The July 31st President Bola Ahmed Tinubu’s national broadcast; a defense to May 29 inaugural speech pronouncement “subsidy is gone”. The president defending his decision of subsidy removal, packaged a broadcast message addressing the impact his decision has been creating on Nigerians.
In this broadcast, couple of plan and policy to cushion the effects the policy have on the Nigeria overall economy outlook were analyzed. It is quite interesting to see the elaborate explanation given on the government objective in achieving the goal of better economy by the Tinubu led administration.
Frankly, the subsidy decision was faulted, in appraisal to its economic implications. However, the deed has been conducted by Tinubu, the attitude of “suffering government smiling” as the Nigerian street language has aided the smooth implementation of subsidy removal. And the civil society organization awareness as well as the understanding of the disadvantage of the subsidy to considerate number of persons coupled with the national assembly involvement has made this policy less complicated.
Obviously, it was not covered in the budget and that shows the president can not help it unless on the basis of supplementary budget plan. Whereas, the Tinubu we knows will not borrow money to do supplementary budget. Knowing this, his predecessor obtained 500m dollars loan in the twilight of his administration and an accumulated debt on the country with little or nothing in the national treasury.
Going by Tinubu’s antecedents, his mode of government and administration revolves more around taxation. This can be traced back to his term in office as the Lagos state governor (1997-2007). His success hinged on the revenue generated from taxes and dues. On that note, I would critique his decision on spending 75 billion Naira on manufacturing sector.
The credit facility targeted at manufacturing sector to strengthen and increase capacity to expand and create good paying jobs is a matter of concern in the time when big multinational companies with direct foreign investigations (FDI) in Nigeria are folding and going out of market due lack of ease of business; company like GalaxoSmithKline (GSK) of 51 years of business in Nigeria are moving out on the basis of unfavorable government policy how will these 75 manufacturing companies targeted will survive, make profit and repay loans in the stipulated time.
Going by the business ideology, it is profit oriented once it’s not a public corporation that is specially established to provide public service without minimizing profit.
An evaluation of naira yearly devaluation show in the past 5 years, naira value has falling ……………, this means that if the situation persist, the manufacturing industry that will be given loans will might be able to have a successful story to tell. Imagine receiving the loan when the 1 dollar is 850 and after one month dollar rises to 1000 or more while some or most of the material going to production are at dollar exchange, how will the financial feasibility done before obtaining loan work? Or each expertise that might or would be paid in dollars be accounted for? This is one angle.
Because interest rate hold essentially on the issue of loan and as a economy indicator will affect the overall behavior of the economy, it is expedient we find the amount that will be paid as interest on this loan by individuals organization. Using simple interest, whose interest is (1=prt), where p is principle (Total loan), R is rate ( ratio of percentage) and T is time ( the years it will take to pay back loan)
Interest = percentage rate / 100 9/100 =0.09. T = 60months /12months =5years.
Interest therefore= I =PRT=1,000,000,000×0.09×5= 450,000.
In sum, 450,000 interest will be paid in 5 years time and breaking it down to monthly repayment of 60 months is 450,000/60 which equal 7,500,000 and 90,000,000 on yearly basis by the various institution. This is somewhat flexible, however the case of it enabling environment with ease of business comes in place. A thought for another day.
– Akuboh Ahmed
Prince Abubakar Audu University Anyigba, Kogi State.
