Vanguard (Lagos)

Nigeria: Waivers for the Rich, Hard Labour for the Poor!

The primary underlying principle in a social contract in a modern democratic dispensation is that of equality of all persons.

Instructively, the higher the degree of social inequity, the greater also will be the level of national instability, and the more restrained will be that nation's economic growth trajectory. Consequently, it becomes inexplicable that some government policies and initiatives facilitate the prosperity of a favoured sub-group at the expense of the vast majority.

Curiously, projects and policies overtly intended to improve mass social welfare have often become a bonanza for a select few, while the masses remain victims of such exploitation. Presidential import waivers are good examples of such misguided government interventions. In spite of the gross abuse associated with import waivers, no recipient of waivers has ever been formally reprimanded for improper conduct!

The damning revelation from partial waiver on fuel prices is another example of how a handful of Nigerians can collude with collaborators in government to steal hundreds of billions of naira from the treasury, against the apparent intention of policy!

Regrettably, those who facilitated or approved false applications for subsidy payments have not suffered any overt sanction, and probably never will.

The plea bargain is also a perfection of a waiver system, which protects the rich and powerful at the expense of the masses; several political office holders liberally abused their offices and ultimately went scot-free after refunding peanuts, to avoid prosecution or the need to repay billions of naira stolen while in public office!

The interventions of the Central Bank and AMCON in the banking sector serve the same purpose as waivers; the promise that injection of trillions of naira public funds would reposition banks to actively support and energise the real sector has remained largely unfulfilled.

The waiver 'racket' has now found fertile grounds in the capital market. The unfettered opportunities for investors to borrow at over 20% in order to acquire the price-manipulated shares of lending banks was primarily responsible for stock market failure in 2008. Worse still, it has become evident that most of these margin loans were grossly under-collateralised, a practice, which apparently contravenes the provisions of the Investments and Securities Act (ISA).

Although AMCON may have purchased the toxic assets at a discounted price of about N42bn, in reality, the current value of the underlying assets or collaterals is only about N19.6bn according to the Minister! Consequently, AMCON's over N2 trillion incursion in the money market may, in reality, also be worth less than N1 trillion at current valuation, a wasteful loss of public funds and threat to AMCON's survival!!

Inexplicably, none of the 84 stockbrokers identified by both AMCON and SEC as guilty of this infraction will be prosecuted! Curiously, these offenders are now adjudged worthy of debt waivers!

This particular debt forgiveness is more unpalatable because the beneficiaries are private businesses and speculators, who willfully engaged in the casino of the stock market, with the full knowledge that the equity they purchased lacked the fundamentals to justify their inordinately high prices!

Since the public did not participate in the profits of these stockbrokers when the going was good, one wonders why AMCON should forego N22.6bn of its asset base as debt forgiveness to these gamblers. There is undoubtedly the moral hazard that this type of waiver will send the wrong signal to operators in the stock market and elsewhere, that government would cover their backs even if they broke the laws and operated recklessly.

It is not yet clear how the securities market will become reenergised by the reentry of the 84 stockbrokers, because with a zero liquidity base, as things stand, they cannot bring fresh capital into the market; besides, the N22.6bn waiver and the attendant slap-on-the-wrist sanctions announced by Dr. Okonjo-Iweala cannot truly deter further malfeasance in the securities market.

In addition to the debt waiver, the Minister also announced the elimination of stamp duties and VAT on stock market transaction fees. In other words, while operators in the real sector have ceaselessly decried the multiple taxes on their depleting incomes without any sympathetic response from government, the Minister has, with this measure, exempted commissions earned on traded value of shares (stock market gambling) and stamp duties on transaction fees from VAT payments.

Indeed, other than the removal of partial fuel subsidy, it is difficult to identify any waiver that has brought succour directly to the masses.

In conclusion, reduction in rate of inflation and a stronger naira remain the most potent waivers for sustaining enduring improved economic growth and social welfare; instructively, however, such waivers cannot be available with our recurrent burden of a cash surfeit economy caused by CBN's substitution of naira allocations for dollar denominated revenue.

SAVE THE NAIRA, SAVE NIGERIANS!

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