Thread by @yinkanubi

@iyaboawokoya @wFalabede @IsuphJt @Ayourb Aunty, I tried to answer this question a few days ago by proffering 5 options (see thread below)

1. Cut Cost
2. Sell Assets
3. Print Money
4. Borrow (Take structural loan)
5. Combo of mixture of 1 - 4

Each of these decisions have severe implications.

https://twitter.com/yinkanubi/status/1253081906314383360?s=19

@iyaboawokoya @wFalabede @IsuphJt @Ayourb Like @wFalabede said if you decide to cut cost, which one would you cut? Many people will say the cost of Political Appointees. But can I shock them that the cost of Political Appointees is actually a fraction compared to the Personnel cost of the Civil Servants and the Police?

@iyaboawokoya @wFalabede @IsuphJt @Ayourb So let's imagine for purpose of analysis that you suspend NASS you save only N128B. But it won't be enough, you will need to cut cost to the Military and the police. For the military for example 89% of budget is recurrent (₦722b) while for the Police 96% (₦396b) is recurrent.

@iyaboawokoya @wFalabede @IsuphJt @Ayourb The entire personal cost alone of the 2020 budget represent about 70% of the entire budget (₦7.6 Trillion). So in a nutshell there is absolutely no way you can discuss cutting cost without discussing sacking public sector officials or reducing salaries. Question is - Which one?

@iyaboawokoya @wFalabede @IsuphJt @Ayourb Do you start from the Military who are the middle of a war? Or you start from the Police who are not even enough? Or you skip those ones and concentrate on suspending CAPEX or pay to Politicians? Whichever one you decide, you will make a lot people unhappy but it needs to be done

@iyaboawokoya @wFalabede @IsuphJt @Ayourb If you decide to sell Assets, the first question will be Which One? The political push back you'll get from this coming from our history of rich & privilege people cornering national assets by selling it to themselves & their cronies will see u expending energy where you've none.

@iyaboawokoya @wFalabede @IsuphJt @Ayourb But it remains the easiest and fastest way of raising cash with no strings attached. What is the point of owing a piece of land and your deep in debt and hungry? How about you dispose of their assets and give yourself an extra year to recover and get back on your feet.

@iyaboawokoya @wFalabede @IsuphJt @Ayourb If you decide to print money (by issuing bonds & securities) to pay for salaries, you are effectively creating debt that you would need to pay back some day. Technically, it makes more sense to use this to finance stimulus that can be repaid (loans) than to use it to pay salaries

@iyaboawokoya @wFalabede @IsuphJt @Ayourb But there are a lot of down-sides to it chief of which is the inflationary pressure you will create. The last thing you want is be dealing with.

The last option is to take a structural adjustment loan to finance the govt for some months or years. These kind of loans come with..

@iyaboawokoya @wFalabede @IsuphJt @Ayourb ...conditionalities. Like reducing/removing subsidies, cutting cost, fiscal efficiency (aka increasing revenue through taxes), FX market liberalisation (aka devaluation) & many more. Bible says the borrower is slave to the lender. If you're done and out, your options are limited.

@iyaboawokoya @wFalabede @IsuphJt @Ayourb My final take is this. The best decision is not 1 or 2 of these options but rather a combination of these options. And I agreed with Waheed that data will allow us select the right combo. The one thing we can't do is DO NOTHING and hope it'll just go away. Max the opportunity.

@iyaboawokoya @wFalabede @IsuphJt @Ayourb Let me end by saying that no matter what the FG does, and no matter the cost cutting or fund raising, IT WILL NEVER BE ENOUGH TO STIMULATE THE ECONOMY. What they do will only represent max 50% of the economy. States Govts will have the replicate it to make the necessary impact.