Governors ask Buhari to take 33 steps to save Nigeria’s economy
Nigerian governors have advised the government led by President Muhammadu Buhari to take urgent action as part of coordinated efforts to instill fiscal discipline and prevent the nation from collapsing economically.
The governors made the proposal during a meeting with Mr Buhari last month, PREMIUM TIMES gathered from sources familiar with the details of the meeting.
This journal reported that the governors had advised the federal government to offer federal civil servants over the age of 50 a single retirement package for leaving the service.
They also urged the Federal Government to immediately end Central Bank of Nigeria funding of government fiscal spending and convert its N19 trillion debt into a 100-year bond.
Governors were concerned about the deteriorating state of the economy and the ripple effect on the nation ahead of the 2023 general election.
Earlier in the week, a PREMIUM TIMES analysis of Nigeria’s external reserves revealed the figures stood at just $15 billion, well below the $36 billion balance on gross external reserves claimed by the central bank. With the country spending 5.9 trillion naira on imports in the first quarter of the year, reserves of $15 billion would barely cover four months of imports.
Last week, details emerged that Nigeria’s surplus crude account balance had depleted significantly from $35.37 million to $376,655, leaving the country without buffers to stabilize the economy and its currency. . Yet another indication has emerged recently that the nation is broke as debt service exceeds income. According to the details of the 2022 fiscal performance report from January to April, Nigeria’s total revenue stood at N1.63 trillion while debt service stood at N1.94 trillion, this which shows a discrepancy of over N300 billion.
Here is a comprehensive list of measures proposed by governors as part of efforts to save the national economy and reduce the cost of governance. The list also contains the estimated savings for 2022 expected from the implementation of the proposed measures.
Governors advised President Muhammadu Buhari to:
A. Reduce FGN spending immediately (with estimated 2022 savings in brackets):
1. Eliminate subsidies/under-recovery of PMS – (6 trillion to 7 trillion naira)
2. Eliminate NNPC Federation Funded Projects – (300 Billion Naira)
3. Social Investment Program (SIP) and National Poverty Reduction and Growth Strategy (NPRGS) budgets at N200 Billion – (570 Billion Naira)
4. Eliminate FAAC extra-constitutional deductions – (100 Billion Naira)
5. Reduce SWV elements for SDG and NASS Constituency projects – (300 Billion Naira)
6. Reduce duplication (e.g. empowerment programs) and waste – (100 Billion Naira)
7. Reduce the 1 percent given to NASENI to 0.2 percent. Amend the law in the 2022 finance bill.
B. Reduce personnel costs of MDA FGs:
8. Provide federal civil servants over 50 (a) a one-time retirement package to leave the service – (350 Billion Naira) and employ at lower cost, more young people and graduate women with ICT complaints.
9. Begin Implementation of Updated Stephen Oronsaye Report – (N1 Trillion)
10. Accelerate the privatization of non-performing assets. (Billion Naira)
11. The 2023-2025 MTEF should be reviewed and updated to reflect the above expenditure management measures and the government’s commitment to restore fiscal discipline.
12. The planned 22% salary increase in 2023 should be reconsidered.
13. Reduce the budget deficit to a maximum of 2% of GDP in 2023-2025.
14. Overseas travel by MDAs including Independent Budget Agencies such as CBN, FIRS, NPA, NIMASA and NCC etc. must be suspended for at least one year.
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15. The Ministry of Foreign Affairs should not issue visa applications to foreign embassies for FGN officials and their families, unless expressly authorized by the Presidency.
16. Switch from state income tax to consumption tax:
17. With the introduction of the 3 percent federal income tax, state PIT should be abolished.
18. State sales taxes (10% flat rate) should be enacted for all 36 states and the FCT.
19. Increase VAT levels to 10% with a timetable to bring it between 15% and 20%.
20. Ensure the reintroduction and passage of VAT in the exclusive list.
21. End CBN financing of FGN expenditures and immediately convert the 19 trillion Naira Ways and Means into 100-year 1% bonds.
22. Introduce a Federal Personal Income Tax of 3% for all Nigerians earning more than N30,000 per month. – (100 Billion Naira)
23. People earning less than N30,000 per month, whether employed or not, including farmers and traders, must pay a monthly FPIT of N100.
24. The carriers and the NIMC should work together to ensure that this amount is deducted from consumer airtime and linked to the NIN and BVN.
25. Centralize collection of all federal oil and non-oil taxes in one agency, FIRS, while Customs, NPA, etc. assess and issue requests.
26. Improve offshore production of crude oil and gas.
27. Address persistent gas ownership issues in PSCs (eg Nnwa-Doro, OML 129). This will help position Nigeria to take advantage of gas needs in Europe.
28. Provide incentives and solve problems to accelerate the development of vandal resistant deep offshore fields like Bonga SW (Shell), Preweoi (Total), Zabazaba (ENI) and Owowo (Exxon).
29. Encourage (and pre-finance, if necessary) the rapid completion of the Dangote refinery to reduce future large outflows of foreign exchange.
C. Central Bank of Nigeria
30. Bank of Agriculture, Bank of Industry and Development Bank of Nigeria should be recapitalized
31. NIRSAL funds controlled by CBN should be redirected to development banks.
32: The CBN should be asked to focus on its core and statutory mandate of exchange rate management, interest rate management and inflation targeting. It should also be ordered to stop competing with development and commercial banks.
33. Subsidized CBN interventions in the real sector should cease and the relevant institutions should be recapitalized to provide these services.
The governors made recommendations on the CBN after determining that the naira exchange rate had deteriorated because:
I. The CBN has printed N19 trillion “Ways and Means” Naira for FGN expenditure contrary to CBN and Fiscal Responsibility Acts and in violation of the law.
ii. Trillions of naira chase a few trillions of dollars, putting pressure on foreign exchange reserves and the exchange rate.
iii. CBN’s “fixed exchange” position has discouraged foreign investment ($90 billion peak in investment commitments in 2018, to $20 billion in 2021) and diaspora inflows ($20 billion in 2022 to less than $17 billion in 2021)
iv. PMS subsidies under the guise of “under-recovery” wiped out virtually all increases in foreign exchange reserves.
v. CBN has resorted to the use of swaps, deferred LCs and other innovations to mask the actual levels of charges on our foreign exchange reserves – gross of $36 billion versus net of $15 billion at the end of June 2022.
vi. Exchange rate policy now favors consumption by the wealthy – cheaper medical tourism ($3 billion per year), education ($6 billion per year), and business and technical services like air remittances, etc. ($15 billion) in 2019.
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