untenable option. I put out all my ideas on our economic situation, from how I believe we could attain growth, to how to manage inflation, and how to urgently manage the Naira value. I’m afraid the situation is no longer redeemable. And Nigeria hangs at the edge of a fiscal cliff, which may likely lead to a massive economic decline: a meltdown.
The federal government under Buhari has also shown no capacity, and the fiscal side, led by the ministry of finance, has been shy from taking the needed firm action that may save us from this fiscal cliffhanger. They have been timid in pushing through luxury taxes, excise duties, capital gains taxes, road taxes and other forms of revenue that are progressive and could generate the needed funds.
There has to be a backstop somewhere; Nigerians are not known to be particularly patriotic, and we are stuck with an uninspiring government. Some ‘enlightened’ folks will tell us – like Osinbajo – to float our currency. We know that we produce nothing, so on what basis will the naira be floated? If we do, we will lose the currency.
My view is that our inflation is multi-dimensional. Some of our inflation comes from interventions for COVID-19 which meant that people were paid much money for doing nothing. This is what is happening in the rest of the world. Free money inflation. Also, part of our inflation comes from importing inflation from all parts of the world. Lastly, producers, retailers and importers have to reflect survival costs by marking up the cost to consumers since they now get their supplies at higher rates.
Our national debt stock is about N41 trillion, or close to $100 billion. This is about a quarter of our GDP. But when we add government borrowing from people’s pensions, the borrowing that was used in intervening in the bad bank, AMCON, and the federal government’s exposure to the Central Bank of Nigeria, perhaps we are looking at least another N35 trillion to N40 trillion, taking our debt to GDP ratio to over 50%. Of course, debt to GDP is a meaningless index.
Institute some progressive taxes, like luxury taxes, CGT, vehicle taxes, even the petroleum tax and so on, that can attempt income redistribution. We can begin to double revenue with enforcement as well. There is fire on the mountain indeedCause a period of sacrifice – zero pay, zero emolument – for a year or two on behalf of government functionaries. For the USA to exit the Great Depression, they had to lock down the country and ban the production and purchase of cars for two years .
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