On Tinubu economic reform conundrum

The administration of President Tinubu is desperate to balloon the government revenue basket in order to accomplish its dream of one trillion U.S dollar economy. But paradoxically, it seeks to do this without creating value and its shortest route is to indiscriminately extract the existing money from citizens across all income levels through subsidy withdrawals, […]

The administration of President Tinubu is desperate to balloon the government revenue basket in order to accomplish its dream of one trillion U.S dollar economy. But paradoxically, it seeks to do this without creating value and its shortest route is to indiscriminately extract the existing money from citizens across all income levels through subsidy withdrawals, VAT and other punitive tax regimes. Progressive taxation is usually designed to incentivize new money through extant value creating endeavours, while the current government’s so-called tax reform is viciously focused at transferring existing monies from citizen’s wallets to government purse through the medium of excessive financialization of the economy where bank profit is ballooning to the detriment of the real economy through warehousing government funds as foremost revenue collected.

Only recently since the coming of President Tinubu administration, some major banks have crossed the one trillion-naira threshold in profits, while the real sector consisting of manufacturing, agriculture, small and medium business holdings struggle to stay afloat. The revenues that the government has been extracting from citizen’s wallet and even designing further ways to extract more is not only a regressive approach but a lazy one that has enormous consequences for negative growth and economic contraction in the near future.

If not for poor or no thinking at all, there are prospective ways to earn new money with ramification for both value creation and economic expansion. There are low hanging fruits for new money and Nigeria’s aviation and maritime sectors are among the most lucrative in the world and the fact that Nigeria has no presence in the sectors are not only a matter of national shame but a pathetic neglect of major source of new money that would not only contribute to the government revenues but expand liquidity of the economy.

With a relatively completed airport remodelling and acquisition of a modern deep seaport, Nigeria should be able to participate visibly in these major sectors, not only for national pride and the optics, it generates for the national image but also for the money to be made. Efficient management of national asset as Air and shipping lines are measures of national competence and any nation which seek global reckonings cannot possibly ignore and Nigeria’s obsessive desire of a regional power status would remain vitiated by government inability to own and efficiently manage critical national assets, whether it is power, telecommunication, aviation or maritime sectors. But beyond significant national symbols, the aviation and maritime sectors where Nigeria has some measure of comparative advantage due to the size of the market, absence of public sector participation because of gross incompetence of successive government, especially since the return of civil rule in 1999, constitute a flagrant neglect of the creative revenue stream with all its implications for job creation and other positives in the value chain.

Aviation contributes about 6 percent to Ethiopia’s GDP and support more than 1.5million jobs, while maintaining 19,000 direct jobs. Having strategically embedded itself as the aviation hub in Africa, and following its recent launch of her grand renaissance dam with a potential, turn the country to sub-regional energy hub. Addis Ababa will not have to make very loud statement about her regional influence, because the sheer success of the state in such strategic sectors of the economy would naturally recommend her competence in international affairs and guarantee a place on the table.

With a functional deep sea port and sizable airport infrastructure, Nigeria maritime and aviation can generate new money and spur the creation of substantive value in the economy, if the Nigeria state through the government make investments and follow up with efficient management. Meanwhile, the desperate revenue drive of the president Tinubu has not translated to visible investment in areas with prospective accelerated economic activities and returns. In a bid to turn a 230 million population economy into a mere financial hub with all the consequential hazards both in the short and long term, banks and other financial institutions have become cash warehouses generating massive profits not on rational investment returns but by just cash holdings. The tax structure that has made a recycling of existing money into an economic virtue has been hailed as innovation. But sitting over a recycled money, extracted from the wallet of the citizens and warehoused in banks are never value creation, let alone addition, and driven the government on a binge on external borrowings thereby worsening the economic situation and more dangerously, dooming the prospect for recovery in the long term.

The central key category in the outcome of any economic management and construction is decisively, the quality of life of the people. Every economic reform has some costs but its trajectory must be sufficiently revealing of its potential outcomes, otherwise it becomes sheer esoterism that make sense only to a few people that design and manage it and exclusively for their own interest.

President Tinubu economy reform plan needs a wholesome revisit because its current shape and trajectory have greater prospect to worsen the Nigeria’s economic condition than to relieve it of the structural dysfunction and misalignment of its prospects and fundamentals. Economic constructions especially of structural realignment are too serious to be combined with effusive political goal- scorings, when the imperative is rather of sober reality checks with the usual early returns of negatives are to be eventually overcome with hard work and persistence.

 

Mr Charles Onunaiju wrote from the Federal Capital Territory of Abuja.