FPR By Yushau A. Shuaib

FINANCIAL SYSTEM

Whenever the word “finance” is mentioned, the first thing that comes to mind is money.  But the word is more than money. Finance is the art and science of managing money.  Therefore, the word ‘finance’ is closely related to economics, since every profit-making organisation or enterprise operates within the economy to manage the use of money.

            Nigerian economy may not be different from others except in its policies and implementation, which surely have direct effects on day-to-day businesses.

            Many expert believe that the Nigerian economy is nose-diving, unpredictable all the time with solutions daily proffered but to no avail.  According to Mr. Akingbola, the Managing Director of International Bank Limited, in an article published in Thisday (22/9/99 p.20): “the state of the economy as at the beginning of this year (1999) was anything but encouraging as all key performance indicators went crashing, inflation was again on the rise, interest and exchange rates had resumed pendulum with budget deficit ballooning”. Mr. Akingbola’s observation as a banker illustrates the unfavorable position of the economy, as it requires a dynamic redirection, reorientation and possibly, an effective fine-tuning of existing policies for efficient implementation towards the benefit of the generality of the citizenry.

            The situation has persistently remained the same from the beginning of the 90s, a period of military regimes when no concrete democratic institution was set up.  It must be admitted here that even though some progress was noted, bad management and unwholesome activities of the leadership had become a cog in wheel of the nation’s growth.

            A journalist, Mr. Akin Olaniyan, in an article published in the Punch, entitled “Economy: Abubakar’s unfinished Business”(28/5/1999) decried the performance of the economy when he wrote that “by 1995, the negative growth of the Gross Domestic Products (GDP) the total value of goods and services produced within the time by the country, had been reversed and in fact, had grown by 2.2%” .  He added that this rose to 3.25 % in 1996 and 3.77% in 1997 but fell in1998 to 2.36% and that surplus deficit in 1995 was N1 billion.  By 1996, it was 37 billion but this had, by 1997, fallen to a N5 billion deficit and N57 billion in 1998.  The interest rate, which can be used to control growth between 1995 and 1998, was generally stable between 18 and 21 per cent.

            Looking closely at the government’s commendable publicly announced measures at that period, one might wonder what the problem is with the system due to the obvious instability in the economy, even when exchange and interest rates are stabilised.  In fact, capacity utilisation in 1997 dropped from 34.32% to 31.30% in 1998. It is the prayer on every lip that with emergence of the elected democratic government of Chief Olusegun Obasanjo, the new regime would squarely address the comatose economy.  The good tidings is that, a democratic government always opens doors of opportunities for business-conscious investors to come in.

            In his first budget presentation to the National Assembly in 2000, the President admitted that his administration inherited a prostrate economy characterised by declining capacity utilisation in the real sector, poor performance of major infrastructural facilities, unsustainable liquidity position and rising level of unemployment and inflation (Vanguard 25/11/1999). Even though an elaborate and decisive mechanism was employed by the administration at tackling the persistent inflation, the rate only declined by about 10.5%.

            The budgetary estimates of revenue from oil were based on $18 per barrel for the revised supplementary budget of 1999 and Budget 2000.  Despite the macro-economic achievement of the administration, the President admitted that basic structural imbalances persisted.  The inadequacies are noticeable from the lingering problem of import dependence, reliance on a simple economic sector - oil, weak industrial base level of agricultural production, a weak private sector, high external debt overhang, inefficient public utilities, low quality of social services and un-abating unemployment. In outlining the basic thrust of the budget, christened “People’s Budget,” President Obasanjo announced that the administration would lower the inflation rate, lay a solid foundation for private sector - led economic growth, pay profound attention to education and agricultural production, and consequently reduce unemployment and poverty.  The emphasis of the fiscal policy of the regime for the period was to vigorously pursue effective mechanism to increase the level of government revenue and  promote overall economic development.