YNaija Editorial: The absence of a cabinet is hurting Nigeria’s economy

Although President Muhammadu Buhari has finally named his 36-person cabinet and they have been screened and confirmed by the Senate, the delay in swearing them in and assigning portfolios to them is adding to the cost of the delay of the four months it took them to have them named.

In that period of time, the economy has taken quite a hit due to the absence of a cabinet, particularly a Finance Minister that will articulate the economic policy of the government. It has left investors in the dark as to the direction the Buhari administration will take, and has made them to be on the safe side by either delaying them their investment in government debt or pulling their money out.

This is worsened by the policies of the Central Bank of Nigeria (CBN) which has stubbornly refused to devalue the naira and has resorted to propping it up through extreme measures like restricting foreign exchange transactions, which has set off the domino effect of a shortage of liquidity and businesses hamstrung on how to pay for foreign transactions. This led to international investment bank, JP Morgan Chase delisting Nigeria from its local-currency emerging-market bond indexes, the Government Bond Index-Emerging Markets (GBI-EM) and will be denied re-entry for up to a year as a result of ‘lack of a fully functional two-way market and limited transparency.”

The absence of a finance minister or even a Chief Economic Adviser (for which President Buhari received approval to appoint along with 14 other special advisers from the Senate since June) has ended up with persons who are out of their depth in finance issues such as Vice-President Yemi Osinbajo constantly commenting on economic and monetary issues.

Not only do his comments fall short of a clearly articulated economic policy, those specific to monetary issues send the wrong signal on the independence of the Central Bank, as that it is their purview. It has also caused the actions of the Central Bank regarding the refusal of devaluing the naira to be following the body language of the President, who it must be restated is without an economic adviser or council to guide him on this issue.

Even beyond monetary policy, the government has also not articulated its position on whether or not is going to continue paying fuel subsidy has led many fuel importers to be unable to finance their imports as banks are reluctant to extend credit facilities to them and risk being left in the lurch. It has also led to hoarding in many parts in anticipation of a fuel subsidy removal and prices appreciating, and this is causing scarcity.

Another crisis of confidence comes from the fact that while the ministers are now known, there is still no clarity as to who will be assigned to which specific ministry. As such, we can only speculate, especially for important ministries such as Finance, Trade and Investment, National Planning, etc. It thus has made it even more difficult to predict which form economic policy will take based on the thoughts and antecedents of the ministers.

The biggest effect of the delay of the constitution of a cabinet on the economy is the fact that two months to the end of the year, the Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP), the two documents which provide the basis for annual budget planning as they contain a macroeconomic framework that indicates revenue and expenditure estimates are yet to be presented to the National Assembly. The Fiscal Responsibility Act, Section II mandates that these documents are to be approved by the Federal Executive Council and presented to the National Assembly at least four months to the end of the fiscal year, i.e. in August.

However, as there is no FEC, the documents have not been prepared, the direct implication of which being that the budget will not even be presented to the National Assembly by January next year, and judging from the history of the slow passage of the Appropriation Bill (budget), it might not be passed until mid next year.

All of these actions (or inactions) by President Buhari is in direct contrast with his electoral promise of hitting the ground running. While the president might be methodical in the way he works in order to make sure he makes the right decisions, the world and the economy cannot afford to keep waiting for him. He needs to act fast in order to stem the bleeding the economy is taking.

President Buhari should promptly swear in his cabinet, assign portfolios to them and immediately get to work articulating specific policies for each sector, drawing up the MTEF, FSP and the budget. Already, the Nigerian economy is estimated to have shrunk by 40% in the second quarter. Only prompt government action can prevent this.

Leave a reply

Your email address will not be published. Required fields are marked *

cool good eh love2 cute confused notgood numb disgusting fail