2023: Tinubu plans budgetary expansion to stimulate economic growth
In continuation of our analysis of presidential candidates’ economic plans which started last week with Alhaji Atiku Abubakar’s economic blueprint, today we consider the economic agenda of Asiwaju Bola Ahmed Tinubu, the All Progressives Congress (APC) presidential candidate.
The major task before Nigeria’s next president is fixing the economy. In the last seven years, the economy has contracted due to a number of factors. This has resulted in low productivity, high unemployment rate and rising rate of poverty. SULAIMON OLANREWAJU examines the programme of the APC presidential candidate, Senator Bola Ahmed Tinubu, vis-à-vis his plans to put the economy on the right footing should he win the February 25, 2023 election.
Senator Bola Ahmed Tinubu’s antecedent as the one who expanded the Lagos economy and prepared the ground for its emergence as Nigeria’s largest economy as well as the fifth largest economy in Africa is well documented. On Tinubu’s watch, Lagos State’s Internally Generated Revenue (IGR) grew from a monthly average of N1.2bn in 1999 to a monthly average of N7 billion when he left office in 2007, representing almost a 470 per cent growth rate.
Tinubu, whose ability to aggregate capacity to achieve set goals is well known, lays out in his manifesto, christened Renewed Hope 2023, the strategies, plans and programmes he intends to deploy to take Nigeria out of economic doldrums.
The major thrust of Tinubu’s plan to revitalise the economy is expanding the budget size to accommodate government’s programmes and projects rather than limiting government’s expenditure to envisaged revenue.
The APC presidential candidate states in his manifesto thus: “Budgetary custom bases our annual budget and fiscal policies largely on the dollar value of projected oil revenue. Not only does this practice artificially restrict the Federal Government’s fiscal latitude, it also unduly attracts the nation’s attention towards a single source of fiscal revenue to the detriment of others.
“To achieve optimal growth in the long term, we must wean ourselves from this limitation. A more efficient fiscal methodology would be to base our budgeting on the projected level of government spending which optimises growth and jobs without causing unacceptable levels of inflation. As part of this prudent growth-based budgeting, we will establish a clear and mandatory inflationary ceiling on spending. However, we must break the explicit link between naira expenditure and dollar inflows into the economy.
“Much like the European Union has done, we too must be realistic and legislatively suspend the limits on government spending during this protracted moment of global economic turmoil exacerbated by domestic challenges in security, economy and demography.”
Tinubu hopes to leverage the latitude offered by the budgetary expansion to modernise national infrastructure and create jobs for the nation’s teeming youth.
He said, “Compelled by the unassailable fact that an economy cannot exceed the capacity of the available infrastructure to service it, we shall bring the National Infrastructure Policy to life, harmonising it with the National Industrial Policy to ensure optimal development of key sectors and rapid acceleration of our GDP growth.”
He added, “Under our government, our cities and towns will witness a level of industrial activity unprecedented in our nation’s history. In this, our youth shall become a leading catalyst driving the economic resurgence. This goes beyond the provision of decent jobs. It speaks of empowering those who see their future as starting and owning businesses in the new economy. It goes to opening the economy in a way that encourages the best that the modern digital and IT-driven sectors have to offer.
“We will improve existing industries and sectors. We will be brave and innovative enough to see how new economic vistas powered by today’s technology can create jobs and provide goods and services that will propel us toward greater prosperity and development.
“In helping to shape this more dynamic economy melding the best of the extant sectors with what is new on the economic horizon, our government will be fiscally active; yet equally prudent in the ‘how and why’ of public expenditure because public money is also a storehouse of public values and public trust. We will build an economy that produces more of the everyday items, both agricultural and manufactured goods, that define an individual’s and a nation’s standard of living.”
According to his manifesto, Tinubu intends to give serious attention to stable electricity supply with a view to deploying it as a lever to increasing productivity in the country. The presidential candidate, however, realising that the power sector challenges could not be overcome overnight, said his administration would build on the foundation laid by President Buhari’s Presidential Power Initiative to emplace prudent and practical measures that would improve the nation’s power situation.
Going into specifics on how he would reform the power sector, Tinubu said concerning generation and transmission that “Over the long term, we will seek to implement further reforms to put the nation on a track to sufficient on-grid generation, transmission and distribution to power the bright Nigeria of our dreams. Off-grid and renewable power generation options and solutions undertaken by willing private sector participants will also be encouraged and our administration will work with the private sector and interested state governments to provide access to low cost finance for power projects.”
On estimated billing, he said “We will end this unpopular and harmful practice and ensure that all electricity bills are meter-based. By streamlining and accelerating existing schemes such as the National Mass Metering Programme and the Meter Asset Provider Scheme, we shall seek to ensure that all electricity connections are properly metered within the shortest possible time frame.”
On renewable energy, the APC presidential candidate said, “Our renewable energy plan shall be based on Nigeria’s commitment to carbon neutrality by 2060. Working with the National Assembly, State and Local Governments, we will provide the enabling environment, institutional, legislative and regulatory reforms required to attract foreign and domestic private sector investors, as well as support from donor agencies.
“Our solar energy plan will focus on all major parts of the power value chain to ensure that we take advantage of all that solar power has to offer in terms of generating, transmitting and distributing power across the country. In the upstream sector we shall focus on grid connectedness while also taking advantage of mini-grid and interconnected mini-grid solutions.”
To facilitate the growth of electricity distribution companies (DisCos), Tinubu said, “We will further enable DisCos to charge cost-reflective tariffs for electricity supply. Our government will reduce import levies on manufacturing inputs and provide other forms of support so that domestic manufacturers are able to compete and meet demand for meters and provide targeted and efficient tax incentives for local manufacturing companies making meters.”
Tinubu also stated that “We will introduce a Nigeria First policy by which gas resources shall be directed, as a #1 priority to Nigerian power generation. We will, in addition, support power projects that can be delivered quickly to optimise grid reliability, grid interconnectedness and grid wheeling.”
The APC presidential candidate said his fiscal strategy would be to spend public money in a way that would maximise employment of people and resources, adding that monetary policy must buttress this approach.
According to him, “To achieve optimal growth and broadly shared prosperity, monetary policy must complement fiscal goals. The efficiency of monetary policy in driving overall economic goals is limited. Fiscal policy has numerous channels and transmission mechanisms by which it can affect the economy. Unlike monetary policy, fiscal policy can be channelled directly and even exclusively toward the poorer segments of society. Monetary policy transmission mechanisms are largely limited to banks and other financial institutions. By itself, good and wise monetary policy is insufficient to produce the level of growth we seek.
“However, bad monetary policy is sufficient in itself to sink the best of our economic dreams.”
Tinubu added that monetary policy must focus on the exchange rate, interest rate and price levels. “This trio must serve the objective of fiscal policy, which is broadly shared prosperity. In essence, money lends nominal economic value to anyone who owns it or anything to which a monetary price is attached. Idle people and resources are said to have scant economic purpose or value. They are wrongfully derided as ‘useless.’ When money becomes attached to them either through a living wage or capital investment, what was once idle becomes valued and productive.”
On exchange rate management, Tinubu said it is too important to either be ignored or left to the vagaries of an unrestrained market because it influences the costs of imports, competitiveness of exports, and net capital flows.
He said, “To ensure that exchange rate policy harmonises with our goals of optimal growth and job creation driven by industrial, agricultural and infrastructural expansion, we will work with the Central Bank and the financial sector to carefully review and better optimise the exchange rate regime.
“Our economic policies shall be guided by our desire for a stronger, more stable Naira founded upon a vibrant and productive real economy.”
On foreign debts, Tinubu said, “Our administration will engage in extraordinary prudence in contracting debt in foreign currency. Our policy will be such that new foreign currency debt obligations will be linked to projects that generate cash flows from which the debt can be repaid. Where possible, we shall limit such foreign currency denominated debts to essential expenditures that cannot be adequately addressed by either naira denominated expenditures or debt obligations.”
The APC presidential candidate said he would curb the nation’s reliance on imported goods.
According to him, “Importation of non-essential products will be discouraged through policy measures including luxury taxes, higher tariffs, and higher processing fees.
“At the same time, international brands will be incentivised with tax credits, rebates and other fiscal incentives to establish manufacturing plants in Nigeria both for export and to meet the needs of the large population of consumers in Nigeria and the wider ECOWAS region. We shall also enact new policies to exploit the framework provided by the African Continental Free Trade Agreement (AfCTA) to further boost domestic manufacturing and production.”
To boost the nation’s revenue, Tinubu plans to increase crude oil production to 2.6 million barrels per day by 2027 and 4 million barrels per day by 2030.
Underscoring the current challenges in the sector, the presidential hopeful said to increase domestic crude production, the country must first stop crude oil theft and prevent vandalism of pipelines, crude oil infrastructure and assets. To achieve these, his administration would establish a Special Enforcement and Monitoring Unit whose sole mandate would be to protect the nation’s pipelines by deploying technological interventions such as stationary aerial monitoring platforms and drones, towards curbing production disruptions.
He stated that technological assets would be used to track the movement of vessels and to provide real-time, immediate notification of any breaches or ruptures of pipelines or other facilities.
Tinubu stated further, “In addition, we will provide new incentives to boost investment in the sector. We shall focus more investment on frontier oil and gas exploration, particularly in as yet untapped parts of the country (for example within the Lake Chad basin). To increase our refining capacity, we will explore public-private partnerships in this area. We will consider, as a model, joint venture partnership arrangements entered into between other leading oil producing states and global petrochemical firms.”
He also plans to increase indigenous share of crude oil production to over 1mmbpd by 2027.
To make that a reality, he said “We will, further, implement incentives to encourage indigenous participation and mandate IOCs to assign a share of revenues towards knowledge sharing and technology transfer to indigenous companies.
“We will fully implement the Host Community Development Trust which mandates greater assistance and cooperation by oil companies with host communities, particularly in the areas of environmental protection, preservation and rejuvenation.”
To harness domestic gas potential, the APC flag bearer said his administration would achieve full deregulation of midstream gas prices within six months, increase gas production by 20 per cent and complete critical gas infrastructure projects by 2027.
He stated, “To realise the potential of the gas industry in a world that seeks cleaner sources of energy, we will accelerate implementation of the Nigeria Gas Master Plan and fully develop and modernise our regulatory framework for natural gas production.
“To ramp up domestic supply, we will complete critical gas infrastructure projects, including: pipeline infrastructure (e.g., Obiafu-Obrikom-Oben pipeline (OB3), Trans Nigeria Gas Pipeline, Escravos Lagos pipeline system (ELPS) II, Ajaokuta-Kaduna-Kano (AKK) pipeline) and the seven key gas development projects. We will also explore the expansion of such projects to other states.
“To further optimise gas production, we shall, on the one hand, enforce gas flaring penalties, while on the other, offer tax credits or similar incentives to companies that achieve reasonable flare reduction targets.
“Producers will be required to submit natural gas flare elimination and monetisation plans to the government and will be mandated to install metering equipment on all facilities where gas flaring may occur.
“A special investigation/enforcement unit will be established to monitor gas flaring activities and assess compliance with the PIA’s provisions on the reduction of gas flaring and the impact of any non-compliance on affected communities.
“Non-compliance will be met with financial penalties which shall be used solely for development and environmental relief of the affected communities.”
To ensure stability of petroleum product supply, Tinubu said his administration would fully deregulate the downstream sector and phase out the fuel subsidy while maintaining the underlying social contract between government and the people.
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He said, “We do this by dedicating the money that would have been used on the subsidy to fund targeted infrastructural, agricultural and social welfare programs ranging from road construction, to boreholes, public transportation subsidies, education and healthcare funding programs. In this way, the funds are more directly and better utilised to address urgent social and economic needs.
“Our planned approach will not only mitigate the price effects of deregulation but will also result in the significant expansion of public infrastructure and improvement of the public well-being.
“Subsidy removal and deregulation are, however, only part of the solution. To further increase our refining capacity, we shall focus on the rehabilitation of the nation’s refineries and shall consider, as a model, the joint venture partnership arrangements implemented by other leading oil producing states and global petrochemical firms.”
To optimise government revenue, Tinubu said his administration would deploy the same skills and expertise used in Lagos State to generate record levels of internally generated revenue, create wealth and attract investment.
“We shall also improve and significantly expand the current administration’s efforts to generate revenue by reducing leakages in the financial system and create the enabling environment to expand the private sector initiatives undertaken by the Buhari administration.
“We will mobilise private sector investment, processes and people to raise the revenue profile of our great country and achieve our ambitious plans for the nation’s rapid development.”
Going by the manifesto, a Tinubu administration will result in economic buoyancy for the country but there are some gray areas in the manifesto. The presidential candidate speaks about “basing our budgeting on the projected level of government spending which optimises growth and jobs without causing unacceptable levels of inflation.” While it is very necessary to increase the budget because of the nation’s unrelenting population growth, how the candidate hopes to raise the resources to fund the increased budget without resorting to taking loans is not stated in the manifesto. In addition, with the inflation rate already over 20 per cent, would this plan to phenomenally increase the budget not result in unprecedented level of inflation?
The candidate’s plan to transform the nation’s power sector is commendable. He has great plans for generation and distribution but his manifesto is quite equivocal on transmission, which is the major problem in the electricity value chain. Currently the nation generates about 12,000 megawatt but is only able to distribute less than 5,000. How would that be addressed in the short and medium terms?
Then Tinubu plans to make the fiscal authorities the driver of the economy contrary to what has been the case since 2015. While that is the right thing to do because monetary policies are primarily meant to enable the realisation of fiscal objectives, it is left to be seen how the new plan would pan out without causing any disruption in the system.
Altogether, the APC candidate’s manifesto is a well-thought-out agenda that is good enough to give a new life to the economy. But that is hardly a surprise given Tinubu’s reputation as a renowned reformer and a master strategist.
Next week’s focus: Peter Obi’s economic plan.