Low oil price: FG, states to hold retreat on alternative to devaluation

Crude Oil

The Federal Government and 36 states governors will soon hold a retreat to consider alternatives to devaluation of the naira. Meanwhile, Governor Nasir el-Rufai of Kaduna State and his ogun State counterpart, Ibikunle Amosun, have supported the decision of the Federal Government against further devaluation of the naira.

The two governors also called on state governments to reduce the size of government and less dependence on income from the federation account, in order to survive the era of low oil price. Speaking on the second day of The Economist Summit on Nigeria, the two governors said the sharp decline in oil revenue in the last two years had had severe impact on state governments, necessitating belt tightening measures and increased internal revenue generation. The second day of  the summit, entitled, “Dawn of a New Era,” featured a keynote panel with Governors Amosun, El-Rufai and Umaru Tanko Al-Makura of Nasarawa  State discussing impacts of the drop in oil revenue on the states as well as policies needed to encourage increased investment and sustained growth.

On naira devaluation

 El-Rufai said: “In my life time, I have seen three rounds of devaluation of the currency but right now, I am against it. I have clearly not seen the benefits of devaluation to us. Is parallel market the only way to solve the scarcity problem? I don’t think so.  The only value of devaluation is the removal of corruption in the distribution system. “We will be having a retreat soon to look at other options other than the orthodox system of devaluation. We cannot continue to subsidise the elite. The elite did not vote us. On his part, Governor Ibikunle Amosun said: “I support President Muhammadu Buhari on the issue of devaluation. It is not good to devalue naira when we are still import dependent nation. Almost everything we import. So, let those who are importing source for dollar. We should have a secondary foreign exchange market, if you like call it parallel market.” 

States should reduce size of govt & increase IGR

 According to El-Rufai, “the Federal Government has been supportive but at the end of the day, the states must help themselves. The states must shrink their size of governments. “You cannot run a government that you cannot afford. You cannot exist as a government whose only function is to pay salaries of a very small percentage of the population. It is unjust “So state governments and the Federal Government must undergo significant belt tightening with a view to reducing cost and finding ways of enhancing revenue.”

 Need to review the constitution 

Governor Al-Makura of Nasarawa State stressed that there was need to amend the nation’s constitution so states could have power to make some economic decisions “He said: “Certain amount of power should be devoted to states to be able to take decisions. Government policies, both federal and states, are intended towards certain category of people. I believe in all-inclusive policy. Government should carry all deprived people along. Government should come strong on inclusiveness.” Governor El-Rufai also called for review of the constitution to allow state governments to be more involved in the mining sector. He said: “We need to amend the constitution to give greater freedom for mining. Agriculture is largely a state and local government matter. Constitution needs to be amended to have a true federalism.”

CBN should reduce interest rate

Governor El-Rufai also stressed the need for a low interest rate regime in the country, saying: “The biggest problem destroying the economy is the level of interest rate. With the level of interest rate, no one can borrow at 20 per cent and have real business. We must make policy decisions that will make interest rate to near zero. The CBN should either bring down interest rate or one day we will do it for you.”

Measures to increase IGR and attract investments

The three state governors also spoke on the efforts of their governments to increase internally generated revenue and attract private sector investments. Governor Amosun said: “In terms of diversification of the economy, we in Ogun State have started investing in the agricultural sector. If you look at our five cardinal programmes, we do not say we just want to implement an agricultural programme. What we are implementing is agriculture that will lead us to industrialization because gone are those days when you engaged in subsistence farming. “Now we are not just talking mechanized farming, but also farming that will take full advantage of the value chain that agriculture offers. And what do we mean by that? It means that whatever we grow, we must process; whatever we process, we must market once the products are ready. So, it involves a lot of things like the presentation, the packaging, marketing, etc.” Governor El-Rufai stated: “In addition to reducing cost, we have to increase revenue of the state through the collection of tax. Our hope is that we would be less dependent on the federation account. We need to attract the private sector. We have some companies that are interested to come to our state and we are doing everything possible to attract them. The action of paying tax is part of the citizens responsibility, and so we are widening the tax base.” On his part, Governor Al-Makura said: “We have opened up opportunity where women will access government support. In Nasarawa, we have deficiency in education but are working towards addressing that. “We are building markets where women will secure employment. We embarked on biometrics which enabled us reduce ghost workers.”