PERSONAL NOTE TO THE NEW ECONOMIC ADVISORY TEAM

Dear Prof Doyin Salami, Chairman Economic Advisory Team,

I salute your passion for Nigeria and courage in accepting to serve on the economic advisory team to advise the President on the economy at this critical time.

As a concerned Nigerian playing in the private sector, I would like to highlight issues that I believe are pressing even though you may already have these issues captured from your broad knowledge and research of the Nigerian economy.

POLICY TRANSPARENCY

The number one issue I believe we need to tackle on the economic front is policy transparency. We need to be clear what direction the Government is moving. What economic model are we running — control-centred or market-oriented? Business-friendly or extortionist antagonist of business? What incentives are we creating and for whom?

Policy transparency is the number one attraction or put-off for investors (local and foreign). This therefore needs to be prioritized and delivered in the very short-term.

EXCHANGE RATE MANAGEMENT

Exchange rate management has been a major failure of this administration. It’s approach of using differential exchange rate for different sectors/transactions has not only created major distortion in the economy by incentivising rent-seeking arbitrage behaviour over and above productive activities but it has impacted investor confidence as this creates a lack of transparency.

The immediate priority is to unify the multiple exchange rate windows and in the medium term (18–24 months) to move towards a managed flotation of the Naira exchange rate as a measure to further boost market transparency.

SIMPLIFY THE TAX REGIME

Running a business full-time in the last four years has exposed me to a lot of the challenges facing small business in Nigeria. One big problem is multiple and indiscriminate taxation. Just last week, I understand a new tax was introduced to fund the Police Trust. Some states make this even more complicated by layering their own indiscriminate taxes, levies and charges.

Income tax, Consumption tax and Property tax should be the core of our taxation and should be all most individuals and companies have to deal with. Beyond this, we can have “incentive-taxes” that are designed to shape behaviour e.g. Emission Tax/Charge and Luxury tax. We should totally avoid arbitrary levies that may conflict of other objectives e.g. the recently introduced stamp duty charge on bank deposits which goes against the objective of driving merchants to cashless channels as each deposit now attracts a N50 stamp duty charge.

INSTITUTIONALIZING THE SANCTITY OF CONTRACT

We have made several mistakes relating to contracts which has given us a bad reputation as an investment destination. As a key objective of the economic plan will be attracting investments both to fund our infrastructure deficits and other public sector projects and also attracting investments into the private sector of the economy, it would be important to develop an executive bill that will improve the sanctity of contracts especially within the public sector and working with the national assembly to pass such a bill into law.

ALTER INTERVENTION MODEL

Where sectoral intervention becomes inevitable, we should alter the model and shift away from the current handouts focused approach. Handouts are not sustainable and some of the sectors are not responding to the money being thrown at them simply because the problem isn’t just about money.

We should rather seek to create and finance BUSINESS SYSTEMS. Some examples below:

· Creating a pull of funds to boost franchising as a way to drive retail business is far better and more sustainable than directly giving a number of independent retailers money and hoping they would pay back.

· Funding farming ecosystem through outgrower schemes and platforms such as Farmcrowdy is more sustainable than giving inputs or money directly to smallholder farmers.

· Disbursing micro-loans through established microfinance banks with necessary guidelines is far better than having government directly disburse money to citizens as with TraderMoni and its like.

The advantage of targeting business systems are numerous and include:

· Ease of management

· Increased success rate and sustainability as business systems deliver value beyond financing including training, market-access, branding, tested/proven processes, standards, etc.

· Improved transparency and ease of measuring the success of initiatives

CITIZEN IDENTITY AS A BASELINE FOR BETTER PLANNING

This is a medium-to-long-term objective but one that this team must help address. We need to fix our national planning problem and that starts with having baseline data for more scientific planning. We need to fix our national identity database issue and this should be fast-tracked by linking national identity registration to accessing government services, voter registration, asset registration, etc.

If you cannot register to vote or enroll your child/ward for free education or medical services and cannot register a car or property unless you have a NIN or legal resident’s registration ID, we would fast track registration for the national identity and improve the accuracy of that database.

EASE OF ACCESSING SECTORAL INCENTIVES

There are a number of incentives for businesses of all sizes and in different sectors. I know for instance that there are pioneer schemes for the information technology sector where I operate but accessing these incentives aren’t straight-forward even for the highly informed. When we make incentives complicated and difficult to access, then they cease to be incentives.

Just like taxes, we need to simplify our incentive systems and make the road to accessing them a level-playing field.

THE HARD DECISIONS WE NEED TO TAKE

1. We need to remove petroleum subsidy and we can do this without the feared political backlash by adjusting the income tax basis to put more money in the pocket of the low-income earners (less than N1m per annum) and small businesses (less than N25m annual revenue). Increasing tax-free allowances and/or reducing the effective tax rate at these levels of income will be one way of doing this. But petroleum subsidy should go like yesterday.

2. Civil service rightsizing is another hard decision that needs to be taken immediately and I consider this to be an economic decision because it essentially deals with the utilization of our hard-earned resources. Rightsizing does not necessarily mean we would end up with fewer people working for Government. Overall, we may end up with more people in the service of the Government, but we need the right people. The opportunities here are:

· Eliminate unnecessary roles (you don’t need a tea-boy/lady in an office that already has a PA or Secretary for instance, we can outsource janitorial services and get better results than having redundant cleaners that hardly do the cleaning job well)

· If we already have an agency in charge of Tropical Disease, why do we need another agency in charge of Trypanosomiasis with its own set of Directors, Deputy & Assistant Directors, etc.?

· The excesses eliminated in the waste described above can the compensated for by recruiting to fill critical vacancies in the Nigeria Police, Medical Personnel in Government hospitals, Teachers & Professors in schools.

3. Lastly, we must tax the informal sector. This is a hard decision to make especially for a populist Government but its an action we must take. Farmers were taxed and Cattle taxes were in place during the regional Government and it was during the second republic that populist politics led to the elimination of these taxes. Same goes for the traders that populate our markets. We cannot continue to put all of the burdens for taxation on the formal sector while the largest portion of our population basically lives largely without making its fair share of contribution.

I wish you and the economic advisory team Godspeed in your assignment and have the confidence that you will make us all proud and happy by the results you will deliver.

Best regards,

Rasheed Adegoke