 We're back with the breakfast and plus TV Africa this morning, and just with six days to the end of 2022, we'll take an in-depth analysis of government's policy efforts. Now, some of the most talked about economic policies of 2022. Now one of such economic policies is the RT200 Forex Programme, that's the FX. Of course in February, the Central Bank of Nigeria, CBN, introduced a raise to $200 billion dollars in FX Repatriation Programme. Now it was the government's show of seriousness in tackling its dwindling foreign exchange, reserve and adopting other means of, you know, revenue generation aside from oil. Now fast forward, the program was designed to ensure that Nigeria ranks in $200 billion dollars in FX Repatriation exclusively from non-oil exports in the next three to five years. Now one of such is that we have the limit on dollar spending, as was one of such of it. Now Amiti Forex crunched in the country, the banks had announced a reduction in dollar spending limits on the Naira denominated debit cards, in much the Nigerian government and the Nigerian banks reduced the limit on Naira cards from $100 to $20 monthly, while some banks suspended the usage of Naira cards for international transaction. Months later, Nigerians were thrown into panic when several African FinTech also shut down their virtual dollar card services that was really affected. Godwin and Mephile, governor of the Central Bank of Nigeria, that's the CBN, admitted that there was, you know, a significant FX shortage in the country and acts banks, some banks, to come up with a solution to boosting inflow, whether or not that happened, you know, it's a conversation for another day. Another of such policies that was talked about is the sugar tax. Now Nigerians were, just as Nigerians were recovering from the dollar spending limits on the cards, that's on June the 1st, the federal government began the implementation of sugar tax of 10 Naira per liter on all non-alcoholic carbonated and sweetened beverages in the country. The policy embedded in the Finance Act of 2021 was designed to discourage excessive consumption of sugar in beverages and raise revenue for health related and other critical expenditure. I know that the health sector actually embraced that, you know, with an open arm, but it was not the same for the manufacturing sector. We had, you know, the back and forth. Now these are some of the policies, but in the course of the conversation, I'm sure that we would definitely have to mention some of this talked about economic policies. Now let's, you know, have our guest join us this morning. He's an economist, and he's also public affairs analyst, Kelvin Emmanuel joins us this morning from the FCT. Thank you so much, Kelvin, and Merry Christmas. Thank you. Thank you so much for having me. Merry Christmas to you too. Let me get your thoughts on, you know, some of this economic policies that the government had put in place just to ensure that, you know, we have a smooth warning of the economy that life was easy for the people, Naira redesign, cash limits, which these are recent policies, sugar tax, and what have you, what are your thoughts on them? Like, thank you. Like I've always said, I don't think Naira design and the draw limits, the solution to the problem that Nigeria has had. Look, there is, I say this, there is one major issue on the exit polls for 2023 elections. It's not tribe, it's not religion. It's not all the shenanigans that we used to in political campaigns in Nigeria. It is inflation and the economy. Inflation, inflation, inflation. Nigerians are asking why the prices of sugar has gone up. They're asking why the price of kerosene has gone up by 1140 percent, from 830 Naira to 947 Naira, and over 1,000 Naira at the pump stations. Nigerians are asking why the price of PMS has gone up from under 800 Naira to over 200 Naira and over 250 in some occasions in Nigeria because of the cost of distribution around the country. Now, on the usual petrol subsidy, I am a proponent of removing petrol subsidy and deregulating to incentivize investments and building refineries in Nigeria, commercial sized refineries. I'm a proponent of that because I think it's ridiculous for the government to spend a second to 5 percent of its budget on subsidizing PMS in its direct sale direct purchase agreement. But you look at the IoT 200 program, for example, and you consider why the program has not succeeded and why for the $10 billion that the program has attracted, which is 5 percent of its target. Now, I don't think that if you set a target where you have a KPI and you achieve 5 percent of your KPI out of 100 percent, you consider it successful. I don't think you consider it successful. So you can imagine the central bank using $190 million US dollars to incentivize $10 billion worth of inflows in diaspora remittances and NXP proceeds. I don't think that's a success. If the central bank of Nigeria says that that's a success, I don't understand what they're talking about because the real issues, for example, why FX dollars are not coming into Nigeria and you know, there are four major sources of FX for the central bank. Number one, you have trade finance, which are your NXP proceeds, proceeds you guess from export, export NNs. Okay. Number two, you have your oil receipts, oil and gas receipts, oil receipts, which is what you get from your production sharing contracts, from your joint venture agreement between NNPC and its JV partners. You and I know that the central bank said that the $30 billion monthly NNPC was remittance to the federal government in 2014 has dropped nearly $0.00 in 2022. And why? The issues are because of the drastic drop in production output at several fields and stations in Nigeria, crude oil tax, that in my opinion, I believe is organized. Okay. Then you have diaspora remittances, which is the mainstay of the economy right now, the major source of FX for Nigeria that remitts over $20 billion, which I believe should be leverage for Nigerians in diaspora to actually use in negotiating like a clause in the Electoral Act that gives them the opportunity Nigerians in diaspora to vote as absentee ballots in forthcoming elections in Nigeria. Yeah. And the reason, when you look at the fact that, and then the thoughts and final very cool for FX into Nigeria is actually foreign direct investment. FBI is foreign portfolio investment and FDI is foreign direct investment, votes speculative and non-speculative, speculative and mostly portfolio investment, FPLs, non-speculative or foreign direct investment. And I'll tell you what, the reason why IoT 200 program has not been successful is because institutional investors cannot find the forward curve to price risk for bringing in investments into Nigeria. Companies that end FX cannot find a way to maximize their earnings because when they bring in their FX, they are forced to sell it off at the investor and exporter dealer window at the official market rates. And then you have that wide go between $446 and $740. How can you be asking a company that end $10 million to sell its FX at $446 and $4.4 billion when it can sell it at the parallel market and end $7.4 billion? The companies are opting for opening foreign accounts and diverting their NXM proceeds of trade finance to foreign destinations or they actually use it to buy machinery and equipment they need abroad or they don't need, send it to Nigeria, sell it off and get the street values what and what they were supposed to end. So you are asking companies to get $65 million for $10 million in exchange for getting a difference between $7.4 billion and $4.4 billion, which is about $3 billion. Are companies going to opt for being patriotic to the country to making profit for their business? My guess is the latter is the answer to the question. So you can just understand why there has been a disconnect and then you have the issue of monetary policy and fiscal policy and how there has not been a correlation or synergy between the fiscal authorities and the monetary policy which is the central bank of Nigeria. You have seen that for 10 consecutive months in 2022 there has been a hike in the inflation rates and the central bank has also followed with the corresponding hike in the monetary policy rates and you consider that the cost of capital has become more expensive, the central bank has required banks to raise its cash reserve ratio which is the amount of cash it has in its votes and bring it back to the central bank of Nigeria as a means to bring in all the cash into the banking system and reduce the cash in circulation which is leading to currency hooking whereby the people who have cash are charging an interest to give trade their cash, a fiscal cash with people who need cash and don't have it. So you can see all the disconnect and the reason why you have inflation in Nigeria, it's both cost-push and demand-push, cost-push so much cash pursuing too few goods from issues like ways and means lending, violation of that window by 105 times from the $500 million limit to about the $23.7 trillion where we have it right now, $49.2 billion and then demand-pull, demand-pull in the sense that you have a situation where the economy is not producing enough to meet up with demand and this structural defect is also because of the exchange rate, the demand is not available and companies are finding it difficult to source the raw materials they need to actually produce and the import substitution lever to substitute for the products especially in enterprise manufacturing that consumer manufacturing needs to produce is not available and for example you can see that with several commodities, you can see it with energy in diesel, DPK, you can see it in food and you know food and energy makes up the basket for calculating inflation in Nigeria, you can see it in food in sugar, in starch, in wheat, flour, especially is a major cost of situation we have in Nigeria today. So for me I believe that the fiscal and monetary authorities are not together, they don't communicate well, there has not been the political will to take the hard decisions necessary for you to create a full market economy and move Nigeria from the government providing subsidy which it doesn't have the liquidity to do to a market economy where the private sector is brought on board to be able to engineer growth and drive the creation of jobs in Nigeria. I'd like to find out from you, I mean just as I asked you know another question but this is actually in comparison with the developed climate economy, are you saying that you know subsequent policies that have been talked about in 2022 like you know cash limit redesign of the currency, limit on the you know the dollar and what have you is a fallout from the ROT 200 FX program? No it's not a fallout, the ROT 200 FX program is actually like a program that was designed to create incentives for dollars to come into Nigeria but the problem, the reason why ROT 200 is not successful is because you have a situation where investors were finding it difficult to reconcile the fact that they could not price risk. How can you have a difference between the official and parallel markets to the tune of about 300 Nair and the government is bringing dollars into Nigeria, you don't have the means to take it back because if you bring your dollars into Nigeria, when you want to take it back you need dollars, if you convert it to Nair you need to convert it back to dollars to take it back, CBI will not provide you with dollars, for example you can see that with the airlines, the airlines have a backlog of about 700 million dollars and I dare to say, I dare to say that the major reason why Emirates cancelled Nigeria and the UAE government restricted Nigeria from coming into the UAE for tourist visas where people were under 40, it has majorly, it has everything to do with the fact that Emirates was finding it difficult to repatriate over 200 million dollars it has stuck in Nigeria and they couldn't find dollars to repatriate with. You have the number of companies that have a backlog of 7 to 8 billion US dollars, the CBI doesn't have the dollars to provide them. And when you have a situation like this, what happens, companies cannot go to the black market because if they go to the black market, they don't have, there's no liquidity in the black market to provide them or they have to sacrifice all their profits and even some of their revenues to be able to get the dollars they need to move on. How can you do business in Nigeria and then the external risk of devaluation and inflation is actually greater than the internal rate of return? And then you have to sacrifice all your profits even more to be able to repatriate your money. So their money is either stuck in Nigeria or their private risk and they are telling themselves that look there's no false market in Nigeria that will help us to hedge the external risk. Calvin, so we're able to look at all the aspects of this conversation. You know just before we delve into others, for instance, the ROT 200 FX program. Now and if you look at the FDI, you find out that the United States seem to be topping the charts followed by China. And I'd like to find out what they're doing differently from the Nigerian economy. I mean, what are these guys doing differently that's putting them on top of the charts in terms of the FDI? Calvin? I'm with you. Calvin, can you hear me or did you hear my question? Yes, I can hear you. Alright, so I'm asking the United States is now the world's top destination for FDI and followed by China. My question is what exactly have these countries done to put them on top of the charts? What are they doing differently from Nigeria? Look, China has 25% of, one out of every four ships that seems around the world comes out of China. China has 25% of global manufacturing. China, Brazil, India, Russia and South Africa controls 40% of global trade. Those five countries alone. If you want to understand China and how it became the manufacturing capital or warehouse of the world, or factory of the world, like they call it today, you have to go back to the 1980s. You have to go back to Zouanlai and then to Koba for a manpower miles ago. You have to go to the Silk Road program and how China was able to create a 50-year development plan to build its regions into the enterprise manufacturing capital of the world. China has a strategy. Nigeria doesn't. If you want to understand the U.S. economy, you have to understand the fact that number one, America has the world's reserve currency. One more than 175 countries in the world recognize the U.S. dollar as a global legal tender. You travel with the U.S. dollar, you can exchange it anywhere in the world. America can afford to use that quantitative easing to drive economic growth. America has the most capitalized stock exchange in the world. America is perceived as the most stable country in the world. When there is a global crisis, for example, the crisis in Ukraine, you can see that the U.S. dollar index has had the most rally and is actually as the strongest right now, because whenever there is a crisis anywhere in the world, especially in military crisis, when we had the COVID pandemic, investors ran to the U.S. When the Russian-Ukrainian war started, you ran to the U.S. So you have to realize that for you to succeed as an economy and as a country, you need a deliberate plan. You need a short, medium, and long-term plan, and you need the political will to back the execution of that plan. Look, Nigeria is not short of genius policy programs. What Nigeria is short of and lacking of is actually the political will to implement those policy programs to grow Nigeria. For example, Nigeria can feed the entire African continent, but it lacks the political will to create the both sides and put the structures in place to ensure... Unfortunately, we have been disconnected with Kelvin now. Kelvin, you can continue with your thoughts. It lacks the political will to put the both sides in a structural place to ensure that Nigeria is the food capital of Africa. Look, it's my view that Nigeria should drive the AFCF framework that integrates the 54 countries in the entire African continent. Look, it's cheaper for you to ship products from Nigeria to Australia or Nigeria to the U.K. or Nigeria to Rotterdam in the Netherlands or Nigeria to China. It's easier for you to fly from Nigeria to Amsterdam, from Nigeria to Abuja to JFK than it is for you to travel within the African continent. Nigeria needs a customs union. It needs a monetary union, and it needs integration of trade within the continent. So let me ask you a two-in-one question. That's because we're out of time. Now, what do you make of the rationale behind some of the most talked about economic policies for 2022? For instance, the sugar tax is that there should be, you know, this courage excessive consumption of sugar. That's what it is. Of course, the health sector embraced it, but the manufacturers were not finding it very funny. That's on the one hand. We also know that the issue of the limit on the dollar card or transaction, what have you, was because of the forex issue. Now, I'd like to ask you, looking at some of these policies that we have mentioned, the ROT200, you know, to the sugar tax, what have you, the redesign, all of the reasons that have been given, do you think that are irrational enough? What do you make of the rationality behind all of these policies? On the issue of sugar tax, and then on the other side, the health sector lodging the federal government for raising the means for the courage excessive consumption. I think you might want to look at the high-fructose alternative to the 45% that is imported into Nigeria, from mostly South America, as in India, for which Nigeria has like a 1.2 billion dollar import bill yearly, and has three major companies bringing in sugar into Nigeria. I also think the government might want to look at the replacement for using Sub-Itor, which is like a tertiary, advanced form of sweetener, that is gotten from, can you get it from cassava, you can get it from potato, you can get it from corn, okay, as an alternative, actually a cheaper alternative to the 45% sugar. Okay, you're raising the sugar tax by 10% is only going to add to the vats, because the manufacturers are going to pass that cost back to the consumers. The only problem with that is it's going to raise the cost of manufacturing, the cost of doing business. So yes, on one side it's a health hazard measure that the government is using to discourage excessive consumption. On the other side, it's actually a revenue earner for the government, which on the other hand creates more havoc for ease of doing business and the cost of doing business in Nigeria, which is at an abysmal low, is a source of worry to a lot of companies in Nigeria, both for the ones existing and for the ones who plan to come in. We probably need to be looking at the second conversation at this point in time. Thank you so much for being part of the show. We thank you so much and we wish you a Merry Christmas once again. Thank you for having me. Have a great holiday. Kevin Emmanuel is an economist. He joined us this morning from the FCC. Thank you so much and have a wonderful Christmas and a prosperous New Year. We take a break when we return a belief in the allocation of one billion nair for constitutional amendments, which probably might just not see the light of day. Stay well.