Culled—Proshare
12/4/2018/Proshare Research
Economic Growth has largely remained at the top of the pyramid when compared with other economic indicators, leaving both the middle income and the poor (base) behind. The decline in the growth of per capital income provides the needed precursor. Thereby, pinpointing the fact that policy over the years has failed to neither improve income distribution nor organically boost gross national income.
Fig 1: Nigerian Development Indices
Source: UNDP
The state of Human Development Index (HDI) forced the International Monetary Fund (IMF) to tilt towards a more balanced approach with a more inclusive growth as the end game; as the existing growth level seemed to have failed to alleviate poverty since per capital income is still on a downward trajectory.
Therefore, this edition of Proshare confidential takes a deep study at the recently published IMF Article IV for 2018 which points out fiscal dominance, political interference and policy inertia as major risks to the macro economy. In a nutshell, the fund highlights the following as its policy objectives:
- Monitoring Price
- Reducing Income Inequality
- Mobilization of Resources
The fund remained convinced about its growth forecast, while opting for a more reduced role for monetary aggregate as an intermediate tool. Inflation targeting remains top notch for the fund, thus showing its aversion to a multi-targeting approach.
In the same vein, the report proposed a unified base for tax while supporting an ad-volerem tax. This is hinged on the position that the Voluntary Asset and Income Declaration (VAIDS) might not be deep enough.
Moreover, there is a need to improve compliance regarding Personal Income Taxes (PIT) and Company Income Taxes. Though the progressive tax was proposed, the fund was quick to advocate for a widening in social net and cushioning.
Most proposition by the fund largely in line with our position. However, this study is clear to point out that the trio of lean industrial structure, the nature of dependence on the external economy and the distribution of power and institution, all play out as strong determinant to the developmental path of any nation. Thus, they cannot be ignored while moving forward.
The study also points out that the erosion in HDI due to income inequality and rising level of primary school dropout has contributed to the elevation in dependency ratio. Therefore, opening up the economy, strengthening female human developmental index, increasing public spending on research, reducing the degree of school dropout and using remittances as a smoothening agent will go a long way in reducing income inequality.
The study also supported pro-poor policies especially those tending towards human development rather development which is solely consumption driven.
Certainly, a more proactive approach is inevitable in-order to alleviate poverty. The hard nut is how best to sustain fiscal prudence, especially when consumption remains largely needed.
For further details contact research@proshareng.com