Thursday, 29 September 2016

Recession: Anambra’s unique strategy

By Theophilus Ezebunwa

NO government wishes for recession, but it happens from time to time in many economies. How each government responds to it separates great leaders from ordinary ones. For example, American President, Franklin D. Roosevelt’s greatness in history rests essentially on his New Deal which got the United States out of its humongous economic crisis of 1939. One great lesson which economists and national leaders learnt from Roosevelt’s New Deal is that massive expenditures on infrastructure go a long way to stimulate the economy. This is basic Keynesian economic theory.
However, with the rise of conservative governments in Britain in 1979 under Margaret Thatcher and in United States in 1980 under Ronald Regan, the International Monetary Fund (IMF) in particular became dominated by the brand of monetary economics popularly known as the Chicago School of Economics which is almost synonymous with Professor Milton Friedman, the 1976 Nobel prize laureate. The IMF caused Third World nations hit by recession and other serious economic crises to adopt contractionary economic policy, which resulted in massive cuts in health and education budgets and, of course, in job losses. Social unrest became the order of the day in almost all developing countries which approached the IMF for a bailout.
Against this background, one is delighted that Nigeria is responding to the current recession induced by the crash of crude oil prices, perhaps in the Keynesian tradition. After months of announcement by Vice President Yemi Osinbajo who leads the Economic Team that the government would stimulate the economy through massive spending, Finance Minister, Mrs Kemi Adeosun, announced on Friday, September 16, 2016, that N360 billion would be released within one week for the implementation of capital projects.
The amount brings to N770bn the releases made by the government since this year for infrastructure development, as N420bn had earlier been made available to appropriate ministries, departments and agencies (MDAS) for this purpose. Consequently, Nigerians have been expecting various state governments to announce their own plans to make the people grapple with the economic crisis which is the worst in Nigeria in decades.
Rather, what we have been seeing from state governments are measures which are reminiscent of the failed IMF prescription, measures like threats of reductions in workforces and reductions in salaries.
Perhaps the only exception is Anambra State where Governor Willie Obiano on Tuesday, September 20, announced a N20 billion economic stimulus package. The package touches on tax/levy/fee relief for especially the most vulnerable in society; employment of hundreds of people in primary healthcare and road maintenance; automatic employment of university graduates from the state who have disabilities; massive support for small and medium businesses, as they already employ 800,000 persons; provision of N20m directly to each of the 177 communities in the state to spend on any project it desires, bringing the total amount to N3.6b; provision of N225m to the three Youth Empowerment Scheme centres in the state for fish farming as well as rice and garri processing. In addition, the Anambra Small Business Agency (ASBA), which is the organisation behind the eminently successful Anambra Rice project since its creation only two years ago, will be given at least N3b to loan to key sector investors at 9% interest rate per annum, that is, less than one third of the prevailing credit rate in Nigeria.
It is ABSA which made available to Anambra small scale investors N1.5b out of the N2b from the Central Bank of Nigeria for each state which is able to meet its strident standards. It is unfortunate that most states have not been able to access these funds because of their inability to meet the appropriate criteria.
It is important to emphasis the importance of Anambra State’s payment relief to the weakest in society. The governor announced that cart pushers and vulnerable people will no longer pay tax. He also announced the abolition of certain fees imposed illegally and surreptitiously by corrupt revenue agents who exploit weak and ignorant persons.
Special steps are taken the world over to protect the poor. Even in extreme capitalist societies, the poor are subsidized through what is known as cross-subsidy. The wealthy pay higher taxes, levies and fees than the poor, and it is the difference in pay which is used to compensate those who provide services to ensure that they do not sustain undue losses which could them out of business. For example, in a place like Lagos, the cost of land registration in Ikoyi, Victoria Island and Lekki Peninsula inhabited by the wealthy is higher than that of Ajengule, Ajangbadi and Mushin where struggling Nigerians live.
It is a pity that in times of recession, many governments around the world tax the poor unduly in a desperate effort to raise revenue to meet their obligations. But this practice is wrong not not only wrong morally but also economically. Dr Pius Okigbo, Africa’s most scintillating economist, remarks in his book, Essays in the Public Philosophy Development, that any government which pursues economic policies without regard to the social consequences will only have itself to blame. Therefore, Governor Obiano deserves our commendation for demonstrating acute sensitivity to the marginalized. Pope John Paul the Second would call this care an example of solidarity with the human family.
Other state governments should borrow a leaf from Anambra State and unveil their economic stimulus packages in terms of release of funds for capital projects which drive the economy but also welfare packages to cushion the severe effects of recession on the poor in our society. There is no reason why other state governments cannot do it. After all, the monthly allocation from the federation account to Anambra is quite modest because it is not an oil bearing state. Indeed, as Senator Ben Murray-Bruce of Bayelsa State has brilliantly noted, there is something special about Anambra State which should challenge other states in Nigeria.

Ezebunwa is of the University of

 Nigeria, Nsukka.

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