The primary underlying principle of a social contract in a modern democratic dispensation is that of equality of all persons.
Instructively, the wider the social inequity, the greater also will be the level of national instability, and the more restrained will be that nation’s economic growth trajectory. Consequently, it becomes inexplicable that some government policies and initiatives should facilitate the prosperity of a favoured sub-group at the expense of the vast majority.
Curiously, projects and policies overtly intended to improve mass social welfare have often transformed to a bonanza for a select few, while the majority remain victims of such exploitation. Presidential import waivers are good examples of such misguided government interventions. However, in spite of the gross abuse associated with import waivers, no beneficiary of waivers has ever been formally reprimanded for improper conduct!
The damning revelation from partial waiver on fuel prices is another example of how a handful of Nigerians can collaborate with government officials to rip off the treasury!
Regrettably, those who facilitated or approved the fraudulent applications for subsidy payments have not suffered any overt sanction, and probably never will; after all the former CBN Governor and the auditors, who gave banks clean bills of health prior to the banking meltdown have also presumably enjoyed waivers, as none of them apparently suffered any sanctions. Indeed, the same officials, who presided over the mess, were retained to also ‘sanitise’ the system!
The plea bargain is another dimension of the waiver system, which protects the rich and powerful at the expense of the masses; several political office holders, who recklessly abuse their offices, ultimately go scot-free after refunding peanuts, to avoid prosecution or the need to repay billions of looted funds!
The interventions of the CBN and AMCON in the banking sector also serve the same purpose as waivers; the promise that the injection of trillions of naira public funds would reposition the banks to actively support and energise the real sector has remained largely unfulfilled. Whether or not all the banks are now truly sound remains controversial, but the positive trading reports currently posted may be evidence that the banks have prospered in spite of their inability to support the real sector, and instigate increasing employment opportunities.
Curiously, the greater part of banks’ profits are still derived from the huge interest payments on government’s borrowings to the same banks bailed out with public funds!!
The waiver ‘racket’ has now found fertile grounds in the capital market; the unfettered opportunities for investors to borrow at over 20 per cent in order to acquire the price-manipulated shares of lending banks was primarily responsible for stock market crisis in 2008. Worse still, it has become evident that most of these margin loans were grossly under-collateralised, in contravention of the provisions of the Investments and Securities Act.
Inexplicably, none of the 84 stockbrokers identified by both AMCON and SEC as guilty of this infraction will be prosecuted! Curiously, these offenders are now adjudged worthy of debt waivers by none other than the Finance Minister and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, who appears eager to consolidate her image of willfully giving away public funds!!
Although AMCON purchased the stockbrokers’ toxic assets at a discounted price of about N42bn, in reality, the current value of the underlying assets or collaterals is only about N19.6bn according to the Honourable Minister! Consequently, AMCON’s over N2 trillion incursion in the money market may, in reality also, be worth less than N1 trillion at current valuation; thus, AMCON may ultimately have flushed another N1 trillion public funds down the drain!
Since the public did not participate in the profits of these stockbrokers when the going was good, one wonders why AMCON should forego N22.6bn of its asset base as debt forgiveness to speculators, who willfully engaged in the stock market casino, with the full knowledge that the equity they purchased lacked the fundamentals to justify their inordinately high prices. There is undoubtedly the moral hazard that this type of waiver will send the wrong signal to stock market operators, that government would underwrite future reckless or unethical market behaviour.
According to Okonjo-Iweala, the cancellation of the stockbrokers’ debt of N22.6bn is primarily aimed “at giving life to our capital market, as it would ‘remove’ the heavy burden (of debt) to allow stockbrokers to fully operate and reenter into the market with more investments and make the market more vibrant”. It is not yet clear how the reentry of the 84 stockbrokers will reenergize the market as, they certainly cannot bring fresh capital into the market with their current zero liquidity base.
Nonetheless, in view of the constitutional provisions on Appropriations, the National Assembly may still have to consider whether or not the Honourable Minister has the powers to waive this magnitude of debt without legislative approval!
In addition to the debt waiver, the Minister also announced the elimination of stamp duties and VAT on stock market transaction fees. Curiously, while operators in the real sector have ceaselessly decried the multiple taxes on their depleting incomes without any sympathetic response from government, the Minister has, with this measure, exempted commissions earned on traded value of shares (stock market gambling) and stamp duties on transaction fees from VAT payments. How this will positively impact the life of the poor is still unclear.
Paradoxically, while the ‘gambling’ proceeds in the stock market are now exempted from VAT, the government remains determined to increase VAT rate above five per cent in spite of its adverse impact on inflation and competitiveness of made-in-Nigeria products.
However, the attractiveness of equities in the Nigerian Stock Market will continue to slip, if the industrial landscape continues to contract, and ultimately, there may be more stockbrokers than stocks, for sale in the market!
In contrast, it is more plausible that reduction in multiple taxation and a reprieve of N22bn for Small and Micro Businesses, which inevitably failed under the yoke of over 70 per cent annual interest rates charged by micro-finance banks, would certainly have induced a more positive knock-on effect on employment and the economy.
However, reduction in rate of inflation and a stronger naira remain the most potent waivers for sustaining enduring economic growth and social welfare; instructively, however, such waivers cannot materialise with our permanent burden of a cash surfeit economy instigated by CBN’s substitution of naira allocations for dollar denominated revenue.
By Henry Olujimi Boyo
