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| CBN GOV EMEFIELE |
It
is very unfortunate to note that the Federal Government’s delay, reluctance,
refusal or even neglect to settle its huge indebtedness to domestic economic
agents, including contractors and others is one of the reasons the economy remains
comatose and the suffering in the land remains excruciating.
For
obvious economic and social reasons, such as addressing rising unemployment
rates, stimulating consumption and reducing the risk of bank failures, the government
ought to pay its debts but sadly and quite disappointingly, such wise counsel
remains unheeded.
Now that the economy has progressively transited from recession to depression
perhaps, the President Muhammadu Buhari-led government must stop to
acknowledge the loud and persistent call and take immediate action to
kick-start the economy with redemption of genuine local debts.
Given the recent report of the Central Bank of Nigeria (CBN) after its last
Monetary Policy Committee meeting that “Federal Government’s indebtedness to
the domestic economy was crippling economic activities and threatening the
health of the nation’s financial system”, the seriousness of the situation
and the need to tow the path of reason should dawn on the managers of the
economy.
The CBN, statutory banker and financial adviser to the Federal Government,
did not stop at pointing out the implications of not settling the debts, it
also advised the government to “urgently assess the extent of its
indebtedness to domestic economic agents and develop a framework for
securitising the debts in order to settle its outstanding domestic
contractual obligations which cut across all sectors of the economy”.
Besides the above, the CBN governor, in seeming exasperation, further advised
the government to support the monetary policies with effective implementation
of fiscal policies, as there was nothing more the monetary policy side of the
equation could do to cause a stimulation and growth of the economy.
No doubt, the absence of a clear fiscal policy and an economic direction for
the country has been one defining attribute of the current government which
all Nigerians have lamented.
Indeed, if the apex bank was offering all the above advice and suggestion to
the government for the first time, it can be accused of not having been alive
to its duties and responsibilities. This is because; the attitude of the government
in not taking the settlement of its debt obligations seriously and the
attendant negative implications on the economy should have been a crusade for
the CBN which has long been hammered by some stakeholders.
However,
it is reasonable to conclude that for the CBN to have gone public with its
position suggests that its silent observations or suggestions might not have
received the attention of the
appropriate authorities and mindful of the risks which continued delay in
paying the debts portend and the blames that may arise, it decided to go
public.
Of course, public officials must consciously restrain themselves from communications
that, no matter how factual and well intentioned, may send the wrong signals
to the not- so-sophisticated public.
For
instance, if the CBN governor is understood, rightly or wrongly, to be
overwhelmed by what is happening in the economy that he has been charged as
an expert to find solutions to, what would he or anyone else expect from the
ordinary citizens?
The governor might have been conveying CBN’s advice and suggestions to the
appropriate authority without eliciting expected actions or reactions, but it
is not part of his charge to publicly throw-up his hands in surrender or
defeat. What is expected of him is to find tolerable ways to secure not just the
attention of the President but also his full understanding and appreciation
of the matters on the ground with a view to achieving desired actions.
The
unacceptable alternative, as was in the reported case, is to give the
impression that the economy has become intractable. And, because many people will
believe the governor, stakeholders’ negative reactions may ensue and worsen
the already bad situation.
That stated, further delay by the government to commence aggressive
settlement of its debts to domestic economic players, after learning the
harms the outstanding indebtedness are causing the society and the economy,
will amount to a destructive insensitivity on the part of the government. It
will certainly mean that financial institutions that had advanced money to
those government’s creditors will remain at grave risk of distress as the
level of their non-performing credits (whether sub-standard, doubtful or
lost), become exacerbated.
Indeed, the CBN has warned that the level of bad credits in banks is rising
dangerously. If at this time of economic depression a bank in Nigeria becomes
distressed or fails, the economic and social consequences will be explosive.
The CBN has recommended that the government should consider securitising its
debts to raise money with which to meet its already outstanding debt
obligations.
Yet
another alternative that should be considered is borrowing from the international
financial markets where there are some low-cost funds with generous
concessionary repayment terms. A combination of these two options can also be
considered.
Importantly, the reported huge credit balance in the Treasury Single Account
(TSA) provides a good starting point pending conclusion of other feasible
arrangements.
Finally, preventing the looming socio-economic dangers in today’s Nigeria
requires the Buhari-led administration’s immediate injection of huge amount
of funds into the economy.
While the government may wish to get involved in new projects, settlement of
its domestic indebtedness in all sectors of the economy must be given top
priority.
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