By Prof Charles Inyangete
BACKGROUND
This is not the time to retreat to a partisan approach to the fight against Covid-19 and its aftermath. We need a coordinated national strategic response to the fight, and the Presidential Economic Sustainability Committee (ESC) chaired by the Vice President of Nigeria Professor Yemi Osinbajo is acknowledged.
Inequality in our country, Nigeria means that many do not have the ability to meet the pronouncements of the government to counter the Covid-19 pandemic. With nearly 200 million people on lockdown across the nation, the requirements of staying at home with no income, social distancing, frequent washing of hands for the majority is a price too high to pay. This for Nigeria is a big lesson in building a strong society. The people need to be involved and effectively participate in crafting solutions. We must bring an end to the era of imposition of policies whether be it in housing, public health, education and the like.
Now is the time for proactive and decisive leadership coupled with a coordinated robust response in the fight against the pandemic. The public and the private sector must come together in partnership to chart the path to recovery and sustainable development for the nation. We need to take radical bold steps to address the new world order post the Covid-19 pandemic.
THE NEED FOR A RADICAL APPROACH TO FUNDING SOLUTION
A recent article in the Wall Street Journal describes the combination of the slump in crude oil price and Coronavirus pandemic as creating a perfect storm for Nigeria’s economy. It is considered that the economic fallout from these twin negative forces working in tandem poses a threat to the very existence of Nigeria, with virtually no demand even at rock bottom prices for crude oil, the mainstay of the economy.
We are at war albeit against an invisible enemy, and a war/post war solution is needed. As revenue from crude oil dissipates, finding a practical funding solution is critical to winning the many battles ahead. The Federal Government of Nigeria over the years has been fighting another war against corruption. Anecdotal evidence (there is no reliable publicly available source of data) suggest that funds looted from Nigeria in recent decades range between USD 50 billion (N20 trillion) and USD 100 billion (N40 trillion). These estimates are in the order of between twice and four times the level of the initial approved national budget of just over N10.5 trillion for 2020. Unlocking looted funds in the order of N20 trillion including funds in foreign currency would make a huge contribution to the economy of the Nigeria.
The Proposal
This author proposes that a one-off Presidential Amnesty be granted under stringent conditions for a limited period to unlock looted funds for the country. Those seeking to benefit from the Presidential Amnesty must abide by the terms and conditions of the amnesty. It should be clear that partial compliance with the terms and conditions of the amnesty is non-compliance.
Implementation of the Amnesty
As a fundamental part of the implementation of the Presidential Amnesty, ALL looted funds recovered in various currencies under the amnesty MUST be placed in bonds (Eurobonds) issued either in corresponding currencies or a designated foreign currency such as the United States Dollar. Funds recovered in the domestic currency (Naira) will be placed in a domestic currency bond issued for the same purpose with similar bond features. The bond issue will be a private placement and subscriptions will be open ONLY to those who choose to accept and meet the conditions of the Presidential Amnesty.
Bond Issue(s) and Bond Features
The Presidential Amnesty would require the Central Bank of Nigeria (CBN) to issue on behalf of the Federal Government of Nigeria, a financial instrument to be known as Post Pandemic Rehabilitation and Reconstruction Bond(s) in either the various currencies corresponding to the recovered funds or a designated foreign currency. The bond(s) should be Irredeemable Financial Instruments with Zero Coupon.
Use of Funds
The funds from the Post Pandemic Bonds would be used in building social housing, social infrastructure and bringing services such as water and health care (hospitals) services closer to the people.
EXPECTED OUTCOMES
The implementation of the proposed Presidential Amnesty for looted funds described in this document would achieve the following benefits:
- Provide a transparent process that levels the playing field by giving an opportunity for every offender to be treated in the same manner;
- Funds recovered in foreign currency will remain either in the currency of recovery or a designated foreign currency. This will enhance accountability and ease the tracing of looted funds recovered.
- Create a permanent and publicly available record of the process for future reference.
- Funds released for economic activity and sustainable development as the bonds are never to be redeemed, hence providing a superior long-term funding source. Anecdotal evidence suggests that looted funds constitute a large pool of funds (in the order of N20 trillion and above) that the government can access by creating suitable conditions for the rapid recovery of the funds looted.
- The funding approach proposed in the document mitigates the risks and uncertainty of raising funds through financial markets which are currently at the highest levels as illustrated by the recent downgrading of the nation’s credit rating as well as the outlook for the financial sector. In view of the heightened levels of risks and uncertainty in the financial markets it is expected that there will be major adjustments to existing risk parameters as well as evolution of new risk metrics.
THE ROLE OF AGENCIES
The agencies responsible for fighting corruption will repurpose and refocus their role to tracing and monitoring compliance with the Amnesty conditions. In addition, the appropriate agencies will continue in their existing role for those who reject the Amnesty. Those that reject the amnesty will continue to be treated under the current regime of prosecution and sequestration of assets.
RECCOMENDATION
The proposals presented in this Concept Paper should be adopted by the Federal Government of Nigeria as a veritable funding solution for the recovery and sustainable development of the economy of Nigeria amidst the imminent ravages to be inflicted by the collapse in crude oil prices and the Corona virus pandemic.
By Prof Charles Inyangete is the Pioneer MD/CEO of Nigeria Mortgage Refinance Company Plc