An economic and financial expert, Mr Bismarck Rewane, has expressed disagreement with a call by the National Leader of the All Progressives Congress, Asiwaju Bola Tinubu, for the Federal Government to suspend the fiscal deficit limit imposed on it by law.
Tinubu had said the suspension of the five per cent deficit limit of the Fiscal Responsibility Law this fiscal year would enable the government to spend massively to stimulate the economy amid the COVID-19 crisis.
He also said the limit should be raised to 25-30 per cent to allow the government more room to make the minimum expenditures necessary to save the economy and the people.
According to him, any inflationary fears being harboured as a result of increased government expenditure will be minimal and nothing to be compared with the impending recession.
Rewane, who is a member of the Presidential Economic Advisory Council, said government spending alone would not be enough at this time of crisis.
He said, “Our fiscal deficit today, even under the new budget, is going to grow to N4.3tn. Our GDP is N177tn; five per cent of GDP is almost N8tn. So, there is still room of another N3tn. There is a reason for the limit. The Fiscal Responsibility Act does not allow government to impose a penalty on the future generations.
“I agree that during a recession or a slowdown, you need to increase the amount of government spending. But government’s investment is not a substitute for private investment; that is why I defer with Tinubu. The point is that private investment needs to be encouraged or incentivised. The government spending is in addition to private investment.”
Rewane said the CBN could lower interest rates, but raised concern about doing that “when your rate of inflation is already too high.”
Tinubu had suggested that the Central Bank of Nigeria should move to reduce interest rates to single digit.
However, the Chief Executive Officer, Economic Associates, Dr Ayo Teriba, agreed that the fiscal deficit limit should be suspended to enable the government rise up to the current emergency situation and rescue Nigerians’ livelihoods.
He, however, emphasised that the “extraordinary measures” should not go beyond the period of emergency.
“We have a lockdown that is imposed by a pandemic and the government should ensure that the citizens are protected from the hardships caused by the lockdown,” he said.
On interest rates, he said, “You can give money to people who need this money for a month or two. But I do think that lowering the monetary policy rate is beyond the powers of the CBN in that it’s likely to spill over into the foreign exchange market and cause disruptions in the foreign exchange market.”
A former Director-General, West African Institute of Financial and Economic Management, Prof. Akpan Ekpo, said government could increase the fiscal deficit limit and increase spending without going into further borrowing.
He said the government should reduce the cost of governance which he described as “too high”.
He said the money donated by the private sector should be used effectively towards curbing the economic hardship in the country, adding, “The government does not have to go and borrow.”
Reacting to the development, a Professor of Economics at the Olabisi Onabanjo University Ago-Iwoye, Ogun State, Sheriffdeen Tella, said that the private sector suffering liquidity crunch, time had come for government to provide the much needed fund to stimulate the economy.
He said, “The private sector is not producing and so it does not have money to spend. It’s the government that has to spend to stimulate the economy.
