Posted by News Express | 4 January 2016 | 2,782 times
Today, we continue our discussions started last week on how entrepreneurship skills in governance mixed with innovation and creativity can jumpstart the economy leveraging on our advantages and acquisition of the right knowledge.
On the fiscal side of the economy, a lot more needs to be done, ranging from fiscal discipline to efficient budgetary procedures and systems, decisions on the relationship between recurrent and capital expenditures, procedures of managing corruption, labour issues and so on.
Someone may ask, what is the relationship of all these to entrepreneurship, since that’s my forte? Simply put, faulty economic systems produce dysfunctional and bad social and financial effects, like poverty, crime, low productivity, lack of/inadequate access to health care and education, clean and drinkable water, housing, respectable employment, and so on. Then very important and germane is to recognise that although faulty economic systems may produce a handful of stupendously wealthy people, the truth is that “one rich person in the midst of six poor people is equal to seven poor persons.” The society will be better for it in terms of development, efficiency, inclusiveness and serenity, if we can get the systems to run efficiently and orderly. Only then will the effects of economic development, innovation, creativity and entrepreneurship begin to be clearer, experienced and enjoyed by all.
On the fiscal side of the economic management, one would ask why it has been difficult on a seating to tell specifically what the nation’s actual earnings are, especially from the oil and gas sector, the internal revenue services, e.g. the tax board (FIRS), the Customs, Immigration, the maritime industry regulators (NIMASA), the Satellite agency and weather management agency, the telecommunication regulatory agency and the broadcasting commission, and so on.
The Constitution mandates that all revenue accruing to the Federal Government be paid into the Federation Account before appropriations, but what you notice is that organisations like NNPC, NIMASA and other agencies spend at source without recourse to the national budget or the constitutional provisions. These highly discretionary activities leave a big opening to corruption, since it becomes difficult to monitor or track effectively such actions, as has been proved by those of NNPC and NIMASA.
Looking at the nation’s budget size, one would wonder why for about a decade or so, it hovered at about N4.3 to 4.6 trillion, when just the revenue from taxes alone equals that amount. The question then is, what happened to the rest of the income from the other streams; could they have been lost in transit? But thanks to the new directive on the Treasury Single Account (TSA), they could likely be on the way to recovery. The point here is, were all the revenue aggregated in one place as the constitution stipulates, Nigeria should well have over N15 trillion to budget on and appropriate. Then we can move on to the next stage of reformation, which has to do with the budgetary system and the relationship between recurrent and capital budgeting.
For the budgetary system, the incremental style of budgeting hasn’t been of much help so far, but thanks to the new regime of zero budgeting system, although it might come with its own hiccups of bureaucracy and lengthy time of preparation and completion. All the same, whatever it takes to end the status quo of practically copying and pasting whatever it was in the preceding year’s budget and marking it upwards with a specific percentage to arrive at the current year budget, must be encouraged, for that is the root of wastage, pilfering and other corrupt actions.
The nation has remained largely undeveloped with dilapidated infrastructure as a result of the budgetary system and processes. A situation where over 70 per cent of the budget is spent on the recurrent expenditure, while the rest becomes too small to make any significant mark on the all important dividends of democracy, which is expressed through the development activities, on roads, rail lines, provision of health care, education, and so on. But if the revenue aggregation is observed to the letters of the constitution, then at least the about 30 per cent of a huge sum representative of the improved budget size, will mean much to actual provisions of the development activities of the government and to the dividends of democracy. Yet it can be better, by restructuring the ratio between the recurrent expenditure and that of the capital by, say, reversing what we presently have in operation. This is possible because with a huge 30 percent of a large earnings, things like the salaries and emoluments of the federal civil and public servants, the nation’s statutory payments and debt servicing, which are some of the constituents of the recurrent expenditure, will be more than well taken care of. We can then have a whole lot left as the 70 per cent of the budget wholly devoted to real development, for this is actually where the rest of the population is taken care of, and money trickles to the public and the market place, so that the larger proportion of the people can begin to feel the effects and impacts of good governance.
Since we are not an export-based economy yet, it will be to our best interest to begin to perfect our international trade, economic participation and dominance within the confines of our comfortable zones of the West African region. Reason: In most of the West African nations, the Nigerian business presence is very high, our currency also is being exchanged for the local and other international currencies – it is even used for purchases therein. We can begin to dominate these areas with our competitive advantages and enlarge our markets to these frontiers for all our products, increasing the scope and limits of our supply, as it enlarges our productive capacity (this is by way of taking advantage of the ECOWAS protocol of free movement of goods and persons within the region).
Most importantly, if we can satisfy our local consumption with local indigenous made products and services, we will never have to worry about the fall in the price of our commodities in the international market. This is because we will be meeting our local needs ourselves, being the ones making these products, therefore we would be providing enough employment for our teeming populace, hence we would be very low on poverty index as a nation. With these we would have to worry less about foreign exchange, because we may not need to use them after all, since we are making very little imports. Then both our foreign reserve and the sovereign wealth fund would be preserved. This would leave us a prosperous, progressive and inclusive strong nation, where all would have a sense of belonging and be happy to make their own contributions.
On the foreign exchange management, a thought has to be spared for the supply side management, aside the demand side that we have all along been engaged in. If we can encourage the import side of foreign exchange through FDIs and receipts from external transactions of various organisations like the NNPC, NLG, and other companies with offshore branches and businesses, like the banks, telecommunications companies and the Diaspora funds – if we can encourage them to bring in their funds into the economy themselves through the open market –
then there would be enough foreign exchange to cover our needs in that area, and there would not be any need to be drawing from our national reserves and defending the Naria with our earnings.
The salient point of indigenous economic participation is a thing that must be looked into. A situation where the major drivers of the economy are operated by foreign organisations and practitioners is not acceptable, if we our desire is to get the best out our economic potentials. In the oil and gas sector, it is baffling that all the lucrative ancillary services are operated by foreign interests: insurance, legal services, logistics (haulage of the crude oil and gas to the international markets and destinations, and many more. None of these are handled by the locals or is the transactions domiciled locally, to at least benefit the system. And these are where the real money is in the industry.
The same is happening in the maritime industry even with the cabotage law: almost all the cargo vessels are foreign; the same goes for their insurance, legal services and so on, there are very minimal local contributions in this industry. No wonder the economy cannot feel the impact of this huge industry and the activities that go on there, except in the Custom receipts and so on, but in the real business of the maritime industry, we are not there yet. For Nigeria to get out of her economic situation, she must engage all her potentials fully and they include all that we have been enumerated above and more.
The issue of capital market participation of conglomerates is a thing that must be looked into, because some of these organisations make most of their money here but go to list in the stock markets of their nations of origin; thereby denying our populace the opportunity of benefiting from their reported activities in Nigeria through the capital market. There is the issue of their CSR and consumer rights; is it not natural that Nigeria being the place they make most of their income, that their investments in CSR be in this nation? Rather, what do we get is that they sponsor football clubs, adopt hospitals and schools back home, but substitute CSR with promotions in Nigeria, and go on to rake in more money from us instead of giving back.
To get back on our feet as a country, we must consider seriously the issue of non-commodity based revenues like taxes. Most developed countries live on taxes rather than commodity based receipts. This is more guaranteed, accountable and makes the citizenry to easily connect with the nation and governance, knowing that it runs on the sweat of their brow. Corporate tax is one thing I know that if we can access efficiently from all corporations and organisations running activities in Nigeria, we might as well step down oil receipts to the background. But to what extent the organisations pay their taxes in Nigeria is a thing yet to unravel, especially in the oil and gas industry, the maritime and so on. If we can get them to pay then our worries are taken care of by half. The second leg is the income and property taxes, although we would need a veritable identification system to run a system can will accrue all these, but in the mean time we can be innovative to get things done for now to get by, while we wait for a more sustainable and enduring ideal version when we have the identity system sorted out.
With the foregoing, Nigeria is far from any form of recession if we can get our acts together. As a highly informal economy, recession is hard to get on us because most activities and revenues are not accounted for and are not within the banking and official systems. This is one of the reasons managing money supply in Nigeria is a tough call. We have about 32 million active bank accounts in Nigeria, in a country of 170 million people, and about a hundred million adults. It is easy to see with this, the level of financial exclusion in the country, and to imagine the humongous level of funds in the informal market; monies with the traders (in their shops and at homes for businesses and personal use), monies with the currency traders and the neighbourhood traditional savings vendors (the isusu vendors), and the ordinary people. With all these and the precautions that we have extensively discussed in this article, we as a nation will not only come out of this economic situation, but we will rise to take our rightful position as the arrow head of the African market and the black world.
•Lawrence Nwaodu is a small business expert and enterprise consultant, trained in the United Kingdom and the Netherlands, with an MBA in Entrepreneurship from The Management School, University of Liverpool, United Kingdom, and MSc in Finance and Financial Management Services from Rotterdam School of Management, Erasmus University Netherlands. Mr. Nwaodu is the Lead Consultant at IDEAS Exchange Consulting, Lagos. He can be reached via firstname.lastname@example.org (07066375847).
No comments yet. Be the first to post comment.