Worry over limited policy content
PDP proposed reforms for FDI, GDP growth similar to failed APC policies
Three months to the general elections, financial industry analysts are worried that the recently released campaign documents of the two leading political parties, the ruling All Progressives Congress (APC) and leading opposition party, the People’s Democratic Party (PDP), launched with fanfare, are limited on policy contents and are unlikely to be revealing about policy, but a rehash of the old change agenda and hints of pro-market stance from the other side.
Analysts at the investment bank cum research institution, FBNQuest, in their economic outlook for the fourth quarter of the year, released and made available to business a.m. over the weekend, said there was little on relevant policies on some of the issues facing the country such as fuel subsidy, which will help address the problems facing the country.
While noting that PDP’s Atiku Abubakar has produced a plan with ambitious targets for foreign direct investments (FDI) expansion and gross domestic product (GDP) growth, they said in the report that the reforms proposed to attain the target are not very different from the policies of the APC, which have failed to deliver growth in GDP per head during its tenure.
Commenting on President Mohammadu Buhari’s change agenda, they said the change promised in 2015 has been modest, adding that critics can point to power and other shortages, as well as the grossly inadequate infrastructure.
“In our view, one main reason for such disappointment lies in the centralised system of government and its negative impact on decision-taking. It appears at times that almost all decisions and appointments have to be rubber-stamped at the presidency,” they avowed.
They cited the examples of what they described as many important positions in public agencies and diplomatic posts left vacant because of the centralized nature of decision taking by the current government.
“There are many examples of important positions in public agencies and diplomatic posts left vacant for this reason. This institutional inertia has blunted the ability of the big-hitters in the executive to lead from the front,” the analyst said.
They said the APC change has been patchy “yet is evident in some fields,” describing the resort to expansionary budgets through to 2018 (signed off in mid-June by President Buhari), as helping to bring about larger capital releases by the government.
“These budgets have enabled the FGN to deliver on some of its “social interventions” on job creation in the public sector. We would also single out the success of Kemi Adeosun, the recent federal finance minister, in cutting waste, improving cooperation between government agencies, strengthening revenue collection agencies and driving a coherent FGN debt strategy”, they maintained.
They, however, lamented the inability of the National Assembly to pass the petroleum industry bill (PIB), avowing that there was now no chance that the petroleum industry bill will be passed before the elections, and lamented that it has languished for more than ten years in the National Assembly.
Noting that the governance component was approved by the assembly in January but sent back by the presidency in July, the FBNQuest analysts’ outlook said: “It seems that proposals to trim the power of the president and the petroleum ministry over oil licenses and contracts were unacceptable. Additionally, the presidency objected to a new regulatory body that would house 10% of oil revenues,” noting that the other components of the omnibus bill are fiscal, administrative and host community sections.
Expanding their take on the state of the economy, the analysts attributed high transaction cost and regulatory model as the reason for the low volume of mobile money transactions in the country; but they acknowledged that there was a potential boost to consumption from the current low base of mobile banking following the award of operating licences by the CBN.
The report revealed that data from the Nigerian Inter-Bank Settlement System show that licensed mobile money operators handled transactions totalling N1.10 trillion ($3.6 billion) in 2017 compared to the figures for the much smaller economies of Ghana and Kenya last year, which were $36 billion and $45 billion respectively.
“High transaction costs are a disincentive in Nigeria generally but the regulatory model is also a barrier: it is bank-led whereas that in both Ghana and Kenya is telco-led. Changes are afoot however, and the CBN has issued a circular on the regulations for new payment service banks,” the report further said.
It notes that two mobile operators have indicated that they plan to set up subsidiary companies to apply for the necessary licenses next year. It described this development as positive considering the fact that the very rapid expansion of the industry in Kenya has spawned a number of initiatives with a strong developmental angle such as the provision of low-cost solar power to off-grid communities in rural areas.
“This last area has become the darling of the private equity industry, DFIs and also philanthropists. One innovation was the sale in May 2017 of a government bond restricted to subscription by mobile, the first in Africa and, we think, globally,” they said.