Former Central Bank of Nigeria (CBN) Governor, Prof. Chukwuma Soludo, has faulted the recently released 2017-2020 Economic Recovery and Growth Plan (ERGP) by the Federal Government, saying it lacks projections for competitive real exchange rate.
While assessing the current state of the Nigerian economy, the ex-CBN boss said the Gross Domestic Product (GDP) had dropped by half in dollar terms in less than two years of the President Muhammodu Buhari’s administration.
Prof. Soludo, who was the Keynote Speaker at the Vanguard Economic Discourse in Lagos at the weekend, queried the ownership of the plan, which he believed will determine whether the plan was just a public relations document or whether it will be implemented.
“Is the extent of the plan consistent with the APC manifesto, which promised a conscious plan for post-oil economy and to restructure the country and devolve power to units with the best practices of federalism? Is this plan that plan?” Soludo queried.
He went further to describe the envisaged 15 million jobs to be created under the plan as a “very nice wish.”
“The plan envisages continuing the practice of the past government of borrowing to finance recurrent expenditure. Up until 2018, recurrent expenditure will continue to exceed total revenue. The deficit will continue to exceed capital budget, meaning that capital expenditure will continue to be borrowed, as done by the last government. So, what has changed?” he queried.
Soludo said there were no projections for the trajectory of exchange rate or foreign reserves in the plan, stressing the need for a competitive real effective exchange rate.
He said, “The plan as packaged is a good effort, but in terms of our expectations as a plan for transition to a post-oil economy as promised by the APC, it is a missed opportunity.
“I am willing to bet that not much will happen in terms of the structure of the economy or the structure of fiscal and export revenue at the end of the plan.”
He noted that the current government inherited a bad economy, adding that by May 2015, the Federal Government was already borrowing to pay salaries and about 30 states had challenges meeting their salary obligations.
“The previous government had an unprecedented rate of debt accumulation even at a time of unprecedented oil boom, and was even depleting our foreign reserves instead of more than doubling what it met,” he noted.
He pointed out that most macroeconomic variables have worsened in the last two years. Inflation from about nine per cent to 19 per cent; dollar exchange rate from about N197 (official) and N215 (parallel market) to now N305 (official) and N465 (parallel); unemployment from 7.5 per cent to 14 per cent; GDP from about two per cent to -1.5 per cent; poverty is escalating and youth agitation increasing; business confidence remains very low; foreign reserves remain depleted, and the current account balance is negative, and sovereign credit ratings have worsened.
“Nigerian workers have suffered a double whammy. The average nominal wages are declining, while real wages dramatically shrunk with high inflationary pressure.”
He stated that the Federal Government had continued to spend over 100 per cent of its revenue on recurrent expenditure as done by the previous government, while borrowing 100 per cent of all its capital expenditure.
“There remains half-hearted commitment to deregulation of petroleum pricing as well as the privatisation of refineries. The budgetary framework remains largely the same with all the institutional inefficiencies. Monetary and exchange rate policies were in their own worlds,” Soludo said.
While acknowledging the efforts of the present administration in fighting insurgency and corruption, he criticised the implementation of the Treasury Single account (TSA), which he said could have been done without squeezing the economy of needed liquidity at a time of recession.