These days there is little money in the system (no liquidity). Crude oil, which should have given Nigeria easy liquidity has crashed. The consequences of this are clear for everyone.
Nigeria needs cash to stimulate spending, short term borrowing and investment, boosting the economy. One thing that would work is for the CBN to reduce the capital base of Nigerian banks, to give them more money to dispense loans that would boost spending. Here are 4 easy steps the government needs to take to raise N100 Billion to stimulate the economy.
- The CBN should reduce the capital base of commercial banks from N25 billion to N20 billion. That will free up N5 billion per bank from each of the nation’s commercial banks. N5 billion times the number of commercial banks = N100 billion freed up to boost the economy.
- The CBN should offer minor tax breaks to the banks to encourage them to use the money to boost consumer spending and local manufacturing.
- The Federal Government should try to keep reasonable restrictions on buying of foreign exchange so that the money has more chance to circulate locally.
- The strong anti-corruption stance of the government should be maintained to deter people from sabotaging the effort.
The economy really needs the boost N100 billion can give, and N5 billion reduced from the capital base is too small to pose any significant risk to creditors. Besides, President Buhari’s strong anti-corruption stance should deter many who would seek to commit economic and financial crimes as a result of the scheme.
For those saying I should have addressed this to the CBN alone, we include the Buhari Administration because we note the close synergy between the Administration and the CBN and the positive effect of 2 or more heads discussing an issue.
Do you have any suggestions of how the government can further boost the economy? Please tell us.