions have dealt
with economic crises. I emphasize the need for immediate
economic and macroeconomic policy measures to be put in
place. This will require setting up a council of economic
advisers to advise Mr. President on economic policy by
providing objective economic analysis and advice on the
development and implementation of a wide range of domestic
and international economic policy issues. This will provide a
New Economic Model that when implemented and pursued
vigorously can pull us from this recession by second quarter of
2017. However, if nothing is done the recession cycle may well
extend up to Q4 2020. Thank you for this opportunity to
address you directly on this very crucial topic.
Yours sincerely,
Olisa Agbakoba SAN, OON
Cc: Dr. Abubakar Bukola Saraki Senate President
Cc: Hon. Yakubu Dogara Speaker of the House of

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