Date Published: 03/22/10
The “Sylva Stimulus Package”: Catalyst For Development By Salami Tajudeen
Human life is an extension of the principles of nature, and human civilization is a venture extrapolated out of human natures: man and his natural potential are the root of the entire human domain. The great task of all philosophizing is to become competent to interpret and steer the potential developmental forces in nature and in the human condition, both of which are prodigiously fatalistic. I believe that the sole purpose of any government is to reduce human suffering, protect the vulnerable and push forward the frontiers of civilization.
In 2009, the International Monetary Fund (IMF) reported that the global economy is in a severe recession inflicted by a massive financial crisis and an acute loss of confidence. Economic activity slowed in many advanced economies in the face of tightening credit conditions, with advanced economies falling into mild recessions by the middle quarters of 2008. This led to marked decline in global trade, foreign direct investment and drastic fall in international flows of finance.
The global financial crisis has led to a reduction in the growth rate of the world ’ s economies, resulting from lower demand for commodities, especially, crude oil. While speculative behaviour and investment activities helped buoy up crude oil prices internationally in the first half of 2008, the fallen consumers ’ and producers ’ confidence in advanced and emerging economies had a negative impact on crude oil prices by the second half of the year. Crude oil prices have declined from record highs of about US$147/pb in July, 2008 to current prices of about US$78.61/ barrel1, reflecting the major global downturn in demand. Consequently, the aggregate revenue available for distribution to the three tiers in the last quarter of 2009 fell short of the projected estimate of 4.88 trillion by a staggering 19% which is about N0.9 trillion.
In addition, the global financial crisis has resulted in foreign portfolio investment withdrawals from the Nigerian Capital Market in order to service financial obligations. Total financial inflows to Nigeria between 2007 and 2008 increased by 21%, but is estimated to have reduced by 38.6%3 between 2008 and 2009. Consequently, the All Share Index which grew over the years from a value of 12,137 in 2002 to 66,371 in March 2008, with a market capitalization of about N12.64 trillion, fell to 23,003 points in February, 2010, with a market capitalization of N5.55 trillion because of the meltdown4. The global financial crisis also impacted non-oil revenues from Value Added Tax (VAT), Company Income Tax (CIT), and Customs and Excise Duties due to its effects on GDP, international trade producer and consumer confidence. In Nigeria, the Banking sector also witnessed severe shocks, with reverberating effects.
Governments across the globe has initiated sustainable measures mitigate the effect of economic bleeding. Some of these strategies include public capital injections and an array of liquidity facilities, monetary easing and fiscal stimulus packages. Specifically, governments of many developed countries have provided significant fiscal stimulus support to the various sectors within their economies. These include the following:
Expenditure Stimulus Package : This includes increased expenditure in infrastructure, providing protection for vulnerable groups, by strengthening unemployment benefits (Canada, Russia, the United Kingdom, the United States, and Turkey), cash transfers to the poor (Korea), support to children (Australia and Germany) and pensioners (Australia and Canada). Furthermore, countries are also stepping up support for small and medium-sized enterprises (SMEs in Korea), strategic or vulnerable sectors, such as forestry and construction (Canada and Germany), for energy efficient buildings and agriculture (Russia).
Revenue Stimulus Package: This includes lowering taxation and social security billion U.S economic stimulus package, which was signed into law February 17th 2009 by President Barack Obama of the United States contains numerous tax provisions, including $282 billion in tax cuts, $650 million to educate vulnerable populations, including low-income individuals and people with disabilities in small scale enterprises.
Capital Injections: Many countries have recapitalized their banks. For the advanced G-20 countries, the average outlay to date is projected at 3.2 percent of GDP, with considerable variation across countries (ranging from 4.6 percent in the United States to none for Australia and Spain). Among smaller advanced economies, Austria, Belgium, Ireland, and the Netherlands have announced large programmes, ranging from 3 ½ to 5 ½ percent of GDP.
Asset Purchases and Direct Lending by the Treasury : Governments and some central banks have provided substantial direct loans and have purchased illiquid assets from financial institutions. Amounts involved range widely, with the United Kingdom, Japan and Norway accounting for over 10 percent of GDP. The advanced G-20 average is 4.4 percent of GDP. Other countries that have made appreciable advances in vocational education include Belgium, France, Romania and Germany.
The Federal Government has taken several measures to cushion the impact of the crisis. First the Federal Government set up a Presidential Steering Committee on the global economic crisis in January 16, 2009 to articulate specific strategies to mitigate the impacts of the crisis. This was followed by a Presidential Advisory Team on the Capital Market, which was set up in August 2008 to deliberate on measures to reverse the declining fortunes of the Nigerian Capital Market. Further, the Security and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE) and all capital market operators reduced their transaction fees by 50% to boost trading on the exchange.
Pursuant to its macro-economic objectives, the Central Bank of Nigeria (CBN) has reacted to the recession by reducing the monetary policy rate (MPR) from 10.25 per cent to 9.57 per cent as well as the cash reserve requirement (CRR) from 4.0 per cent to 2.0 per cent. Essentially, these steps were take to stopped liquidity mopping since September, 2008 to stimulate spending within the economy. Now, the CBN is taking on the challenge of restricting banks in managing their margin loans, and to shore-up the ailing banks the CBN Injected about N400 billion into the financial service industry to stabilize the banks. More of such economic recovery measures are unfolding depending on the dynamics and efficacy of the strategies already adopted.
In Bayelsa State , as in other States of Nigeria, the economy is not insulated from the challenges presented by the global financial crisis. The Administration has begun the implementation of several measures and initiatives to address these challenges. Some of these has begun the implementation of several measures and initiatives to address these challenges.
The Sylva administration’s initial focus was to ensure adequate coverage of the State’s payroll cost, debt service obligations and the continuous discharge of social services to the people, irrespective of diminishing resources. In response to the underperformance of its revenue projections, the State Government re-prioritized capital projects and ensured that only those that can catalyze development are given priority. Government has also re-forecast the 2009 revenue estimates in line with the fast changing macroeconomic realities. In order to boost economic growth in the State, government has commenced viability assessment of specific MDAs with a view to strengthening them to become autonomous and generate their own revenue. This would enable the State Government to redirect its investments in critical capital expenditure.
Now, government implements fiscal measures including keeping the MDAs spending within their projected limits for personnel, overhead and capital budgets, thus ensuring budgetary and fiscal discipline. Also, efforts have been intensified to diversify the revenue sources by focusing on agricultural projects in which we have comparative advantage, such as oil palm, rice and fisheries to boost revenue and stimulate job creation.
We also pushed for the States to be included in the Federal Government ’ s Food Security Programme as a means of directing Federal Government spending to the State. The State Government halted its decision to properly implement the Personal Income Tax (PIT) Tax Act in the State Civil Service and instead converted the existing non-compliance to a tax credit in the hands of the Civil Service in order to maintain their income and purchasing power. The Sylva administration has not minced words in its commitment to clean up the State Civil Service and instil transparency and accountability in the State, we slowed down the biometrics exercise as a palliative measure to cushion the impacts of the global financial crisis.
In spite of the measures and fiscal stimulus packages that have been implemented, many economies are yet to grapple with mounting unemployment, poverty, diminishing standards of living and the increasing misery index. This is the underpinning philosophy of the Sylva Stimulus Package.
These are the circumstances that prompted the formulation of an effective stimulus package that will deliver on its objectives, government have taken into consideration leading practices in the design of fiscal stimulus packages. Furthermore, the expenditure required in the implementation of the Stimulus Package has been built into the 2010 budget in order to expedite the required buy-in and expenditure approvals by the State House of Assembly. The overreaching goal is to cushion the effect of the global financial crisis and facilitate wealth creation.
Quick win projects are community-based projects valued at less than or equal to N 10million which can be executed by sole proprietorships resident in Bayelsa. It is expected that these initiatives will have immediate visible impact when implemented and Bayelsans can enjoy their benefits within a short period of time. This measure is geared at targeting and delivering the immediate benefits of creating these projects locally to the most affected communities.
The expected benefits to accrue from this stimulus package include the sinking of boreholes empowerment of indigenous contractors translating to improved purchasing power and more effective socio-economic service delivery in the State. Ultimately, it would result in enhanced achievement of government
The Sylva administration will create 2,000 Quick Win projects through the consolidation of all counterpart projects in MDG, UNICEF, SUBEB, EU etc. Such contracts will be in the area of rehabilitation of health and education facilities, embarking on community water schemes and construction of internal roads in rural communities and other development areas. The Quick Win projects are designed to empower people, generate employment and improve the economic wellbeing of Bayelsans. These projects are estimated to cost about N6.4billion. In order to promote private enterprise in the State, Government will establish industrial parks or estates serviced with infrastructural facilities such as access roads, power, water supply, in which SMEs can site their projects.
Among the niche’ areas government wants to invest include: the Millennium Development Goals Projects with a projected investment of N1,600,000,000.00; the State Universal Basic Education Board Projects attracts N2,660,000,000.00; the sum of N700,000,000.00 has been earmarked for UNICEF Projects, while European Union Projects N1,500,000,000.00. These Quick-Win Projects will ensure full employment, increased socio-economic activities and thus palliate the impact of the economic recession.
The Second area is the Civil Service Welfare Scheme. The Civil service is the engine room of government and this is the reason why governments in their quest to ensure rapid socio-economic development, place high premium on the welfare of its Civil Service. It is in view of this, that the Bayelsa State Government has recognized the need to implement measures to motivate its civil service and improve their purchasing power.
One of the strategies for achieving this objective is to initiate a range of a social welfare schemes for civil servants to address their housing, education and transportation challenges. The State Government plans to guarantee civil servants access to credit from financial institutions for car and housing loans, as well as educational support and rent assistance. The State shall work with the Civil Service cooperatives to administer and oversee this scheme. Applications for the Welfare Scheme are to be made by the prospective recipients through the Head of Department and endorsed by the Accounting Officer of his Ministry.
Payment and subsequent deductions subsequent deductions shall be through the prospective recipient’s salary account. The expected benefits include: access to bulk sums, at low interest rates, for the acquisition of assets; improved purchasing power and standard of living for the state ’ s employees; increased economic activities within the State in addition to improved relations among the civil servants & the State government. Areas that will attract government priorities include: Housing and car loans, rent assistance and educational support.
Government is also determined to promote entrepreneur The sum of N1billion has been set aside as loans for cooperative societies to channel small and micro enterprises within their communities. This will be channelled through the Bayelsa State Micro Credit Administration Agency, in conjunction with the Ministry of Finance & Budget. Funding will be guided by the principles of transparency, accountability, prudence and areas of priority. The establishment and reinvigoration of the micro-credit schemes shall improve peoples’ access to capital to facilitate the growth of SMEs. The objective of the Microcredit Scheme is to provide credit facilities to the SME operators to help them undertake income-generating ventures with their attendant economic multipliers. Among others, the expected benefits include improved access to credit facilities; improved self-reliance; increased employment opportunities; enhanced household income; wealth creation and poverty alleviation. The target beneficiaries are low income earners, those who have no access to bank loans, the rural folks and physically challenged persons.
In line with the Government’s policy thrust, Bayelsa State will embark on Post Amnesty Capacity Building to sustain the momentum of the amnesty programme and consolidate on the success of the triple E strategy. the Sylva Stimulus Package will deliver skills training to 5,000 Bayelsans in 2010. This initiative will be anchored by the Amnesty Implementation Working Group. The post amnesty capacity building stimulus package shall focus on the creation of skills, promotion of income generating vocational training for employment generation and economic empowerment. The target beneficiaries for the stimulus package shall include unemployed and under-employed youth, female adolescent youth, youths with physical challenges as well as gifted youth with creative abilities.
One of the unintended consequences of militancy is the de-skilling of youths. To surmount this challenge, government has resolved to adopt viable and sustainable strategies for implementing the stimulus. One of such strategies is capacity building. The are capacity building programmes would be designed to prepare the youth to become useful and active citizens in adulthood. Government would provide the much-needed attitude reorientation training to be held in closed camps where the inductees will undergo attitude reorientation and leadership training. A second strategy is vocational training – which is designed impart requisite skills, abilities and competencies to develop enterprising and self-reliant youths. Youths will be trained in photography and video production; hair dressing and cosmetology; welding and fabrication;- woodwork and furniture making;- horticulture and landscaping Catering/fast food business and other areas that would promote enterprise.
The State will equally leverage on agricultural Projects. Presently, Bayelsa State is pursuing the employment generation initiative through its existing partnerships with foreign investors to build the capacity of Bayelsans in rice production, mechanized fisheries (aquaculture) and oil palm production. Plans are also underway to stimulate increased private sector participation in the Bayelsan economy, encourage private sector partners to be domiciled in the State to set up businesses catalyze the domestic economy through employment.
The biometrics exercise has thrown up seemingly daunting challenges. In order to complement the biometrics exercise, the State government shall conduct a comprehensive review of the manpower requirements within the State Civil Service to identify areas of specific gaps and devise means of filling the gaps. Within the framework of government Ministries, Departments and Agencies (MDAs) government will implement workable governing processes which will serve to revitalize the organizations to run independently of government and generate employment.
The State Government shall initiate the use of Direct Labour through the Direct Labour Employment Agency. This programme will involve creating temporary job opportunities through the execution of infrastructural projects using direct labour. These will be complemented by the vocational training and skills enhancement programme aimed at improving the quality of workmanship available in the State
The global economic recession is one of the manifestations of the failure of capitalism. Like the Great Economic Depression of 1929 and the Asian Financial Crisis of 1997, no country has been exempted. There is consensus among scholars that the stimulus package is a potent short-term measure to shore-up the failing economies all over the world. In Bayelsa State the Governor Sylva Stimulus Package (SSP) is designed to create more jobs, promote youth empowerment and reduce poverty. However, the SSP can only be effective when there is robust public support and buy-in. What is critical is the prudent management of resources and making strategic investments, while simultaneously enhancing human capital.
Ostensibly, government will implement strategies and mechanisms to mitigate its exposure to volatility. In the longer term, government would make concerted efforts to entrench transparency, accountability and good governance through the strengthening of existing institutions. All these institutions would contribute constructively to Sylvanomics - an economic development paradigm that is holistic, people-oriented, technology-driven and aligns with vision 20: 2020, the Seven-Point Agenda and the home-grown development strategy.
In the final analysis, all growth depends upon human activity. There is no development physically or intellectually without effort, and effort means work. The United Nations asserted that ‘the most valuable 100 people to bring into a deteriorating society would not be economists, or politicians or engineers, but rather 100 entrepreneurs’. The SSP pushed by the present administration is built around the idea of creating entrepreneurs and encouraging self-reliance for sustainable development – which is on the development agenda of the progressive States.
Tajudeen, is a Lagos-Based Business Analyst, wrote this commentary on the SSP
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