The Nation Newspaper

Author: Olakunle Abimbola

  • The short run

    The short run

    Nigeria ticked more critical boxes on infrastructure — the most potent driver of any economy — between 2015 and now, against 1999 and 2015. 

    The latest arch-symbol of that push is Dangote Refinery (DR): the earliest local arrival in renascent crude oil refining. DR and budding refinery competitors promise sustainable fuel production. 

    That should rebuild a doughtier Naira forex parity, after decades of wasteful petrol imports, with all their ugly rackets. 

    It’s the first such solid promise since SAP kicked off in 1986; and reduced the Naira into a mere rag in the forex market, sapping the local economy with mega-inflation.

    Yet, all of these alluring promises could easily buckle if the short run is bungled. That’s the critical challenge the Bola Tinubu Presidency faces.  So, it needs creative thinking — and policy flexibility — to navigate this treacherous short term.

    Incidentally: 1999-2015 (16 years) and 2015-2024 (nine years and counting) — two power epochs — belong to two different ruling parties.  In the first, the PDP held sway.  In the second, the APC has been in charge — and their contrasts can’t be starker! 

    The first frittered away easy wealth.  The second grabs at vanishing resources to build hard bridges to the future.  But the people blame post-2015 — a redemptive epoch — because of an unbearable threshold of pains.

    By the way, a joke just went viral in the social media, on the current high inflation. It benchmarks the spike in the price of rice.  Before 2015, a bag of rice went for xNaira (ultra-low).  After 2015, it rocketed to yNaira (ultra-high). 

    It thereby decreed a time epoch: Before 2015 or After 2015 to capture the torrid times — it’s crazy inflation, stupid! 

    Yes, the pocket badly hurts.  Yet, that belly analysis could be so misleading: for the present ruins rose from the false prosperity of old.

    Indeed, that spike in the price of rice sprang from the heedless bazaar of yesteryear — the golden years of cheap foreign rice.  That crippled farming, sacked local farmers but enriched foreign ones.

    What’s more?  Years of high receipts from crude oil boom provided the free cash for reckless food imports: food that could be grown and processed here. 

    That twin-neglect accounts for the high hunger and low youth jobs today — crop processing could have resulted in a slew of cottage industries to provide rural jobs.

    That was the high point of the Olusegun Obasanjo — and the entire PDP — years.  The arch-emblem of that costly distraction was President Obasanjo forking out US$ 12 billion to “buy off” Nigeria’s debts — and patting himself on the back for it!

    Imagine what that cash would have done in massive critical infrastructure — rail, power, roads, education and health?  Penetrative rail could have neutralized high shuttle costs — and inflation — in this golden age of holy market forces, when a hint at any form of subsidy is heresy!

    Incidentally, aside infrastructure, the Muhammadu Buhari years (2015-2023) also saw an aggressive agricultural rebirth, with the administration virtually squealing “rice, o compatriots!” and investors reacting with a spike of rice mills. 

    It’s to be lauded that the Tinubu era has continued with that twin agriculture-infrastructure focus, with own legacy policies of student loans and consumer credit. 

    Still, the impact of these strategic policies are little felt — what with inflation piercing the pocket as a ruthless javelin; and pangs of hunger leaving everyone winded.

    It’s the horrid short term again!  Which is why the administration must do some quick thinking — tactical manouevers that don’t necessarily throw the spanner into its policy works but that will ease present pains.

    Here though, the policy makers must listen with an open mind: not a mind plagued with self-crippling policy bigotry, or aggressive defensiveness.

    No place for Lady TINA — There Is No Alternative.  TINA was the witch Gen. Ibrahim Babangida threw at everyone, in those very early days of SAP!  See where it has landed us!  There is always an alternative when there is creative thinking.

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    DR — and other refineries — could open a fresh window of opportunities to drive down petrol pump price, at least till when the government can mainstream compressed natural gas (CNG), the ideal fuel to power this low-cost economy.

    One thing is clear: it’s doubtful if this inflation-plagued economy can manage fuel pump prices around the N1, 000-a-litre belt — and the pricing template has its own laughable (though “market prices”) contradictions.

    Lagos, the vortex of business, opportunities and putative prosperity, buys petrol at N950-a-litre.  Maiduguri, the bastion of a prostrate economy — no thanks to Boro Haram and its aftermath — buys at over N1, 019-a-litre.  Isn’t that further reinforcing structural energy poverty, and deepening real poverty, as far as fuel pricing goes?

    Now, the issue here is not some sterile argument on how Nigeria’s West African, and nearest Central African, neighbours buy petrol at far higher than N1, 000-a-litre.

    For one, most of these countries are not crude oil producers.  For another, Libya that both has crude and refines its crude, sells petrol far cheaper.  In fact, it boasts the cheapest pump price in all of Africa.

    So, splitting hairs over these comparisons is akin to winning the “market forces” argument but losing the plot on the huge inflation that now plagues this economy. The social cost is huge and scary — and it seems to get heavier by the day.  That could yet prove explosive — except again, some smart thinking is done.

    So, why not tinker with the current policies to locate the cost profile — using locally refined petrol — that can work for this heated economy: at least until CNG fully comes on stream?

    October 1, with the policy of refineries buying crude in Naira kicking in, offers a fresh window of opportunities — a strategic investment in the local economy that could well cool off the inflation.

    Might it hurt anyone really, if the government were to adopt an exchange rate, well below the bracket of N1, 650 for the dollar, for the sale of crude to refineries? 

    O yes!  It would bore a hole in the government’s books — since it would earn far less on its projected Naira quantum from each dollar.  That could mean less to share from the Federation Account.

    Yet, that loss could translate into huge gains in social costs.  The government itself is gunning for CNG, in a smart move to wean the local economy from petrol and diesel.

    What would work for this economy — in this critical, make-or-break short term — is energy costs closer to the eventual destination of CNG, than the present cut-throat petrol.

    Market forces zealots would call that subsidy.  But since that appears heresy in current government thinking, Ripples prefers to tag it a strategic investment to radically push down costs. Most citizens simply can’t afford the current energy costs.

    Such creative tweaking will drive down transport costs and moderate inflation.  That way, this brutal short run would be much more tolerable. As someone quipped, you’re all dead in the long run!

  • Blues orchestra

    Blues orchestra

    Beware! A Blues orchestra blares out there since 2015: lest its virus turns you into a bitter, ever-grumbling wretch!

    The Tinubu tenure is hardly 100 days, from a four-year term.  Yet, what this lobby see, gazing through their tear-soaked crystal ball, is nothing but sure catastrophe.

    Indeed, from 2015, it’s been near-permanent sessions of gloom: uppity priests and pesky imams, loud churches with strange preachments, ethnic champions gaming the naive as rights activists — all abandoning their calling to play self-destruct politics.

    All that is not about to stop.  Yet, subversive sobs solve nothing!  

    Which is why the administration, aside from gauging sensible citizen feedbacks, should buckle down, undistracted, to its policies and programmes. 

    From 2015 to 2023, it was wailing unlimited.  But with strategic deafness, former President Muhammadu Buhari kept out that din.

    He made his mistakes — as the Tinubu order will make its: every regime does.  But those that claimed that government did “nothing” now wished they were blind, so as not to see clear landmarks that it left!

    The sheer futility of subversive tears, though all is still work-in-progress! 

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    That droning will probably get worse in the first four Tinubu years, as policy options bite hard.  As the pocket hurts, simple souls surrender to sweet sadness.  But it’s a journey to nowhere but wilful self-deceit. 

    Now, a juxtaposition of the opening gambits of Buhari and Tinubu. 

    President Buhari shunned fancy theories for stark pragmatism: grow what you eat and eat what you grow!  It was a fierce re-focus on agriculture.  

    Its rail modernization was loud symbol for its twin-policy pillar: infrastructure.  Without fixing those two pillars, the economy would continue in a perpetual crawl.

    The missing link in infrastructure was electricity — but even that was not for lack of trying.  There were no low-hanging fruits just because power transmission had terrible deficits in crucial investment — and for much too long — to yield any sudden sparkle.

    Even at that, that government worked the Siemens Germany-Nigeria government-to-government transmission upgrade, still ongoing; and bound to yield appropriate results.  President Tinubu has no reason not to build, on that foundation, his own power security policies and programmes.

    To support its stress on crops and grains, Buhari emplaced the Anchor Borrowers’ Scheme, driven by Godwin Emefiele’s Central Bank of Nigeria (CBN).  

    For infrastructure, it installed a slew of funding options, chief among which was the Presidential Infrastructure Development Fund.  PIDF was to accelerate strategic infrastructure projects, under which came the Lagos-Ibadan Expressway and the 2nd Niger Bridge — the umpteenth mirage across the Niger that Buhari finally gifted life!

    Aside, there were Sukuk bond funding for specific sections of federal highways and tax-concession-for-projects, under which private sector players like Dangote, BUA and even NNPC Ltd agreed to rebuild public roads, in the best tradition of public-private sector partnership (PPP).

    Still, was what the nay orchestra’s response to these Buhari-era initiatives?  Stone Age Buhari-nomics! — its economic theory class howled.  

    Every pyramid of rice paddies was a “scam”.  Every new mill to process new rice — a symbol of new sundry grains — was “fake news” and “government propaganda”.  

    Even the negative impact of insecurity on crop cultivation — real enough — was over-blown as if it was in every material particular!

    Yet, without this aggressive path back to the farm, you just wonder what Nigeria’s hunger level would have been, after Russia’s invasion of Ukraine.

    On infrastructure, the “debt burden” was the ultimate blot.  Such triumph was the debt crow that it “cancelled out” long-term assets — rail and roads — those debts procured; and how they would strengthen the real sector.

    Politically driven eternal moaning often cripples the brain! 

    That brings the discourse to President Bola Tinubu’s opening gambit.

    In 2013, 10 years before winning power, President Tinubu, with American Brian Browne, co-authored Financialism: Water from an Empty Well — a rather iconoclastic work on how good, old capitalism (booming production of goods and services) was tapering into “financialism” (booming money stock for money’s sake), leaving in its trail global poverty.

    That appears reassuring, for it presupposes that the president’s policy entry tactics of tweaking the public purse — junking oil subsidy and floating the Naira — are no ends in themselves but a means to an end.

    Removing subsidy could ballon state earnings but hardly boost citizens’ pockets.  Floating the Naira — effective devaluation — could harvest quite a confetti of the local currency.  But it hardly makes the real sector hum to deliver short-term prosperity.

    So, opening gambits are neither good nor bad in themselves.  Good or bad greets the success or failure of the overall strategy.

    The Obasanjo-PDP era prided itself in its “reforms”.  Yet, it birthed no lasting economic legacy, with the near-zero infrastructure the PDP left behind in 2015. 

    Indeed, the former president handed out good cash for “debt forgiveness” — capital that could have developed infrastructure, got the economy humming, and eventually defrayed those debts; even as the economy grew stronger.

    President Goodluck Jonathan, the last of his successors, preened over a bland “rebasing” — an accounting artificiality that proclaimed Nigeria Africa’s biggest economy, yet with no especially vibrant real sector: either in higher manufacturing or any agricultural boom.  Both could have created mass jobs and reduced poverty.

    Classic “financialism” — aided by equal-opportunity sleaze — that vanished at the first sign of economic storm?

    So, the winning strategy, if the Tinubu-era reforms must salvage the economy, is to sink most of the subsidy savings (outside the palliative budget) and the Naira-float cash in further infrastructure upgrade and agricultural processing, without letting off on crop production, aside from playing in the digital economy and allied services.

    That way, the overall strategy won’t be that different from the Buhari era, though the market-friendly opening tactics are.  

    That indeed would be a fit continuum from 2015 — now that the new order is dreaming improved electricity, commodity boards for food security and a credit-powered consumer market that could attract big manufacturing plants to Nigeria, and create millions of jobs.

    Still, the sad ensemble don’t bother about these fine details.  All they do is milk the present pains for own rogue politics.  

    So, the administration has its job cut out: adroitly manage political merchants of grief for now, but leave landmarks that deliver a productive economy that banishes poverty.