Like everything Nigerian, government is at it again: blaming Nigerians for the recession, and how their craving for luxury goods, imports and wet appetite for foreign foods has led us to this mess. They recount how we have wasted all the petro-dollar, importing tooth picks and other useless items which are locally produced. They have also accused us of operating a mono-economy that runs only on oil as if oil and all oily matters, ranging from its operations, marketing, licensing to earnings that are not in the exclusive list and a preserve of the Federal Government.
Come to think of it, who issues import license for importation of petroleum products on which over 50 per cent of the country’s foreign exchange earnings are wasted? Who failed to build local refineries so that millions of jobless youths are gainfully employed? Who issues import licenses for all the luxury goods and who collects import duty on them?
The government misbehaviour, ranging from massive corruption to skewed fiscal federalism and total absence of a political will to take and implement the right decisions are to blame for the recession and not Nigerians. I am aware that the average Nigerian as a peasant farmer is merely waiting for government value-addition to excel. I still remember with nostalgia our beautifully laid ridges adorning our school farm. I am almost certain that every family in this country has a tomato farm, a pepper farm, an okro farm, a scent leaf farm and other kinds of vegetable farms within their houses. Nothing is therefore new in the deafening mantra of ‘‘go back to farming” and/or ‘‘diversify the economy” or we die. The only thing that is new and amazing is the rationale behind government prohibition of legitimate means of income and livelihood, including export of agro-produce.
Still talking about agriculture as the saviour of the universe, and the only known panacea for the recent economic recession, we seem to forget that we once had the Operation Feed the Nation (OFN), the Green Revolution, Back to Land, School-to-Farm, Work-to- Farm, and several other jargons that only succeeded in stuffing our naira into few pot-bellies, while making the people poorer and corruption-endemic. It also does appear to me that there has always been a missing link that has made agriculture and other government policies not to work in Nigeria. That missing link is a preponderance of value chain disorderly insanity, lack of incentives, financing and requisite infrastructure.
A leading factor is the administration of wrong prescription on a known ailment, premised on the misconception that monetary policy alone is all it takes for the economy to rebound. It is also erroneous to assume that the economy wound rebound only when the petro-dollar returns. How did countries like the United Kingdom (UK) and Turkey jet out of recession without oil? The Turkey example should be a case-study for Nigeria. I sincerely do not think it is the duty of the Central Bank of Nigeria (CBN) to unilaterally restrict, or is it ban, 41 items contributing to the Gross Domestic Product (GDP) without the imprimatur of the fiscal policy drivers. Similarly, the daggers-drawn position of both policy makers regarding the interest rate regime leaves much to be desired. Just as it leaves a sour taste in the mouth for managers of fiscal policies to emphasize indigenisation of investments while the monetary policy dictates otherwise? The conflict is both intra and extra, as I am yet to fathom the rationale for floating the exchange rate on one hand and restricting trade as represented by the 41 items on the other.
The biggest casualty of CBN’s meddlesomeness with fiscal policies is the Free Trade Zones (FTZs). Statutorily, the FTZ is a creation of statute, and regarded as a country within a country whose operations are not bound by the dictates of the CBN or any other body for that matter.
Originally called the export processing zones, the FTZ is meant to incubate businesses, transfer technology, earn foreign exchange for the country, and make goods and services available and affordable. But with a stroke of the pen, the CBN has decreed the free zone enterprises out of business and existence, losing in its wake these lofty ideals. Sales proceeds into the customs territory can no longer be repatriated, meaning that raw materials cannot be replenished, and factories grinding to a halt. Ab initio, all companies within the FTZs do not recourse to the CBN for their forex needs but through autonomous sources. These sources are now firmly under the control of the apex bank without opening other financing windows. The question then arises; should we float the currency or float the economy? And for how long shall we continue with the fire-brigade approach in a nation’s affair while sacrificing due process and rule of law on the altar of impunity, nepotism, favouritism, monopoly, and inconsistencies?
By floating the economy, the field becomes more even, impunity would be curtailed, confidence would be restored, investment would grow, market forces would determine pricing, profit, loss, and invariably, the right exchange rate.
Time was when the CBN informed Nigerians that commercial banks were awash with foreign currencies, and consequently restricted inflows into domiciliary accounts. The same CBN soon realised it cried wolf and quickly reversed itself. And there have been similar policy summersaults lately more than all past CBN regimes put together. When investors lose confidence in the pronouncements of a nation’s Apex bank, investments take a flight.
Nigerians can still swear that government position on Naira devaluation remains sacrosanct. But the CBN had introduced devaluation through the back door at over $1 to N470 as against the $1 to N197. How many real investors had taken advantage of this devaluation? All we have seen are portfolio investors and makers of shawarma. Again, with the introduction of the floating regime, Nigerians were assured that the gap between the inter-bank and the parallel market rates would shorten if not close. But what do we have? A widening gap of over N280/$. The wonder futures market and the FMDQ were simultaneously introduced with settlement in US dollars. This too has failed as the CBN resorted to Naira settlement at huge loss to investors. The ugliest side of this gamble was that it succeeded in pilling additional pressure to the already tensed parallel market, as investors were required to fund their domiciliary accounts before settlement in Naira. Even with the floating regime, everyone still rushes to the CBN for one approval or another for trade related issues instead of the ministries. The CBN has become so powerful that it dictates who should trade, where to trade, when to trade, price at which to trade, and in what currency and rate to trade. Why would any sensible investor go through all these rather than adopt a siddon look approach to messy jumble of misplaced iconoclasm?
It has therefore become overdue for government to restore confidence in the economy by cleaning the augean stable whose prescriptions has defied all known financial and economic logic and brought the economy down to its knees. As long as these doubly manipulative standards persist, resulting in air of uncertainty and unpredictability foisted on us by bad managers, manifesting in the deepening of recession, responsible investors would remain sceptical.
As a country, recession or not, what is our real economic objective? Is it to conserve foreign exchange or to create jobs, is it to open up the economy and make goods and services easily available and affordable, or to protect and encourage monopoly or to grow the GDP or to suffocate Nigerians?
A country under
economic bondage
With unclear and undefined economic objective, coupled with apathy for investment the GDP must continue to fall in absence of trade and consumption. Elementary economics tells me that there is no production until the goods so produced gets to the hands and mouth of the final consumer. So, when the government asks us to go into local production, they seem to forget or discard the other factors in the production value chain. They forget most importantly, that production cannot thrive yet under the harsh economic fundamentals. For instance, we have only about 4000 megawatts for over 180 million people; they forget that they have provided no kobo in the budget for the private sector who are the acclaimed drivers of the economy; they forget also that interest rate has remained at triple digits; they forget that insecurity is everywhere; they forget that herdsmen have hitherto remained uncontrollable where cows compete with farm owners; they also seem to have forgotten that they have provided no silos and preservation systems for agricultural produce. They have forgotten that the problem with farming and agriculture has been that of processing and government obnoxious laws inhibiting its export from few poorly maintained ports. We probably seem to have forgotten that the forex requirement in Agricultural processing is over 45 per cent and that the Nigerian Maritime Administration & Safety Agency (NIMASA) and most government agencies collect their fees in foreign currencies.
The way things are, it does appear to me that we may succeed in moving from a mono economy predicated on oil to another mono economy on agriculture. That is if we are lucky. But if not, chances are that we may end up in one-man-economy.
Fiscal federalism not negotiable
As long as everyone crawls to Abuja to get one approval or the other, get one license or one permit from a recalcitrant Federal Government agency or personnel, and losing several man-hours in the process, our economy would remain unhealthy. As long as issues of solid minerals, commerce and trade remain on the exclusive legislative list, the economy must continue to suffer. As long as the Federal Government fails to unbundle itself, and puts more resources in the hands of state and local government areas, the economy may rebound but it will never be strong. As long as the Federal Government does not break the numerous bureaucratic bottlenecks militating against businesses and ease of doing business in Nigeria, chances are that the economy may never grow. Unless and until government reduces incidences of pre-operational expenses, reverses all the retrogressive policies, heals the land of economic injustices, the economy must continue to suffer even after overcoming the current recession. These are economic realities and not my wish.
Here we are, a government that claims it has no business being in business and without capacity to manage public enterprises and in fact, privatising and commercialising its assets, setting up Asset Management Corporation of Nigeria (AMCON) and acquiring private investments which it kept under lock and key. Why would such businesses not die? And why would jobs not be lost? And why would the GDP not collapse?
If monies given to banks which are used in decorating balance sheets are reversed to the credit of owners of such manufacturing concerns, Nigeria may get out of recession sooner than later.
Is it not funny, if not iniquitous that while government is restructuring bad loans of state governments, half of which went into private pockets, and even giving more loans, it is busy blackmailing and publishing names of genuine and patriotic investors who could not meet their legitimate obligations under the harsh economic conditions they operate, under what they call ‘name and shame’, some of whom were owed by these governments, while others never borrowed at all from such banks. While other nations desirous of growth are incentivising and bailing out, we are naming and shaming.
What is level in this field?
Ufomba, an industrialist is a chieftain of the All Progressives Grand Alliance (APGA).
