•Atiku: hard times on the way
More prominent Nigerians are painting a gloomy picture of the economy, with the naira dropping many points and oil prices crashing.
Northern States Governors Forum (NSGF) and Niger State Governor Babangida Aliyu yesterday raised the alarm that states may collapse by January – if steps are not taken to address the on-going financial crisis.
Former Vice President Atiku Abubakar simply advised Nigerians to brace for hard times.
States are finding it difficult to meet their obligations, Aliyu told the Governing Council of the Federal Polytechnic, Bida in Minna.
“I am afraid the way things are going; states may collapse in the next three months, if urgent steps are not taken to address the situation,” the governor warned.
The governor, who was speaking against the financial situation of the state, following a request by the Governing Council for the government’s support in hosting the 18th Nigeria Polytechnics Games (NIPOGA), said the government had many constraints due to the country’s financial crisis.
To Aliyu, a forum, such as NIPOGA, should be encouraged because it will promote unity among the country’s diverse nationalities; but he lamented that the state has no funds to assist as it would have desired.
Aliyu however promised that the state and the 25 local governments would join efforts to ensure that the games succeed.
The chairman of the governing board, Colonel Theophilus Bamigboye, told their host that the polytechnic would be hosting the games between December 6 and 13.
Over 4,000 athletes are expected from 36 polytechnics and colleges of technology to compete for honours in 15 games.
All Progressives Congress (APC) presidential aspirant Atiku said in Abuja that more Nigerians were likely to lose their job as a result of the devaluation of the naira by the Central Bank of Nigeria (CBN).
The former Vice. President said in a statement entitled “CBN’s desperate measures- Nigerians should not face desperate times” that the new measure by the CBN has the potential to affect small and medium scale businesses, especially those that rely on foreign exchange and reduce their capacity to expand and create jobs.
Atiku accused the government of engaging in frivolous spending, careless borrowing and poor savings, pointing out that “this extravagance and inability to put enough away to absorb and cushion potential shocks in global oil price fluctuations shows a high level of negligence and lack of vision.
”Excessive government borrowing and higher bond repayment prices with higher interest rates have also significantly contributed to the present problem.
It is also alarming that the committee admitted in the Communiqué that the depletion of the foreign exchange “does not seem to have any bearing on the genuine foreign exchange need of the country”. This is probably the most sincere admission of the Bank to its incapacity to discharge a critical aspect of its mandate.
”The Bank needs to fine-tune its policies, such that while targeting currency speculators on the one hand, we can boost investors’ confidence on the other to forestall dreadful capital flight.
”Most importantly, we need to deliberately intervene for SMEs whose operations require Foreign Expenditure so as to ensure that people can keep their jobs. We cannot afford to worsen the already bad unemployment rate. There is need to suspend all non-essential business regulations that will hamper the growth and sustenance of small businesses until such time that the ECA reaches a certain threshold.
”Unfortunately, there has been poor disclosure of true state of the country’s finances. This has made it difficult for anybody with good intention to diagnose and prescribe corrective measures. This has also led to constant mistrust and constant squabbles between the Federal government and the states at FAAC meetings resulting from haphazard and arbitrary allocation of funds to states.
“It is gratifying that the Monetary Policy Committee of the CBN has now resolved to take some measures. The reality is that these actions may have come too late. The increase in CRR (from 15% to 20%) and MPR (from 12% to 13%) will obviously increase the cost of borrowing.
“This will affect small and medium businesses and reduce their capacity to expand and create jobs. While the banks and speculators are legitimate primary targets of the CBN action, the challenge of protecting small scale businesses must be equally addressed.
”The movement of the mid-point of the critical window of the Foreign Exchange Market from N155 to N168/ US$ has officially devalued the Naira. In essence, the Naira has depreciated by 45% within a space of 6 years.
“The CBN’s action is only a first move. The Naira may have to be further devalued as stated in the CBN communiqué which claimed that “unlike in previous episodes the current downturn in oil prices is not transitory but appears to be permanent”
”The continued volatility of the Naira can only spell disaster for the economy. The Naira already trades outside the new band, meaning that all Nigerians will suffer. Small and medium businesses who were already starved of funds will now have even more difficulties accessing funds. This leads to less revenues for businesses, and less revenues means less potential for job creation.
“Businesses may now have to cut jobs to balance their books. This is the last thing Nigeria needs when we should be creating more jobs. We are facing a potential economic crisis and the Federal Government needs to change its ways”.
He stressed that planning on a bench mark of $78 dollars will make nonsense of the 2015 budget from the beginning and mag force the nation to borrowing again, saying “the proposed crude benchmark of $78 is already too high and this needs to be reviewed. We should no longer continue to build our castle in the air when other countries have reduced their benchmark to below $70. Planning on a benchmark of $78 will make a nonsense of the 2015 Budget from day 1 unless we resort to borrowing again.
”We should retain only those regulations whose social benefits clearly outweigh their cost. Creating an export oriented agricultural market is the best way to improve productivity, strengthen farmers income, ease rural unemployment, reduce poverty and forestall rural-urban migration.
“We should now be realistic with genuine development in Agriculture by setting up an Agricultural Pre-export Financing Facility such that farmers will have a real choice as to whom they will sell their produce under competitive pricing.
”It is also about time to consider realistic opportunities to reduce the cost of governance. It is not too late to re-evaluate the application of the ECA and channel some part of the account to act as a “Global Oil Price Equalization Fund”. This will act to offset the possible future losses from downward oil price fluctuations.
“I have always advocated for and I believe it is critical to have a truly independent Central Bank of Nigeria, which will adequately intervene without recourse to the Federal Government in a timely and efficient manner.
“The Debt Management Office also needs to be strengthened and equipped to play its oversight role rather than being used as a mere rubberstamp for executive borrowing.
“In the near future, we may need to consider hedging global oil price fluctuations using “Crude Oil Futures”. This is an internationally adopted commodity exchange instrument, which seeks to lock future prices of oil to avoid losses from reduced prices. This, however, can only be effectively accomplished through the strengthening and modernization of our Commodity Exchange
“Whatever measures are recommended and put in place by the CBN, as long as the fundamental issues underpinning the development of a robust economy is not comprehensively addressed, it will all amount to chasing shadows.
“Government Policies should focus on the provision of adequate infrastructure which are necessary for economic growth. Government should address the security challenges to ensure national cohesion, social and political stability, all of which are required to boost investor confidence and grow the economy.
“If we p r o m o t e g o v e r n m e n t t o g o v e r n m e n t ( G 2 G ) partnership and devolve responsibilities and resources to where it can best be utilized for the common good, we will have opened a pathway to reduce the cost of governance.
“Developing accountable institutions for efficient service delivery will forestall leakages through corruption, mismanagement and misapplication of public funds. Above all, we must drastically sanction corruption and nepotism and create competitive services that will stimulate the growth of a private sector driven economy.
“Even though the economy is in a desperate situation that warrants desperate measures, Nigerians should not be made to face desperate times without hope for a better tomorrow”
The former Vice President explained that “the claim by the CBN that under the N200million Commercial Agriculture Credit Scheme, 166,790 jobs have been created since 2009 is despicable. This amounts to creating 33,000 thousand jobs per year at the cost of N1.2million per each creation. This is probably the most expensive way of creating jobs in agriculture anywhere in the world.
”The point that I am trying to make is that the mangers of our economy should be sincere with themselves and be sincere with Nigerians. Hiding under the umbrella of international economic development trend to justify our current predicament is misleading and deceitful.
”The economy is not as strong as they make us believe and the ‘global head winds’ cannot fully explain our dilemma. Key vulnerabilities in the economy have been noticed a long time ago.
”Months ago, I warned that that the economy was headed for hard times if changes were not made immediately. My position was informed by a number of reasons which I observed at that time, namely: Uncontrolled spending and lack of discipline in budgetary implementation both of which propelled the nation into foreign and domestic debt portfolios. Foreign debt ($3.9 billion in 2007 to $9.3 billion now) and Domestic borrowing (now N8.9 trillion).
“Rapid depletion of our external reserves at a height of $68 billion under Yar’Adua in 2008 to as low as $36.75 billion at the end of October 2014; Misapplication of the excess crude account which stood at $22 billion in 2008 but now as low as $470m with nothing much to show for it in terms of investment with recoverable revenues; Sluggish effort at diversifying into other non-oil sectors of the Nigerian economy with the attendant exposure to the vagaries of global economy and the unacceptable cost of governance in which a disproportionate percentage of the budget is being allocated to recurrent expenditures.”
Atiku said: “I warned that the trend will leave our economy undiversified and make us sleep-walk into austerity. Nigeria used to have in 2008, a Foreign Exchange Import Cover of up to 24 months but now have less than seven months cover despite experiencing nearly six years of oil boom”.
