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Now that we have
chosen our president for the next four years, we will do well to think
through what we can expect to feature on his to-do list, every day,
until this stage is reached again at the start of the next election
cycle. Ordinarily, it would help to start with the different planks on
the party platform of our preferred candidate. Trouble is, even when
these were bruited about on the campaign trail, they did not amount to
much. Even as sound bites, these policy platforms always sounded
hollow. Apparently, all the candidates were sure that no section of the
electorate was going to interrogate their manifestoes (and the numbers
behind them) too seriously.

Still, there are
reasons why any election pledge in this country should be taken with a
liberal dollop of salt. Across sectors, the economy’s need is so
substantial and so fundamental. Especially with infrastructure, where
promises to remedy the dearth must contend with the 48 months lag
between the contract award ceremonies and when the projects come on
stream. In the absence of low-intensity, high-impact solutions, it thus
means that any genuine investment today, will only begin to yield
fruits after the first four-year term. This is one of the more perverse
incentives of representative democracy: it forces executive focus on
near-term upside gains with medium-term downside consequences.

This does not,
however, obviate the need for such investment, or the equally important
need for the incoming government to deliver on a few low-hanging
fruits. The Petroleum Industry and Nigerian Sovereign Investment
Authority bills are two versions of the latter type of investment.
Because of the unconscionable delay in passing the former bill,
investment in the upstream sector of the oil and gas industry has
tailed off considerably. Desirable though it might be to cap the oil
wells as part of a radical response to the failure of our fiscal
federalism, we cannot run away from the size of hydrocarbon export
revenues’ contribution to the national budget.

Prompt passage of
the bill is also consistent with acknowledging what the International
Monetary Fund (IMF) describes in its latest comments on the global
economy, as “long implementation lags for discovery, exploration, and
capital investment in minerals industries”. In addition, there are
significant gains to be had in the current environment. The signals
from current elevated market prices for crude oil would seem to
indicate that, along with the pressures from new demand from newly
industrialising economies in Asia, there have been significant
“downshifts in trend (crude oil) supply growth”.

Moreover,
macroeconomic policy has fallen behind the curve over the last two
years. Despite strong terms-of-trade gains, as commodity prices firmed,
we have not accumulated reserves as rapidly as would have been
expected. Instead, the central bank has run down these inflows in
support of an inflexible exchange rate regime. Has this moderation of
domestic exchange rate movement been beneficial to strengthening
domestic demand? Another question touched by the domestic demand worry
is, “What is holding back private investment in this economy?” Soft
final domestic demand is one answer. But there’s another argument. If
our policy is to support the growth of private investment, shouldn’t it
aim to boost net capital formation within the economy, while reducing
the domestic cost of doing business?

The needed
structural reforms go further than this though. The central bank’s
quasi-fiscal interventions in the economy in the last two years have
been anomalous. Returning the funds on to the public balance sheet is
essential for fiscal transparency and in order to clean up the balance
sheet of the Central Bank of Nigeria (CBN). The trouble with this
course of action is that the public debt profile is rising. Adding
debits from the CBN’s balance sheet would further reduce government’s
room for fiscal manoeuvre. Nonetheless, fiscal consolidation is key to
the economy’s medium-term fiscal outlook. Rising inflation is one (but
scarcely the only) reason. Fiscal support was necessary to keep the
banks from going under and to a lesser extent to keep domestic demand
ticking away despite second-round pressures from the global financial
and economic crisis.

But the banks have begun to post healthy results. And it is doubtful
(because of the infrastructure constraints) that domestic demand did
indeed respond to the fiscal stimulus. Thus, it is important for a
positive medium-term fiscal outlook to return immediately to the oil
price-based fiscal policy rule!