AACS Fortnightly
(Mondays)
10th April 2023

From the Chairman’s Desk,

Setting The Economic Agenda (Part 1)

As discussed on the ‘Inside Politics with CKN’ s Good Friday Programme on Silverbird TV https://lnkd.in/eiRE9A6S, AACS reiterates the economic issues that must be dealt with in order to reset the nation’s economy and begin the resurgence.

1. Revenue – Nigeria has a revenue problem that must be reviewed urgently. The nation’s Revenue-to-GDP ratio at 8% is too low, and must be worked on. There could be close to $100b in the economy if we use a GDP of $500b as a base. An efficient rework would ensure it, and will open the economy to a larger potential to healthy borrowings. We can then ramp up spendings on infrastructure, and inclusive growth issues like education, health services, social reorientation and so on, in order to reach at least 25% of GDP. Tax to GDP must improve through a comprehensive progressive overhaul. The Federal Inland Revenue Service (FIRS) announced tax receipts of ₦10trn in 2022, the highest in recorded history, and a lot more can be achieved with proper attention.

2. Fuel Subsidy – It must go, as it is unwise to spend 40% of a budget on such a program, especially when the data on need is inaccurate. However, there is a right way to do this and that route would be through a social safety net for the most vulnerable people, targeted infrastructure In transportation, and private sector refinery establishments to include the modular ones. The government has budgeted a fuel subsidy of ₦3.4trn (15.6% of 2023 budget) for the first half of 2023, as it plans to end the subsidy mid year. AACS has however not seen enough ground preparation to achieve this by showing the plans to cushion this, it is key that it has to be done with an effective plan.

3. Realignment in exchange rate – The official exchange rate of $1 is around ₦448, while the parallel rate floats between ₦250 to ₦300 more. It’s not sustainable, and there is little evidence that finished goods and services are priced at the official rates to the buyers, which ideally would have helped to fight a cost push inflation. If you source FX at the official rate, the final products should reflect that, to reduce the burden of inflation on Nigerians, rather than reflecting the parallel market rate.

Falil Ayo Abina

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