Does the President Need Emergency Powers to Pull the Economy Out of Recession?, By Ibrahim Sanyi-Sanyi
A report published by The Nation newspapers on Monday, August 22, 2016 on the plan by the Federal Government to seek emergency powers for the president – based on a proposal from the economic team headed by Vice President Yemi Osinbajo – has made headlines in the news media and would continue to dominate national discourse for some couple of months to come. The proposed action-plan on the economy is expected to shore up the value of the naira, create jobs, boost foreign reserves, revive the manufacturing sector and improve power supply with the aim of pulling Nigeria out of recession, which some analysts project will be prolonged and deep, with severe consequences on sources of livelihood, security and national stability.
The report has it that an executive bill titled ‘Emergency Economic Stabilisation Bill 2016’ is being packaged and will be presented to the National Assembly when the two chambers resume from vacation on September 12. The bill is expected to grant the president sweeping powers to circumvent some extant laws and use executive orders to roll out an economic recovery package within the next one year.
Specifically, the bill will seek to:
1. Abridge the procurement process to support stimulus spending on critical sectors of the economy;
2. Make orders to favour local contractors/suppliers in contract awards;
3. Reduce the process of sale or lease of government assets to generate revenue;
4. Allow virement of budgetary allocation to projects that are urgent, without going back to the National Assembly;
5. Amend certain laws, such as the Universal Basic Education Commission (UBEC) Act, so that states that cannot access their cash trapped in the accounts of the Commission because they cannot meet the counterpart funding, can do so; and
Curiously, The Nation has been in the forefront of the media campaign to ensure the smooth sail of the planned bid to concede broad emergency powers to the president; and so far, the news medium is doing a good job in that regard. But then, a very important legislation such as the one expected to grant wide emergency powers to a president who already wields awesome authority will raise the eyebrows of discerning citizens. First, this is the second time in the annals of Nigeria’s democratic experiment that such a request will be put across as a bill and presented to the National Assembly for enactment. The first time was 34 years ago, under President Shagari, when Nigeria was faced with a similar economic crisis and the federal government was forced to take immediate action to protect the balance of payments and revamp the economy.
The Economic Stabilisation (Temporary Provisional) Bill 1982 was passed into law. The Nigerian military that ousted Shagari in a putsch claimed that the Stabilisation Act had failed, with the inflation rate above 30 percent and the foreign reserves falling to a $2.85 billion low – a figure which could barely support one month’s imports. Therefore, it is normal for Nigerians to harbour fears – genuine or unfounded – about the risks and consequences of granting additional powers to an already powerful president at the expense of the time-honoured doctrine of separation of powers and legislative scrutiny.
Secondly, the antecedents of the president as a person with a military background and who was once the head of a junta does not help matters. Many, under the present democratic rule, would be suspect of a hidden motive and will definitely loathe having an all-powerful C-in-C operating with diluted checks from the legislature.
Third, the simmering crises of confidence between the Presidency and the Senate/National Assembly leadership due to accusations and counter-accusations on the ‘padding’ of the 2016 Budget on one hand and the tribulations of the Senate President at the Code of Conduct Tribunal over false asset declaration and the forgery of the Senate Rules, on the other hand, could be pushed to new frontiers when the executive bill is laid before the Red Chamber. Only recently, the president of the Senate made a scathing accusation of a ‘cabal’ running a ‘government within the government of Buhari’, a charge that was swiftly denied by the Presidency. It is only natural for Senator Bukola Saraki and his supporters in the Senate to become apprehensive of this type of bill which seeks to curtail their powers in favour of the powerful executive, which they accused to have been hijacked by a ‘cabal’.
Finally, the performance of the Economic Management Team (EMT) does not inspire the confidence of some Nigerians who believe that it was under its watch that the foreign reserves were depleted by about $8 billion in just one year, while it pursued the unfortunate attempt to maintain a strong naira against obvious market realities, forex scarcity that led to closure of businesses and loss of thousands of jobs, high inflation, recession and of recent, an hike in the interest rate which will add to the cost of borrowing by businesses and result in further loss of jobs. Already, the foot-dragging in decision-making and policy announcement has created uncertainties in the markets and eroded investors’ confidence, leading to lull in these markets even after the implementation of a flexible exchange regime. Most patriots will be constrained to ask: How can the EMT – which elected to live in denial instead of being creative with policy options to hold the economy, long enough, from drifting into recession – plan to pull us out of the economic downturn within a period of one year if the president it reports to is granted emergency powers?
Now, looking at the objectives of the proposed Emergency Economic Stabilisation Bill 2016, one will not help but interrogate the need for passing that draft piece of legislation into law, instead of a push by the executive to address the shortcomings identified in five extant laws through amendments.
Shorten Procurement/Contracting Cycle and Fasten Contract Execution
The Public Procurement Act (PPA) 2007 does not allow for contract award earlier than six months after procurement/contracting decision has been taken, as there is provision for a mandatory advertisement of the contract for six weeks. This makes the procurement cycle to be unnecessarily long. Also, it was argued that the ceiling on 15 percent of contract sum for Advance Payment/Mobilisation provided in the PPA is inadequate and cannot mobilise contractors to sites and ensure timely execution and delivery of projects, given the pace the government wants to move in turning the economy around and in the provision of critical infrastructure. However, the same law provides for restricted tendering, direct procurement, and emergency procurement under Sections 40, 42 and 43 which could be explored to fast-track contract awards without passing the rigours of the tendering process. Moreover, the relevant sections of the PPA can be amended if it is established to be inadequate – including increasing the Advance Payment to the proposed 50 percent of the contract price under the new bill – and a proposal to that effect can be presented to the National Assembly for passing into law.
Meanwhile, the provisions of PPA 2007 and Nigerian Oil and Gas Industry Content Development Act 2010 are expected to ensure the adequate participation of local contractors in public procurement and contracting. The two laws can be amended to bring them in line with current realities. Therefore, the proposal to favour the local contractors/suppliers in contract awards, as contained in the Stabilisation Bill, is inexpedient.
Boosting Foreign Reserves and Strengthening the Naira
One of the interesting and significant aspect of the proposed bill is the plan to ease the long and cumbersome procedure for the sale of public assets. It is projected that the government intends to lease or sell about nine public assets in order to generate about $50billion which will be used to shore up the nation’s foreign reserves (which stood at an 11-year low on August 19, 2016 at $25.7 billion) and the value of the naira against the US dollar after the 86 percent and 50 percent drops in Foreign Portfolio Investments (FPI) and Foreign Direct investments (FDI) caused by severe forex shortages in the market. This is a commendable effort that will boost balances of the capital receipts in our reserves which will effectively improve forex availability/supply and ease the pressure on the dollar demand over the medium term. With $50 dollars in its kitty from proceeds of lease or sales of public assets, the country will have respite over its current forex crisis with the economy wet in dollar liquidity. Furthermore, lease/sales of these assets will attract further forex inflows in the form of working capital etc. into the economy.
But the question that occupies the mind is: which of the public assets are up for lease or sale? Already, government interests in PHRC, KRPC, WRPC, NPDC, NGC, PPMC, Carlson/Bermuda Ltd, Hyson (Nig.) Ltd NPA and FAAN which were listed for privatisation (divestment of 60 percent equity – 40 percent and 20 per cent to strategic investors and individual investors respectively) in the First Schedule of the Public Enterprises (Privatisation and Commercialisation) Act (PEA) 1999. The law has not been repealed yet and the enterprises listed have not been privatised. Are these the assets to be leased or sold? Are there others? You bet! In any case, the disposal of public property is dealt with under the provisions of PAE 1999 and Section 55 of the PPA 2007. The Federal Government can actually push for the amendments of these extant laws to enable it abridge the period of time needed to lease or sell its assets, instead of stacking the need for this into a new draft legislation, amongst sundry amendments, under the proposed Stabilisation Bill.
Virement of Budgetary Allocation to Projects without Recourse to the National Assembly
Procedure for virements is provided under Section 27 of the Fiscal Responsibility Act 2007. It requires the minister of Finance to recommend for the approval of the National Assembly virements from sub-heads under heads of account without exceeding the amount appropriated to such head of account. This section can be amended to the provide enablers for across-the-capital-heads virements to allow for movement of votes to critical projects that are needed to revamp the economy with the understanding of the National Assembly being the body responsible for appropriation under our laws. Conceding the emergency powers over virement to the executive will seriously impair the powers on appropriation that is vested in the federal legislature by the 1999 Constitution (as amended).
Improve Access to UBE Funds by States
The requirement for 50 percent contribution of project costs by state governments wishing to draw from the Federal Government grant as stipulated by Section 11(2) of the Universal Basic Education (UBE) Act 2004 is identified as a major constraint preventing many states from accessing the UBE funds. With most states now cash-strapped, the bill seeks to reduce states contribution to 10 percent to allow access to about N58 billion held under UBEC’s coffers. But this also can be handled with amendment to the UBE Act instead of embedded under the proposed Stabilisation Act. Besides, many people will be flabbergasted as to how unlocking N58 billion to states – some of which cannot pay regular salaries – is listed as one of the priority areas that will assist to pull Nigeria out of recession. In fact, some will see it as a means to carry the state governments along to get their support for the proposed bill.
Ease of Doing Business in Nigeria
There is no need to grant Mr. President emergency powers on the plan to get government agencies to fast track their operations – by eliminating the current bottlenecks such delays at the airport and duplication of agencies’ screening of incoming passengers – so as to enable foreign investors come into the country, make consular offices to issue visas within 48 hours and allow visitors, especially tourists, the option to pick up visas at the entry point. And also to compel some agencies of government like the CAC, NAFDAC and others to improve on their turn around operation time for the benefit of business. This also applies to the proposed trucking of liquefied gas from production facilities to power plants to enable them generate electricity – even though it is not cost-effective and an efficient means of transporting volumes of gas needed to generate power. We require synchronisation of systems and processes across the agencies responsible for passenger screening at the border entry points, as well as reforms in those organisations. Alternatively, the creation of a new national border service agency will address most of the identified challenges.
The Joint Tax Board (JTB) is in a better position to address the issue of multiple taxation which affects foreign business and prevents potential investors from coming into the country. On the other hand, Section 59(1) of the 1999 Constitution (as amended) deals with the imposition, increase, reduction, withdrawal or cancellation of tax, fee or duty. Therefore, this section of the Constitution will have to be amended before the president can be granted any emergency powers over tax matters.
Conclusion
The proposed Stabilisation Bill will continue to generate keen interest and intense discussions from scholars, economists, CSOs, the Organised Private Sector (OPS) and public commentators. It is my hope that in the end of it all, informed public opinion on the merits or demerits of the draft law will guide acceptance or rejection of the bill. Nigeria has been to this political economic cusp in 1982 and the Stabilisation Act was enacted to address the economic crises of that time. Let’s learn from past experience, benchmark with similar learnings from other countries and appraise the performance of the Economic Management Team to address areas of weakness in order to arrive at a comprehensive fit-for-purpose solution that will assist the country combat recession. Conferring the powerful executive with more powers will come at a great price to due process, fiscal responsibility, legislative scrutiny and check and balances. For me, each case should be treated on its own merit. We have extant laws that guide economic management which we can amend, on need basis, to suit the circumstances we have at hand.
Ibrahim Sanyi-Sanyi, an economic expert, wrote from Abuja.
A report published by The Nation newspapers on Monday, August 22, 2016 on the plan by the Federal Government to seek emergency powers for the president – based on a proposal from the economic team headed by Vice President Yemi Osinbajo – has made headlines in the news media and would continue to dominate national discourse for some couple of months to come. The proposed action-plan on the economy is expected to shore up the value of the naira, create jobs, boost foreign reserves, revive the manufacturing sector and improve power supply with the aim of pulling Nigeria out of recession, which some analysts project will be prolonged and deep, with severe consequences on sources of livelihood, security and national stability.
The report has it that an executive bill titled ‘Emergency Economic Stabilisation Bill 2016’ is being packaged and will be presented to the National Assembly when the two chambers resume from vacation on September 12. The bill is expected to grant the president sweeping powers to circumvent some extant laws and use executive orders to roll out an economic recovery package within the next one year.
Specifically, the bill will seek to:
1. Abridge the procurement process to support stimulus spending on critical sectors of the economy;
2. Make orders to favour local contractors/suppliers in contract awards;
3. Reduce the process of sale or lease of government assets to generate revenue;
4. Allow virement of budgetary allocation to projects that are urgent, without going back to the National Assembly;
5. Amend certain laws, such as the Universal Basic Education Commission (UBEC) Act, so that states that cannot access their cash trapped in the accounts of the Commission because they cannot meet the counterpart funding, can do so; and
6. To
embark on radical reforms in visa issuance at Nigeria’s consular
offices and on arrival in the country and to compel some agencies of
government like the Corporate Affairs Commission (CAC), the National
Agency for Foods Administration and Control (NAFDAC) and others to
improve on their turn around operation time for the benefit of business.
The
proposed law is in a draft form and a copy of the proposal has not been
presented to President Buhari yet. This fact was buttressed in a
statement credited to VP Yemi Osinbajo’s media aide, Mr. Laolu Akande.
The Economic Management Team is still considering several policy options
and measures to urgently reform and revitalise the economy.Curiously, The Nation has been in the forefront of the media campaign to ensure the smooth sail of the planned bid to concede broad emergency powers to the president; and so far, the news medium is doing a good job in that regard. But then, a very important legislation such as the one expected to grant wide emergency powers to a president who already wields awesome authority will raise the eyebrows of discerning citizens. First, this is the second time in the annals of Nigeria’s democratic experiment that such a request will be put across as a bill and presented to the National Assembly for enactment. The first time was 34 years ago, under President Shagari, when Nigeria was faced with a similar economic crisis and the federal government was forced to take immediate action to protect the balance of payments and revamp the economy.
The Economic Stabilisation (Temporary Provisional) Bill 1982 was passed into law. The Nigerian military that ousted Shagari in a putsch claimed that the Stabilisation Act had failed, with the inflation rate above 30 percent and the foreign reserves falling to a $2.85 billion low – a figure which could barely support one month’s imports. Therefore, it is normal for Nigerians to harbour fears – genuine or unfounded – about the risks and consequences of granting additional powers to an already powerful president at the expense of the time-honoured doctrine of separation of powers and legislative scrutiny.
Secondly, the antecedents of the president as a person with a military background and who was once the head of a junta does not help matters. Many, under the present democratic rule, would be suspect of a hidden motive and will definitely loathe having an all-powerful C-in-C operating with diluted checks from the legislature.
Third, the simmering crises of confidence between the Presidency and the Senate/National Assembly leadership due to accusations and counter-accusations on the ‘padding’ of the 2016 Budget on one hand and the tribulations of the Senate President at the Code of Conduct Tribunal over false asset declaration and the forgery of the Senate Rules, on the other hand, could be pushed to new frontiers when the executive bill is laid before the Red Chamber. Only recently, the president of the Senate made a scathing accusation of a ‘cabal’ running a ‘government within the government of Buhari’, a charge that was swiftly denied by the Presidency. It is only natural for Senator Bukola Saraki and his supporters in the Senate to become apprehensive of this type of bill which seeks to curtail their powers in favour of the powerful executive, which they accused to have been hijacked by a ‘cabal’.
Finally, the performance of the Economic Management Team (EMT) does not inspire the confidence of some Nigerians who believe that it was under its watch that the foreign reserves were depleted by about $8 billion in just one year, while it pursued the unfortunate attempt to maintain a strong naira against obvious market realities, forex scarcity that led to closure of businesses and loss of thousands of jobs, high inflation, recession and of recent, an hike in the interest rate which will add to the cost of borrowing by businesses and result in further loss of jobs. Already, the foot-dragging in decision-making and policy announcement has created uncertainties in the markets and eroded investors’ confidence, leading to lull in these markets even after the implementation of a flexible exchange regime. Most patriots will be constrained to ask: How can the EMT – which elected to live in denial instead of being creative with policy options to hold the economy, long enough, from drifting into recession – plan to pull us out of the economic downturn within a period of one year if the president it reports to is granted emergency powers?
Now, looking at the objectives of the proposed Emergency Economic Stabilisation Bill 2016, one will not help but interrogate the need for passing that draft piece of legislation into law, instead of a push by the executive to address the shortcomings identified in five extant laws through amendments.
Shorten Procurement/Contracting Cycle and Fasten Contract Execution
The Public Procurement Act (PPA) 2007 does not allow for contract award earlier than six months after procurement/contracting decision has been taken, as there is provision for a mandatory advertisement of the contract for six weeks. This makes the procurement cycle to be unnecessarily long. Also, it was argued that the ceiling on 15 percent of contract sum for Advance Payment/Mobilisation provided in the PPA is inadequate and cannot mobilise contractors to sites and ensure timely execution and delivery of projects, given the pace the government wants to move in turning the economy around and in the provision of critical infrastructure. However, the same law provides for restricted tendering, direct procurement, and emergency procurement under Sections 40, 42 and 43 which could be explored to fast-track contract awards without passing the rigours of the tendering process. Moreover, the relevant sections of the PPA can be amended if it is established to be inadequate – including increasing the Advance Payment to the proposed 50 percent of the contract price under the new bill – and a proposal to that effect can be presented to the National Assembly for passing into law.
Meanwhile, the provisions of PPA 2007 and Nigerian Oil and Gas Industry Content Development Act 2010 are expected to ensure the adequate participation of local contractors in public procurement and contracting. The two laws can be amended to bring them in line with current realities. Therefore, the proposal to favour the local contractors/suppliers in contract awards, as contained in the Stabilisation Bill, is inexpedient.
Boosting Foreign Reserves and Strengthening the Naira
One of the interesting and significant aspect of the proposed bill is the plan to ease the long and cumbersome procedure for the sale of public assets. It is projected that the government intends to lease or sell about nine public assets in order to generate about $50billion which will be used to shore up the nation’s foreign reserves (which stood at an 11-year low on August 19, 2016 at $25.7 billion) and the value of the naira against the US dollar after the 86 percent and 50 percent drops in Foreign Portfolio Investments (FPI) and Foreign Direct investments (FDI) caused by severe forex shortages in the market. This is a commendable effort that will boost balances of the capital receipts in our reserves which will effectively improve forex availability/supply and ease the pressure on the dollar demand over the medium term. With $50 dollars in its kitty from proceeds of lease or sales of public assets, the country will have respite over its current forex crisis with the economy wet in dollar liquidity. Furthermore, lease/sales of these assets will attract further forex inflows in the form of working capital etc. into the economy.
But the question that occupies the mind is: which of the public assets are up for lease or sale? Already, government interests in PHRC, KRPC, WRPC, NPDC, NGC, PPMC, Carlson/Bermuda Ltd, Hyson (Nig.) Ltd NPA and FAAN which were listed for privatisation (divestment of 60 percent equity – 40 percent and 20 per cent to strategic investors and individual investors respectively) in the First Schedule of the Public Enterprises (Privatisation and Commercialisation) Act (PEA) 1999. The law has not been repealed yet and the enterprises listed have not been privatised. Are these the assets to be leased or sold? Are there others? You bet! In any case, the disposal of public property is dealt with under the provisions of PAE 1999 and Section 55 of the PPA 2007. The Federal Government can actually push for the amendments of these extant laws to enable it abridge the period of time needed to lease or sell its assets, instead of stacking the need for this into a new draft legislation, amongst sundry amendments, under the proposed Stabilisation Bill.
Virement of Budgetary Allocation to Projects without Recourse to the National Assembly
Procedure for virements is provided under Section 27 of the Fiscal Responsibility Act 2007. It requires the minister of Finance to recommend for the approval of the National Assembly virements from sub-heads under heads of account without exceeding the amount appropriated to such head of account. This section can be amended to the provide enablers for across-the-capital-heads virements to allow for movement of votes to critical projects that are needed to revamp the economy with the understanding of the National Assembly being the body responsible for appropriation under our laws. Conceding the emergency powers over virement to the executive will seriously impair the powers on appropriation that is vested in the federal legislature by the 1999 Constitution (as amended).
Improve Access to UBE Funds by States
The requirement for 50 percent contribution of project costs by state governments wishing to draw from the Federal Government grant as stipulated by Section 11(2) of the Universal Basic Education (UBE) Act 2004 is identified as a major constraint preventing many states from accessing the UBE funds. With most states now cash-strapped, the bill seeks to reduce states contribution to 10 percent to allow access to about N58 billion held under UBEC’s coffers. But this also can be handled with amendment to the UBE Act instead of embedded under the proposed Stabilisation Act. Besides, many people will be flabbergasted as to how unlocking N58 billion to states – some of which cannot pay regular salaries – is listed as one of the priority areas that will assist to pull Nigeria out of recession. In fact, some will see it as a means to carry the state governments along to get their support for the proposed bill.
Ease of Doing Business in Nigeria
There is no need to grant Mr. President emergency powers on the plan to get government agencies to fast track their operations – by eliminating the current bottlenecks such delays at the airport and duplication of agencies’ screening of incoming passengers – so as to enable foreign investors come into the country, make consular offices to issue visas within 48 hours and allow visitors, especially tourists, the option to pick up visas at the entry point. And also to compel some agencies of government like the CAC, NAFDAC and others to improve on their turn around operation time for the benefit of business. This also applies to the proposed trucking of liquefied gas from production facilities to power plants to enable them generate electricity – even though it is not cost-effective and an efficient means of transporting volumes of gas needed to generate power. We require synchronisation of systems and processes across the agencies responsible for passenger screening at the border entry points, as well as reforms in those organisations. Alternatively, the creation of a new national border service agency will address most of the identified challenges.
The Joint Tax Board (JTB) is in a better position to address the issue of multiple taxation which affects foreign business and prevents potential investors from coming into the country. On the other hand, Section 59(1) of the 1999 Constitution (as amended) deals with the imposition, increase, reduction, withdrawal or cancellation of tax, fee or duty. Therefore, this section of the Constitution will have to be amended before the president can be granted any emergency powers over tax matters.
Conclusion
The proposed Stabilisation Bill will continue to generate keen interest and intense discussions from scholars, economists, CSOs, the Organised Private Sector (OPS) and public commentators. It is my hope that in the end of it all, informed public opinion on the merits or demerits of the draft law will guide acceptance or rejection of the bill. Nigeria has been to this political economic cusp in 1982 and the Stabilisation Act was enacted to address the economic crises of that time. Let’s learn from past experience, benchmark with similar learnings from other countries and appraise the performance of the Economic Management Team to address areas of weakness in order to arrive at a comprehensive fit-for-purpose solution that will assist the country combat recession. Conferring the powerful executive with more powers will come at a great price to due process, fiscal responsibility, legislative scrutiny and check and balances. For me, each case should be treated on its own merit. We have extant laws that guide economic management which we can amend, on need basis, to suit the circumstances we have at hand.
Ibrahim Sanyi-Sanyi, an economic expert, wrote from Abuja.
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