Asuri Vasudevan (Contributor)
Vasudevan was Executive Director, Reserve Bank of India between 1996-2000.
Having worked in Abuja, Nigeria in the prestigious Central Bank of Nigeria (CBN) for four and a half years between December 2006 and end-June 2012 with a break in- between, I have come across a number of professionals and ordinary people who were highly motivated and well-meaning. I did sense that in a fundamental sense, the cultural differences between Nigeria and many Asian countries are not really significant. But economic ideologies and performances differ sharply. Nigerians are aware of it. They too want to grow fast along with price and financial stability. This innate desire is manifest in the periodic reports on improving economic performance. For example, in the early 21st century there was a report for growth and stability which became the basis for many development projects from 2003 onwards. In March of this year, the new economic recovery and growth plan (ERGP) was unveiled in the context of the recession in the economy for five quarters beginning 2016. It is a well-written report and is worth careful reading.
The ERGP identified two issues that are well known to all the scholars on Nigerian economy: excessive consumption and crude oil exports. What is new, according to ERGP report, is that implementation is at the core of delivery strategy. Implementation is to be done by different Ministries and Departments of the Federal Government. At the Presidency, there will be a Delivery Unit.
The intent of the report is very good. And implementation and delivery—the two words much used in the report—are undoubtedly critical for the ERGP to succeed, assuming that all the numbers given in the report are feasible. Prima facie, the two words seem to weave a magic formula. But one needs to go a little deeper. One should recognize the imperative need for unleashing elaborate accountability mechanisms for implementation to proceed successfully. Each Ministry and Department would have implementation groups which, going by past experience, would be very large because each sitting of the group would entail some material gains for members. Implementation groups will obviously submit reports to the persons who would be heading the Ministries/Departments. The lags here could be long. If implementation faces obstacles or faces constraints because, say, of lethargic response from another Department or Ministry that may have to contribute its mite to the implementation, then the exercise would be further delayed. How does one resolve this governance issue? Through inter-Ministerial coordination groups? Or let reports go to respective Ministerial Heads to give their final decisions? Let us assume that the entire process goes smoothly and reaches the Delivery Unit. What does it do? How accountable would it be? Where will the buck stop?
These questions may sound like those of a skeptic but the institutional and governance systems need to be thoroughly checked and if need be overhauled for their effectiveness. Administrative reforms are critical for the purpose. So is the need for political will and commitments. The last mentioned, however, cannot be taken for granted. After all, everyone knows how much time is spent in passing annual budgets. On some occasions, it has taken almost five and odd months from the beginning of the fiscal year in question.
There are a few more observations that need to be made on the ERGP. How good are the projections for the three-year medium-term period? Real GDP growth is expected to leap from -1.54 per cent in 2016 to 4.8 per cent by 2018 and further to 7.00 per cent by 2020. In the terminal year, agriculture growth is projected at 8.37 per cent which will perhaps be the highest in recent years. Industry will record 8.02 per cent from a negative of 10.13 per cent in 2016. Both the sectoral growth projections need to be carefully looked into, after duly taking into account base effects. How much of public investment would go into these sectors, given the ERGP’s emphasis on the necessary investment for environmental restoration in Niger delta area? How does gross saving rate (gross savings to GDP) go up from 11.29 per cent to 21.31 per cent by 2020—almost double—within a matter of three years is not properly explained. There would be a deceleration in consumption by little over 10 percentage points between 2016 and 2020, giving a return to the classical concept of ‘forced saving’ that has no place in most modern societies. Current account deficit in 2016 of 1.84 per cent of GDP is projected to turn out to be a surplus of 2.89 per cent by 2020. This number is lower than the projected excess of saving over investment of 3.97 percentage points in 2020. How does one account for this discrepancy?
It is with regard to oil GDP that one has to ask a few questions with reference to the developments in the international arena. Many observers believe that alternatives to oil have grown recently and would have accelerated growth in near future. Shale oil is only one of the alternatives. There are efforts at generating wind energy and solar energy in large quantities particularly in the light of the climate change concerns and overall global agreement for moving away from fossil fuels to non-fossil ones. Oil GDP growth of 4.45 per cent projected for 2020 from a negative of 15.41 per cent could, therefore, turn out to be an unfeasible proposition.
One wishes that there are more intense studies in the case of Nigeria about sustainable fiscal and external account positions, given the uncertainty about the rise in crude oil demand and strong global recovery. Such sustainability studies may require extension of the medium-term period to 5 years or 7 years essentially because the main challenge of economic diversification in favour of goods and services that would face both domestic and foreign demand, cannot be met within a period of three years.
One only hopes that the country would not this time be like Tennyson’s brook that proceeds on the same path for ever, with clear knowledge that men may come and men may go.
Mumbai
August 15, 2017
