Economists and fiscal experts have described the latest moves by the Federal Government to establish an Infrastructure support facility from the surpluses recorded in revenue collections following the unification of the foreign exchange (FX) rate as fiscally unreasonable.
The Special Adviser to the President on Communications and Strategy, Mr. Dele Alake, had disclosed at the end of the July 2023 Federation Account Allocation Committee (FAAC) meeting held last Thursday, that out of the distributable national revenue of N1.9 trillion in June this year, only N907 billion will be distributed among the three tiers of government, while N790 billion would be set aside for an Infrastructure Fund.
However, analysts noted that the higher FAAC allocations to the tiers of government due to the devaluation of the Naira last month was a misguided perception by the government of a treasury windfall.
Monetary economists at Proshare Limited, one of the nation’s leading investment research and consulting services providers, in the firm’s ‘Analysts’ Note’ circulated to our correspondent at the weeked, have argued that the cognitive challenge of a ‘monetary illusion’ could cause the domestic inflation rate to spiral above the June 2023 figure of 22.79%, thereby leading to a headline inflation rate of between 25 and 26% in Q3 2023.
The analysts further noted: “The choice of keeping a proportion of the fiscal allocation for June 2023 in a knee-jerk entity called Infrastructure Fund highlights the irritating practice of government authority creating multiple institutions or structures to address single issues.
“With a national Infrastructure Company (Infraco), an Infrastructure Bank, and the infrastructure finance division of the Nigerian Sovereign Investment Authority (NSIA), setting up an Infrastructure fund from FAAC is like building a submarine to be carried on a ship that is part of a super vessel, the structure would look impressive but the purpose dubious.
“Bankable projects can be addressed by both the NSIA and Infraco. Besides, rather than carve special funds from FAAC, the FGN should simply pay sub-nationals their proportion of FAAC that is dollar-based in dollars, while the naira component should be paid in Naira”, they added.
The economists maintained that the strategy of paying sub-nationals their FAAC allocation in dollars would ease pressure on the naira and avert the current practice of fiscal double dipping, where dollar inflows are converted to naira and carried to the parallel foreign exchange market for the purchase of foreign currencies at a premium to the official Importers and Exporters (I&E) foreign exchange (FX) window.
According to the experts, if governments agree to FAAC savings to strengthen domestic infrastructure then, the funds should be sent as contributions to the NSIA, or go to the capitalization of Infraco, or perhaps increase the loanable deposits of the Infrastructure Bank. Fiscal showboating to demonstrate false modesty is unbefitting serious governments.
The firm’s analysts have suggested that designated domiciliary accounts could be created for states to have direct access to dollars rather than have them round-trip through parallel market alternatives, pointing out that with state dollar accounts funded regularly through FAAC, the monthly pressure on the national currency will be reduced.
