A former deputy governor of the Central Bank of Nigeria (CBN), Dr. Obadiah Mailafia, on Monday, released bombshell as he disclosed that not less than 20 per cent of the currency circulating in Nigeria is fake.
Mailafia made this known at the venue of a public hearing by the National Assembly on the implementation of the N7.298 trillion 2017 budget estimate by the federal government. Mailafia in a paper presentation titled: “Public Finance in the Context of Economic Recession: Innovative Options,” said it was saddening that the concerned authorities appear to be oblivious of the gravity of fake currency circulation, which he noted, was highly detrimental to the growth of the economy.
According to him, when fake currencies of that magnitude circulate, original currencies become scarce, noting that “bad money chase away good money.” He described recession as a situation where the gross domestic product (GDP) output falls more than two quarters, while describing recession as the situation where GDP growth falls for more than five, six, seven years.
The ex-CBN official attributed the current recession in Nigeria to a myriad of factors such as global fall in the prices of crude oil, dwindling foreign reserve, weakening of the Naira, negative growth and existing gap in public policy. Other factors, he listed, were poor banking practices, stock market crisis, speculations, regulatory failure, corruption and fraud and weak macro-economic management.
Mailafia in an attempt to stress that Nigeria is not the first country to witness recession, alluded to the American depression of 1929, describing it as one of the worst in world history.
He recalled that though the crisis was caused by stock market crash, it was compounded by government’s myopic nature and its failure to apply the right policy to address the problem. According to him, the depression in US was worsened more by increase in the interest rate, instead of lowering it as he warned the federal government and financial regulators against toying with high interest rates, pointing out that it will further compounding the economic woes. He also warned against increase in tax, suggesting that the federal government should rather drive for more income tax by getting more people to pay, instead of increasing it because it will further compound growth and investment.
He, therefore, advised the legislature and executive to deploy the current budget process to stimulate the economy, focus on factors that can rejuvenate growth, stabilise the exchange and interest rate and provide a stimulus package that will ensure a synergy between the economic growth and budget package.
He said it was unfortunate that CBN allowed the MMM initiative to operate in Nigeria, a situation he said could be further detrimental to an already crippled economy in view of Nigerians’ gross involvement in the Ponzi scheme through withdrawal of monies in the bank and subsequent investment in the scheme, describing the scheme as risky for banking business.
He further advised the government to reposition key institutions, invest in key infrastructure that can create employment to teeming youth on the streets, reinvent railway operations and reduce taxation. In his own submission, Minister of Agriculture, Chief Audu Ogbeh, traced the forex crisis to 1986 when Naira was first devalued by the military regime of General Ibrahim Babangida, saying since then, the Naira has been devalued annually. Ogbeh also supported views on lower interest rate, saying unless economists and bankers collaborate on a reduced interest rate, “disaster lies ahead for Nigeria and Nigerians.
Representative of Senator Udoma Udo Udoma, who is the Minister of Budget and National Planning, Mrs. Zainab Ahmed, said the 2016 budget failed to achieve its target because of certain factors. According to her, GDP growth fell from below 4.39 per cent target to 1.55 per cent; production volume from targeted 2.2 million to 1.81 million; inflation rose from projected 9.8 per cent to 17.8 per cent; exchange rate depreciated from projected N197 to $1 to N305/$, while revenue target of 3.8 per cent only yielded 2.117 per cent. She added that oil revenue declined sharply, while fall in oil price and shortage in oil production compounded the situation.
She said the 2017 budget was designed to achieve economic recovery, stimulate growth, pull Nigeria out of recession and sustain macro-economic growth, adding that the budget was planned to expand the frontiers of privatepublic partnership (PPP), create jobs through small and medium enterprises (SMEs), create wealth and foster social safety for the poor and vulnerable in the society.
She further explained that this year’s revenue projection of N4.942 trillion is 28 per cent higher than N3.85 trillion in 2016 with 11 per cent projection on recovered loot; 4.9 per cent etc. When he arrived the venue of the event later, Udoma said in line with submission of Mailafia that the government had no plan to increase tax and VAT rates but rather seeking to broaden collection base.
“I will like to talk about taxation. A view was expressed that we should not increase taxes. We should broaden the collection of taxes, that is, precisely what is in the budget. There is no increase in VAT, there’s no increase in company income tax, there’s no increase at all in taxes,” he said.