Bailouts: Time to roll out the results
The economic intervention or bailout is expected to lead to positive outcomes if properly designed and implemented effectively or effectively. Such an intervention, rightly recommended by British scholar and leading economist John Maynard Keynes, is common when countries are going through times of stress, difficult times or recessions and there is a need to prevent economies sink into depression, which is a deeper problem of economic turmoil. Economic interventions generally consist of injecting funds into businesses, but it is not always a question of injecting funds. This can take the form of policy changes such as the Asian financial economic crises of 1997/98, when monetary authorities introduced capital controls to prevent further catastrophes leading to market failure. Control ultimately saved the economies from further financial and economic depression.
Recently, the Central Bank of Nigeria intervened moderately in the foreign exchange market, stopping the supply of foreign exchange to Bureau de Change operators in the country. This is a unilateral intervention aimed at correcting the failures of the foreign exchange market and did not involve injecting funds into production. For more efficiency, the Ministry of Finance should deploy certain products to be banned. All imported wines and exotic fruit juices, cookies, hair accessories and other manufactured products should be effectively banned.
Government ministries, departments and agencies, including the CBN, have over the years intervened in the Nigerian economy in one form and another. The positive results do not seem obvious to the naked eye as the country sinks further and further into the abyss of unemployment, under capacity utilization in industries, debt problems and rising prices ( notwithstanding the data published by the National Bureau of Statistics recently). Figures on the international scene that show the Nigerian economy is in dire straits are corroborated by the facts on the ground. In recent times, Bureau statistics have shown a drop in prices while in the markets of Kuje, Kawa, Onitsha and Oyingbo, the prices of foodstuffs, rags, laundry detergents and solid soaps and other goods. common have more than doubled in the past three months. Unfortunately, it is the politically induced statistics produced by the NBS that will be used for research on Nigeria that will invariably give poor results upon which recommendations will be made.
The implications of misdiagnosis clearly provide icteric recommendations.
Sorry for the desirable digression. It is high time that citizens started to get feedback on interventions involving public funds. CBN, for example, has been implicated, based on high-profile media reports, injecting N2tn into both agriculture and industries, especially over the past five years. From now on, citizens should be informed in concrete terms, not only of the total amount invested in the intervention, but how much by companies, by industry, by farms and by non-agricultural or non-manufacturing companies. What were the expected results in terms of job creation, production, taxes paid, etc., as provided for in the memorandum of understanding signed at the start of the intervention? Where are we today and where should we be tomorrow?
The same goes for other MDAs. Transparency and accountability are part of the economic intervention program. During the 2014/2015 economic recession, the CBN said it gave foreign currency to some banks as intervention funds for certain industries. It remains to be seen whether the funds have been distributed, to which companies and for what purpose, as well as whether the money has been returned to date. The late Henry Boyo’s ongoing investigation led the House of Representatives to set up a committee on the issue but upon his death in 2019, the committee’s work died with him! Very unhappy but things have to change.
The public bodies that serve us are accountable to citizens. We must make them accountable because this will make them transparent in the accomplishment of their tasks. There was the issue of job vacancy in the 774 local governments in Nigeria. It is part of the interventions to support employment or reduce unemployment. Much noise between the legislature and the executive was made about who should run the project, until the executive, through the Minister of State for Labor, Festus Kenyamo, properly took charge. . Since then, not much has been heard about the implementation of the project. Of the 10 applicants from three local governments in Ogun State that we vetted after collecting and submitting the required forms and details, only one is currently a beneficiary. What this shows is that the program provided jobs for some people, as other beneficiaries may not have been considered in our research effort.
The public, however, deserves to know all the details of the implementation of the program before additional funds are committed for its expansion or if this is the kind of program that can empower people in a sustainable way. The ministry must publish verifiable reports, including the names of beneficiaries from different areas of local government. We need to know the impact of the project and what happens next for the beneficiaries. A full report must be submitted to the legislature and the public. The legislature too, after approving the project, should exercise the oversight function and report to the public while the office of the Auditor General of the Federation audits the project and also makes its report public. We are awaiting reports from both sides.
Recently, CBN interventions have focused on 1,686 projects in agriculture, industry, aviation and others with more than N2tn. The Bank revealed that there were around 37 interventions to stimulate the Nigerian economy. It is huge and commendable. Fortunately, the Bank is an institution with credible statistics in the country and should therefore have all the statistics relating to each of the projects for public consumption and legislative files. The Bank must now provide the file of the companies it has financed with the names, the year of intervention, the funds provided, the expected and actual results, the jobs generated, etc.
Intervention in the electrical industry whereby companies producing meters were paid and the product provided for free to consumers (or that is what one can assume) is a better way to subsidize or intervene for industries. . However, the government needs to know how successful this intervention was. What expansion has taken place in terms of the increase in the number of meters produced after the intervention? How many jobs have been generated since business expansion is expected to have a corresponding increase in the use of resources? By how much tax paid increases each year, because even if companies receive a tax break or tax holiday, the increase in employment should lead to a corresponding increase in taxes collected from new employees and paid to the government. How much was repaid by the intervention funds (if the funds were given in addition to the creation of a loan market) and how long will it take to pay the balance. Intervention in such businesses should be based on a return on investment format as it is like giving a free loan to help businesses grow and different from the school feeding project. Even the “Tradermoni” project should be on a payback basis so that if a trader repays he receives double the amount for the next installment, otherwise the trader will see the money as a large sum. Unfortunately, that’s how it is now. Many see the program as an official bribe to motivate electoral support for the party implementing the program!
There should be a standard report format for all interventions. In fact, there should be a format and a formality even for the proposed interventions so that the result is measurable. In this context, the intervening institution will have to sign a memorandum of understanding between itself and the beneficiary institutions, industries and individuals. In some other countries, the intervening institution will need to prepare a proposal clearly indicating what needs to be done and what the expected results are for consideration and approval by the executive committee or legislature so that the actual results can be measured against the proposed results. .
It is not in all cases that an intervention is a subsidy that does not require repayment. Some are loans, especially for industrial production, be it agriculture, manufacturing or services, and should be considered as such as it is the global standard. The company must work to repay the intervention funds. Any intervention without a proposed visible or statistically plausible result is fraught with a lack of transparency and accountability and should be rejected by the approving authority. One of the main results of any intervention should be the amount of employment and the increase in results that such intervention will generate at different intervals of the implementation of the program / project until the end of the project.
- Tella is Professor of Economics, Olabisi Onabanjo University, Ago Iwoye
All rights reserved. This material and any other digital content on this website may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without the express prior written permission of PUNCH.
Contact: [email protected]