By Arize Nwobu
MON, JUNE 10 2019-theG&BJournal-Economic sabotage by citizens is a deliberate act to flout economic policies of a country which results to undermining, weakening or destroying the economy. It is one of the worst things to happen to a country because the economy is the lifeblood of a people. A booming economy is the delight of citizens while a sabotaged and depressed economy is a reproach. An undermined economy can hardly grow and develop optimally which can result in a vicious cycle of poverty, outbreak of social vices and insecurity which hinders investment and perpetuates the vicious cycle.
In an article entitled, ‘’Protecting the Economy- Role of CBN’’, published in the July 2017 edition of ‘The Nigerian Stockbroker’, the official magazine of the Chartered Institute of Stockbrokers (CIS), I had written among other things, that the Nigerian economy could qualify as one of the most sabotaged economy in the world, and the sabotage was on all fronts and perpetuated largely by Nigerians and sometimes in collusion with foreigners.
Some of the perpetrators include many businessmen and women including those who would obtain waivers and rake in stupendous profits but would not pay commensurate taxes. Former Minister of Finance, Kemi Adeosun had noted that, ‘’it is a pity that Nigeria has one of the lowest tax regime ratio globally at six per cent the only country that is lower than us is Oman. We have so many wealthy entrepreneurs who have managed to develop habit of not paying tax, we need to correct that.’’
Tax influences employment, household income which in turn impact consumer spending and investment. To not pay tax is to undermine the economy by fueling unemployment and constraining investments the reason governments all over the world take it seriously.
Other economic saboteurs include some government officials at Ministries and Agencies who circumvent and countermine state policies for selfish gain and smugglers of goods and collusive law enforcement agents at border posts and ports.
Smuggling is one of the serious problems facing the Nigerian economy which has contributed to its stunted growth. Greed for wealth, ignorance and lack of patriotism have been identified as major causes of smuggling. The Nigeria Customs Service defined smuggling as ‘’trafficking in prohibited or restricted goods, use of inappropriate routes and ports, false declaration of and concealment of goods, willful underpayment of Customs duties, forging of Customs documents and touting in Customs goods and documents.’’
In a report, World Bank had noted that N750billion worth of different goods are smuggled into Nigeria through Benin Republic alone every year, with uncollected taxes and custom duties which hinder economic growth. It noted that $400million representing about 25 per cent of the total current annual revenue collected by the Customs is lost through smuggling across borders. Also, the Nigerian Textile Manufacturers’ Association (NTMA) reportedly noted that Nigeria losses $325million yearly due to evasion of Customs duty and Value Added Tax by smugglers of textile materials.
According to experts, smuggling destroys the local economy by impeding local production, competition and growth of economy and leads to lay-offs, bankruptcies, aggravation of poverty and even destruction of health through the importation of expired and fake drugs.
Smuggling countermine CBN policies aimed at boosting local production, the reason the apex bank recently declared ‘war’ on smugglers. Recently, CBN Governor, Godwin Emefiele had noted that CBN would call for and investigate the accounts of any company suspected to be involved in smuggling and dumping to determine how they sourced foreign exchange and would tag ‘’money laundering’’ on such company.
He said, ‘’we will tag you an illegal importer of foreign exchange into Nigeria and we will write to all Nigerian banks and tell them to close all the accounts of this company in Nigeria, and all the accounts of top management of this company in Nigeria, because those top management members know that what they are doing is illegal, they have to pay a price for it so that people can learn to obey and respect economic policies of the country.’’
It is remarkable that CBN has continued to think outside the box in evolving policies aimed at improving the economy with some positive results. In a recent televised broadcast, notable economist and Chief Executive Officer, Financial Derivatives Company, Bismark Rewane, said there was a ‘’big upswing’’ in the country’s trade balance between 2014 and 2019.
Trade balance is the difference between exports and imports. According to Rewane, the trade balance in 2014 was a negative N6billion and N23.5billion in 2019. He did not give further insights for the ‘’big upswing’’ which may be partly connected with CBN’s exclusion of 41 items from the interbank foreign exchange market which has helped to reduce the import bill.
Out of 19 economic indicators in the review period, the economist noted that 11 returned negative and 8 positive. The positive include the external reserves which increased from $34billion in 2014 to $45billion in 2019, Ease of Doing Business which improved from 47 points in 2014 to 52 points in 2019 and power generation which improved from 3790 in 2014 to 4,016 in 2019.
The negatives include external debt which rose from $9billion in 2014 to $25billion in 2019, the buffers(difference between external reserves and external debt) which decreased from $24billion in 2014 to $19billion in 2019 and the Misery Index (measured by the sum of inflation, unemployment and lending rates, minus year-on-year per capita GDP) which increased from 38.7 per cent in 2014 to 54.57 per cent in 2019 because of increased unemployment plus underemployment which also increased from 21.9 per cent in 2014 to 43.2 per cent in 2019.
The economy has been noted to remain on the tough and rough path with fragile growth which according to Rewane is just returning to 2.03 per cent from 1.9 per cent. Barring global imbalances which often destabilize the economy because of over dependence on oil over the years, it is anticipated that existing CBN policies including the anti smuggling, Real Sector Support Facility (RSSF), Anchor Borrower’s Programme (ABP), exclusion of 41 items from the interbank foreign exchange market, reduction of the Monetary Policy Rate (MPR) and concerted efforts by the fiscal authority, will help to stimulate further growth in the medium to long run.
Nwobu, a Business Journalist and Chartered Stockbroker wrote via arizenwobu@yahoo.com Te: 08033021230
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