Economist Urges FG to Reduce Cost of Borrowing

Hammed Shittu in Ilorin

Former Director General of the Nigerian Institute of Social and Economic Research (NISER) and a Professor of Economics at the University of Ilorin, Kwara state, Israel Olufemi Taiwo, has advised the federal government to ensure a drastic reduction in cost of borrowing.
He advised the government to always borrow at single digit of between zero and five per cent.

He also stressed the need for investment banking policy in the country so as to expand national output and promote economic diversification, by facilitating medium and long term capital.

Taiwo, gave the advice while delivering his 194th inaugural lecture, at the University of Ilorin, recently.
The titled of the lecture was: “Economic Policy Reset for Nigeria: A perspective”.

He said, “the revised cost of borrowing policy would promote profitable investment, increase production activities, improve job creation, promote the country’s competitiveness, raise national output and
absolute poverty.”
He added that, “high cost of borrowing undermines the production system and raises the size of the public sector relative to the private sector.

The don, said that the country’s fiscal system was distortionary and limited in scope to address interrelated problems of poverty and inequality in the country.

Taiwo, noted further that, both irregular wage adjustments and lack of clear-cut criteria for wage adjustments by successive governments had resulted in mixed development outcomes.

“On trade policy, there is very little to choose between import substitution and export-led strategies because of weakness in the production system.”
Accordingly, he urged the federal government to review the indirect tax system to ensure that luxury goods are taxed more heavily.

The economist also recommended the enactment of a law to harmonise the Excess Crude Account with the stabilisation component of the Sovereign Wealth Fund.

He added that the federal government should, “cut the monetary policy rate to single digit, which is the equivalent to a cut in the operating surplus of the Central Bank of Nigeria; accord priority to capital goods vis-à-vis consumer goods imports; migrate gradually from the schedular tax system to the global tax system to ensure equal treatment of a taxpayer’s income from all sources in line with international best practices.”

Other recommendations included institution of a progressive global tax system to ensure that the wealthy are taxed appropriately; redistribution of income and wealth more effectively through targeted government spending, in addition to the global system; improvement on the link between tax policy and the tax structure through tax studies; deepen economic planning in Nigeria and ensure that successive administrations reflect the long-run objectives of government in the structure of government spending and granting of fiscal incentives for key sectors and subsectors including large-scale agriculture, small-scale manufacturing and solid minerals.”

He added that “Nigeria’s man-made resource profile (technology, human capital, capital stock, financial resources, entrepreneurship and the governance system) is modest and needs to be scaled up to have an appreciable impact on the economy.”