Tag: recession

  • Report: Nigeria, South Africa likely out of recession

    Report: Nigeria, South Africa likely out of recession

    Nigeria’s economy is out of recession, a report said on Sunday

    The economy broke out of a long slump in the second quarter with a median forecast for 1.55 per cent year-on-year growth, the Reuters report said.

    The report also shows that South Africa quit shrinking with 2.2 per cent quarter-on-quarter growth.

     South Africa and Nigeria have a lot in common. They are Africa’s two biggest economies and are both making their ways out of recession.

    Nigeria entered recession late 2015. South Africa confirmed a technical recession in the first quarter of this year.

    Reuters report shows strong growth will not show up until business confidence is restored.

    The report indicated that Nigeria and South Africa have both benefited from a recovery in commodity prices since early 2016.

    CEO of Rich Management in Nairobi Aly-Khan Satchu said: “Both countries have bounced off the bottom, but the sustainability is in question. Nigeria needs a single FX policy and South Africa needs more policy certainty.”

    “We expect a return to positive year-on-year growth in Nigeria, helped by improved foreign exchange availability and a recovery in oil production,” said Razia Khan, head of Africa research at Standard Chartered.

    Gaimin Nonyane, head of economic research at Ecobank, said she expected the positive growth trajectory to be maintained.

    In South Africa, catering and accommodation sector was the worst performer in the first quarter. The sector contracted 5.9 percent.  The key manufacturing sector shrank 3.7 percent.

     “Recovery in manufacturing in the second quarter should help drive a quarter-on-quarter acceleration, but growth is expected to remain weak overall,” said Khan.

    Khan added that agriculture should provide some lift to growth but other sectors are likely to only see negligible growth because of waning confidence.

  • Nigeria not out of recession, union claims

    The National Union of Shop and Distributive Employees (NUSDE) has said reports by the government that Nigeria was on  its way out of recession were mere propaganda.

    At the National Executive Council (NEC) meeting of the union in Owerri, the Imo State capital, NUSDE National President Kelly Ogbaloi said it would be wrong to accept that recession was no more when there had not been any reduction in prices of goods and services.

    He said: “It has to be made clear that recession cannot be ordinary calculations in figure and ‘maradonic’ statistics; it is something tangibly felt by every worker that lives in Nigeria.

    “It means true poverty, hunger, diseases and sickness. It is the denial of basic education, health care and other social services. It is the violation of the right and privileges of the working people as employers of labour now cut corners in the circumstance to beat the stronghold of recession, and thereby traumatise the workers and decent work escapes to oblivion.”

    Ogbaloi expressed concerns that workers’ children could not go to good school because of high fees, adding that staple food still remained unaffordable.

    He called on the government to be disposed to what the people need, noting that the communities and other bodies that elected them should see the government working well.

    According to him, political leadership was a framework for delivering benefits to the people, touching the life of the average citizen, affordability of good housing by the people and other infrastructure that make governance meaningful.

  • Recession: Hope rises as economic indicators improve

    Recession: Hope rises as economic indicators improve

    The economy may be on its way out of recession. Besides the International Monetary Fund (IMF) prediction of 0.8 per cent growth by the end of the year, the feedback from critical sectors of the economy shows that the boom time is near. Improved access to foreign exchange, rising crude oil production and upbeat in the manufacturing sector are signs that the recession may not last beyond the third quarter as predicted by the Central Bank of Nigeria (CBN), writes COLLINS NWEZE. 

    If the latest International Monetary Fund (IMF) Report on Nigeria is anything to go by, the country may be on the way out its first recession in three decades. The IMF report, which is positive, has given hope of economuic recovery.

    The IMF is not the only institution that is upbeat about the Nigerian economy in the months ahead, the performance of key sectors within the economy and the improvement in foreign exchange (forex) access to both retail and wholesale users are also pointers that better days lay ahead.

    In the Purchasing Manager’s Index (PMI) for July released last Wednesday by the Central Bank of Nigeria (CBN), the statistics showed an expansion in manufacturing activities for the fourth consecutive month. The non-manufacturing sector growth also entered the third month.

    The sustained development in PMI readings since the turn of the second quarter coincides with the period the economy recorded improvements in forex liquidity and fiscal spending. That was as a result of rebound in oil earnings and external reserves, which are attributable to largely stable oil prices and increase in production volumes as well as increased flexibility in the CBN’s forex policy.

    The July manufacturing PMI grew from 52.9 points in June 2017 to 54.1 points in July – the highest level since the CBN started the data series in 2014. The major drivers of the expansion were: production level (59.3 points), new orders (52.7 points), supply delivery time (51.3 points), employment level (51.8 points) and raw materials inventory (53.6 points), sub-indices which grew 1.1 percentage points, 1.7ppts, 1.0ppt, 0.7ppt and 1.3ppts.

    The outcome of the enhancement in business sentiment was evident in 10 of 16 sub-sectors, which recorded growth in the period. They are: Appliances/components, computer/electronic products, cement, primary metal, chemical/pharmaceutical products, food, beverage & tobacco products, textile, apparel, leather/footwear, printing & related support activities, paper products, electrical equipment and transportation equipment all expanded.

    However, petroleum/coal products, fabricated metal product, furniture/ related products, non-metallic mineral products and plastics/rubber products declined.

    Likewise, the non-manufacturing PMI rose to 54.4 points (compared to 54.2 points in the previous month – June 2017) after two consecutive months of progress. The composite index was buoyed by increases in business activity (56.8 points), new orders (55.1 points), employment level (54.0 points) and inventory (51.9 points).

    Accordingly, of the 18 non-manufacturing subsectors, 16 recorded growth.

    Explaining the results, Managing Director of Afrinvest West Africa Limited, Ike Chioke, said a composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.

    He said in an emailed report: “The positive trend reveals optimistic perception of manufacturers and business owners for the second half of the year on account of forex market flexibility and stability in cyclical anchors of the business cycle – oil production and prices – as well as economic development plans of the federal government; thus, further reaffirming our positive outlook for growth in 2017 (+0.8 per cent for 2017 fiscal year growth forecast).”

    Nonetheless, he said that the Gross Domestic Product (GDP)  growth below three per cent will have little impact on quality of life in the country as per capital income growth is likely to remain negative; hence, the need for more constructive policymaking to address structural constraints to high and sustainable growth – high interest rate, forex market distortion and low investment spending.

     

    Equities

    The equities market has equally benefitted from increased foreign exchange inflows into the economy. The All Share Index advanced on the last four trading days of last week, gaining 1.5 per cent week-on-week to settle at 37,425.56 points on Friday while year-to-date gain expanded to 39.3 per cent.

    Investors also accumulated N194 billion as market capitalisation advanced to N12.9 trillion, while the activity level improved as average volume and value traded rose 26.5 per cent and 319.3 per cent  to N502.6 million units and N22.8 billion respectively.

    Chioke said: “Although valuation multiples have increased since the macro-themed rally started in April, that does not imply the market is overvalued and we remain convinced there are opportunities for investors to key into.

    “Thus, even as the earnings season draws to a close, we expect the broader index to sustain the current momentum to deliver a positive return in the last five months of the year, albeit moderate in the single digit range.”

     

    Forex market

    Last week, the CBN conducted its weekly SMIS sales of $100 million in order to buoy forex liquidity whilst activities in other segments of the forex market recorded marginal improvements. At the official market, the CBN continued to keep rate steady, as the Naira maintained the penultimate Friday’s close of N305.65/$1 on the first session and appreciating slightly to N305.55/$1 at the weekend.

    Meanwhile, at the parallel market, the Naira touched another 2017-high of N363.00/$1.00, both on Tuesday and Wednesday, but depreciated to N365.04/$1.00 on Thursday, eventually closing the week at that level, indicating a flat week-on-week close.

    During the week, activities at the Investors & Exporters window remained robust, with $994 million recorded (as at Thursday) compared to $1 billion the previous week.

     

    IMF on Nigeria

    Between July 20 and 31, the IMF team, led by Amine Mati, was in the country to discuss recent economic and financial developments, update macroeconomic projections and review reform implementation.

    At the end of the visit, Mati, who is the Senior Resident Representative and Mission Chief for Nigeria at the IMF, issued the following statement: “The economic backdrop remains challenging, despite some signs of relief in the first half of 2017. Economic activity contracted in the first quarter of the year by 0.6 per cent, mainly as maintenance stoppages reduced oil production. However, following four quarters of negative growth, the non-oil economy grew by 0.6 per cent (year-on-year), on the back of a rebound in manufacturing and continued strong performance in agriculture.

    The various indicators suggest an uptick in activity in the second quarter of the year. Helped by favorable base effects, headline inflation decreased to 16.1 per cent in June 2017, but remains high despite tight liquidity conditions.

    The IMF said that preliminary data for the first half of the year indicate significant revenue shortfalls, with the interest-payments to revenue ratio remaining high (40 per cent at the end of June) and projected to increase further under current policies.

    The high domestic bond yields and tight liquidity continue to crowd out private sector credit. Given Nigeria’s low growth environment and the banking system’s exposure to the oil and gas sector, non-performing loans increased from six per cent in 2015 to 15 per cent in March 2017 (eight per cent after excluding the four undercapitalised banks).

    The government has started implementing a number of important measures to steer the economy out of the challenges. The Economic Recovery and Growth Plan (ERGP) is driving the diversification strategy and the security in the Niger Delta improved through strengthened engagement.

    The new Investor and Exporter FX Window has provided impetus to portfolio inflows, increased reserves above $30 billion, and contributed to reducing the parallel market premium.

    The IMF said the important steps have also been taken in implementing the power sector recovery plan, introducing a voluntary income and asset declaration programme and moving forward the 60-day national action plan to improve the business environment. Progress is also ongoing within the oil and energy sector through implementation of a new funding mechanism for cash calls.

    It said: “However, the near-term vulnerabilities and risks to economic recovery and macroeconomic and financial stability remain elevated. At 0.8 per cent, growth in 2017 will not be sufficient to make a dent in reducing unemployment and poverty.

    “Concerns about delays in policy implementation, a reversal of favorable external market conditions, possible shortfalls in agricultural and oil production, additional fiscal pressures, continued market segmentation in a foreign exchange market that remains dependent on central bank interventions, and banking system fragilities represent the main risks to the outlook.

    “Acting on an appropriate and coherent set of policies to enhance an economic recovery remains urgent. This includes the immediate implementation of specific priorities that will help achieve the ERGP goals.

    “In the near term, a stronger push for front-loaded fiscal consolidation through a sustainable increase in non-oil revenues would be needed to create space for infrastructure spending, social protection, and private sector credit.

    “This should be simultaneously accompanied by a monetary policy that avoids direct financing of the government and is kept sufficiently tight, a unified and market-based exchange rate, and rapid implementation of structural reforms.

    “Pursuing these policies would help reduce macroeconomic vulnerabilities and create an environment for a diversified private-sector led economy.

    “The team held productive discussions with senior government and central bank officials. It also met with members of parliament, representatives of the banking system, private sectors, civil society, and international development partners. The team wishes to thank the authorities and all those with whom they met for the productive discussions, excellent cooperation, and warm hospitality.”

     

    Inflation figures drop

    The nation’s inflation rate fell for a fifth consecutive month in June even as food-price growth surged. Inflation eased to 16.1 per cent from 16.3 per cent in May, the NBS said. The median of 15 economists’ estimates compiled by Bloomberg was for 16 per cent. Prices rose 1.6 per cent in the month.

    Inflation has been above the upper end of the central bank’s target band of six percent to nine per cent for two years. The CBN Governor, Godwin Emefiele, kept the main policy rate at a record high of 14 per cent since last July to fight price growth and support the Naira even as the economy has contracted for five consecutive quarters.

     

    Forex restriction on 41 items

    The CBN restriction of 41 items from accessing forex from official windows has also helped to resuscitate domestic industries and improve employment generation.

    More than two years after the policy shift, its objectives, such as encouraging local production of the affected items and boosting local industries, suffocated by the importation of competing products are being realised.

    The policy implementation was part of the homegrown solution, introduced by Emefiele, to sustain forex market stability and ensure the efficient utilisation of available forex to grow critical segment of the economy.

    This policy implies that, those who import these items can no access foreign currency through the official window to pay their overseas’ suppliers. Rather, they will have to source forex from the parallel market or Bureaux de Change (BDCs) to pay for their imports.

    The CBN chief said the bank has been developing home-grown policies to surmount challenges that confronted the economy in recent times.

    For instance, over the last 10 years, the CBN had invested over N2 trillion in funding agriculture, Small and Medium Enterprises (SMEs) and other manufacturers in the agriculture value-chain.

    The regulator said the apex bank would continue to support operators in the agriculture, SMEs and manufacturing enterprises through its development finance initiatives, with a view to complementing the federal government’s efforts at diversifying the economy and ensuring that the nation is self-sufficient in food production.

    Speaking on the 41 items on Arise Television, Emefiele said: “The issue of those 41 items, unfortunately, is one that has been on my table. But, I think it is important that in the life of an economy, there is a need for us to take a look and ask ourselves: what really are we importing into this country?

    “When this thing started, we said: why should we import rice? Why should we import toothpick? Why should we import palm oil? At a point in this country, Nigeria was the largest producer and exporter of palm oil and we were controlling 40 per cent of the market share.

    “So, there is the need for us to say at this time when there is a scarcity of forex, it should be set aside for the import of items we cannot produce in this country.”

    Emefiele’s logic is that when items, such as palm oil, are imported, the local producers are made poorer.

    He said: “When we import rice, we impoverish the rice producers in Abakaliki, Kebbi, Sokoto, Katsina and other parts of the country. We need to look at that very seriously because God has blessed this country, with good climate, good weather, which should be taken advantage of.

    “Since we can produce these things, let’s use them to feed our people so that we can save foreign exchange for the country.”

  • Recession: ‘Agencies must innovate or die!’

    There is an urgent need to tackle the lingering economic recession especially as it affects the integrated marketing communications subsector.

    The above concern formed the kernel of discussion at the just concluded Annual General Meeting (AGM) of the Association of Advertising Agencies of Nigeria (AAAN) held in Lagos.

    It was obvious from the meeting that the industry has been pinned to a bad corner and they needed to find a way out of the quagmire which though has existed for long but has been made even worse by the economic recession. Some of the stakeholders feared that the industry has very limited options as it must either innovate or die.

    Former president of the association and CEO TBWA/Concept Kelechi Nwosu, said there is a disruption of the traditional agencies model, but unlikely that the industry will perish. “It’s very unlikely that the industry will perish if we do what we are supposed to do. Also we need to unbundle, but we must do it in a much more efficient manner, which means shared resources, shared value.How can you have a solution that makes sense and its integrated but do not rest under your roof?” Kelechi asked.

    Besides, he said operators need to look at other offerings and different markets. “At TBWA we have talked about SME shops. There is enough to chew for more than 200 percent of the current agencies. But for us to go into that world, we have to change our current mindset. What they are asking of us is actually consultancy.”

    Echoing similar sentiments, the current publicity secretary of the association and CEO X3M Ideas, Steve Babaeko, said what the industry is witnessing today is something that have been keeping a lot of the AAAN members awake at night. “I just came back from Cannes where a huge agency group like Publicis came up to say they were not going to attend Cannes for 2018 and I believe what may have instigated that decision (I am not sure) was that Cannes, though an advertising agency event, for the first time, the tech companies dominated the advertising agencies. The first thing that assaults your presence when you get to the event was this huge canary yellow merry-go-round that you see installed by Snapchat. And all of the beachfronts that used to be the properties of ad agencies were dominated by Google, Facebook, YouTube etc. So for the first time advertising agencies became spectators at their own event,” he stressed.

    “These kinds of events pose challenges at us as a group of entrepreneurs. I think consolidation might just be the saving grace. We need to find a way to network. In Nigeria it becomes even more worrisome because the clients we are serving are closing shop because of the economy, but more advertising companies are opening shop. That inverted pyramid I think is very frightening,” Babaeko lamented.

    MTN Transformation executive and former executive director at DDB, Bayo Adekanbi, however assured that all hope is not loss. “I think there is hope. But the fact is that there must be a deliberate effort to package and build ourselves to the level of respect. There is a lot of capacity in the industry but we must make a deliberate effort to build the practice. A lot has to do with the agency leaders. I am going to give a classical example, when I was an Executive Director at DDB, we had a session where I needed to do a presentation, l am bringing to the agency, Engineers, first class scientists, physics graduates. It didn’t make sense, but I give all the kudos to my Chairman, Mr. Enyi Odigbo, who said ‘Bayo whatever you need to do go and do it.’ Then we recruited lot of first class guys. We built the first data base of historical advertising, PR analytics. As an agency in 2008, what did that do for us is, it did not bring money, but it made clients to respect us. We sent detailed report to them free of  charge.”

     

  • Recession-induced depression on the increase

    Recession-induced depression on the increase

    A Consultant Psychiatrist, Dr Adeyemi Egbeola, on Saturday in Lokoja, decried the increasing rate of recession-associated clinical depression in Nigeria.

    Egbeola, who works at the Federal Medical Centre (FMC), Lokoja, made the assertion at the 2017 Annual General Meeting (AGM), Scientific Conference Week of the Nigerian Medical Association (NMA), Kogi chapter.

    The theme of the conference was: “Economic Recession and The Rise of Depression”.

    According to him, a significant association have been demonstrated between macroeconomic indicators in recession and clinical depression as a mental illness.

    “For every suicide committed, there is an average of 20 attempts (ratio 1:20), due to unemployment, self-rated mental health, debts, financial difficulties and other common mental health issues.

    “Depressive disorder account for 80 per cent suicide, and hopelessness is the most predictive indicator of suicide, a depressive thought pattern.

    “In 2015 from January to November, record show that 25, 267 patients were treated on mental health at the Federal Neuro-Psychiatric Hospital, Yaba Lagos, while the number increased to 53,287 in 2016 within the same period.

    “At the University of Ilorin Teaching Hospital (UITH), Ilorin, at the Adult Out-Patient Department (OPD), 3,500 patients were treated in 2015, while the number rose to 4,311 patients within the same period in 2016,” Egbeola said.

    He urged the Federal Government to intensify training and supervision of low level manpower at the Primary Healthcare Centre (PHC).

    The consultant psychiatrist said that government should also provide cheap, but effective medications and use of routine screening instruments to facilitate detection and reaction.

    He also called for strengthening protective factors and mitigation of stressor, promotion of healthy lifestyle, adequate sleep, exercise, nourishing balanced diet, and avoid smoking and moderate use of alcohol.

    In his remarks, Gov. Yahaya Bello, commended the NMA for their support and commitment in delivering quality healthcare services to the people of the state, calling for more synergy and collaboration.

    Bello said that the health sector had been one of the top most priorities of his administration, restating his commitment to use the available resources to better the lives of citizens.

    He said that six ambulances were recently distributed equitably to six local governments across the three senatorial districts of the state.

    Bello, represented by his Chief of Staff, Mr Edward Onoja, said that recruitment of health workers were ongoing in the state.

    The governor said that the state government had initiated a healthcare package tagged, “Bello Healthcare Plus” for women and children to be receiving free treatment and drugs across the 21 local government areas of the state.

    Bello, however, urged the people to take advantage of various social intervention and agricultural programmes available to them in the state to improve their standard of living.

    In his speech, the NMA Chairman, Kogi chapter, Dr Godwin Tijani, said that the meeting was part of the advocacy aimed at improving the healthcare services to the people of the state.

    Tijani said that the theme of the 2017 AGM “Economic Recession and the Rise of Depression”, was carefully selected due to the current economic recession in the country.

    According to him, the programme will enable them to examine the implication of economic recession and come up with suggestions on how to reduce the rise in depression in the society.

    “It remains our firm goals and beliefs that Kogi NMA, partnering with the state government will turn around the poor health indices in the state, especially reducing maternal and perinatal mortality.

    “We commend the sincere efforts and achievements of Gov. Yahaya Bello in the health sector since inception of his administration, and the cordial relationship NMA has been enjoying with the government.

    “NMA also commend the singular act of reinstating and payment of salaries and arrears of our colleagues employed in 2015,” Tijani said.

    He, however, appealed to the governor to look into the issues of eight of their members that were still on the uncleared list and many members that were still grossly underpaid. (NAN)

  • CBN chief Emefiele lists potential options in a recession (II)

    CBN chief Emefiele lists potential options in a recession (II)

    In his lecture entitled: “The dilemma of monetary policy and exchange rate management in a recession: Potential options for Nigeria”, at the Second Homecoming of the Department of Economics, Faculty of Social Sciences, University of Nigeria at Princess Alexandra Auditorium, University of Nigeria, Main Campus, Nsukka Central Bank of Nigeria (CBN) Governor Godwin Emefiele states how the import restriction policy on some items has helped the local economy. He also says Nigeria is on its way out of recession.

    What then can we do to remedy this situation? Is it our inflexible destiny or collective decision to rely so much on other countries for her basic needs? What kind of future do we really want as a people? I do not think that one policy decision from any arm or agency of government can answer all these questions. But in the ensuing paragraphs, I will proffer my suggestions and present a vigorous defence of the bank’s current policies, which are geared towards engendering growth and curbing inflation.

     

    Policy options

     

    Rebuild our infrastructure:

    Investing in basic infrastructure including roads, bridges, airports, railways and information technology is not only good in terms of immediate job creation; it acts as a catalyst to the movement of goods and services across the country. A recent World Bank study estimates that sub-Saharan Africa’s infrastructure deficit, especially in power and transportation, is costing us about two percentage points of GDP growth per annum. This study also indicates that about $93 billion per year would be needed to tackle the region’s infrastructural challenges. Although Nigeria has relatively better infrastructure than many of her African peers, our core stock of infrastructure is estimated at about 25 per cent of GDP. Given that most middle-income countries of Nigeria’s size have core infrastructure of about 70 per cent of GDP, the African Development Bank (AfDB) estimates that we have an infrastructure-funding gap of $300 billion.

    Obviously, our fiscal resources alone would be inadequate to finance this gap. Therefore, it is critical that we begin to consider innovative mechanisms and ideas to do so. We need to explore opportunities for Public Private Partnerships (PPP) for similar opportunities in infrastructure projects that could offer lucrative returns to investors and help drive economic growth across the country.

     

    Pursue growth-enhancing

    fiscal policy

    More than ever before, it is now critical to concentrate our best efforts in ensuring that fiscal policy is targeted at improving productivity of labour, increasing disposable incomes for workers, and deploying resources to creating an enabling environment for investors. We need to look at how fiscal policy can help stimulate household consumption and business investments. These two make up more than 85 per cent of Nigeria’s GDP by expenditure.

     

    Jumpstart agriculture

    and agribusiness

    Agriculture remains the largest employer of labour in Nigeria and contributes about 24.2 per cent of our GDP. In addition, a good share of the demand for FX today go directly to importing agricultural produce. So, the CBN has both a direct and indirect rationale to ensure that this sector is revived in a significant way. In this regard, we are gratified that the CBN’s Anchor Borrowers’ Programme, together with other initiatives like the Commercial Agriculture Credit Scheme and Nigeria Incentive-based Risk Sharing System for Agricultural lending (NIRSAL), are proving to be successful in several states. To date, the bank has committed close to N29 billion in the Anchor Borrowers’ Programme with active participation across 24 states. In Kebbi State, over 78,000 smallholder farmers are now cultivating about 100,000 hectares of rice farms. It is expected that over one million metric tonnes of rice will be produced in that state alone this year. The positive impact of catalising domestic agricultural production is that we restore wealth and create employment in our rural communities.  These were jobs that were exported to other countries while we impoverished our people. The CBN remains committed to doing more in the identified crops such as rice, maize, sorghum, tomatoes, cassava, cocoa, cotton, dairy, and groundnut. We also need to find ways to make land cultivation much easier especially for smallholder farmers. In this regard, the NIRSAL can assist with technical knowledge and deployment of relevant GIS and Satellite imaging that will realise this within a short period of time.

     

    Explore opportunities

    for more revenue

    There are several ways we can raise additional revenue to finance the increased expenditure that is needed to engender fast and sustainable growth in the economy. I think we can consider a full implementation of the 2003 Cabotage Act. This Act stipulates that all cargoes and passengers in the inland and coastal waters be transported by ships and ferries built, owned, crewed and manned by Nigerians. Contrary to the requirement of this Act, there are several foreign-owned vessels providing shipping services locally. Out of about 600 ships that operate within our waters, only about 60 of them are owned by Nigerians and are mostly idle, in violation of the Act. Industry sources suggest Nigeria may be losing as much as N2 trillion annually from this anomaly. In addition to raising revenue, a full implementation of the Act could also spur job creation, capacity building, and significant backward integration.

     

    Pursue non-oil exports

    From preliminary analyses of global trade trends and discussions with potential trade partners, it is now increasingly evident that Nigeria can benefit significantly from tapping into the market for certain goods, which are in high demand. For example, the demand for Halal meat and sesame across the Gulf Cooperation Council (GCC) countries is huge. In fact, we have credible information that the Saudis may need up to 120,000 heads of frozen goat/sheep per week from Nigeria. Similarly, the demand for cashew nuts and shea-nut butter across the world is rising. Nigeria has comparative advantage in all these products and can quickly tap into the vacuum created from the sharp fall in supply of these products from their erstwhile major suppliers. From these, we can earn forex to bolster our Reserves while also creating jobs and engendering broad-based economic growth.

     

    Pursue import-reducing policies

    In view of the fact that oil prices would remain low for a long period, it is clear to us that FX revenue inflows will remain low, with relatively low FX Reserves, for a while. Given this scenario, we need to take bold and decisive steps at fundamentally changing the structure of our economy. Of course, monetary policy alone cannot achieve this but it must do its part. Throughout this speech, I have talked about the damaging effects of Nigeria’s unsustainable propensity to import. In line with Winston Churchill’s admonition to “never let a good crisis go to waste”, the CBN believes that it is high time we started looking inwards and stopped supporting the importation of items that we can produce locally, using Nigeria’s hard-earned forex.

    I must hasten to add that while they may seem controversial, variants of this policy have proven to be highly effective in other climes and even here in Nigeria. For example, throughout the early days of South Korea’s economic renaissance, the government intermittently used excessively stiff tariffs, quantitative restrictions and prohibitive inland taxes to effectively ban many items. In the Western Hemisphere for example, the U.S. prohibits imports of generic Canadian drugs that are way cheaper but just as effective as those locally made in the U.S.  And for almost a decade now, Indian retailers have been waging a war against their government’s proposal to open up the retail sector to more efficient global players like Wal-Mart. We all know how European governments have helped local taxi drivers in their battle against the new, less costly, and more efficient American taxi company, Uber: a service that uses a smartphone app to get users taxis from the comfort of their locations.

    And here at home, variants of this policy were used to achieve significant sufficiency in cement, a product whose importation could have been costing us over $3.2 billion in FX Reserves annually. In effect, therefore, this policy needs to be supported not just in response to the pressure on the Naira but as an opportunity to change the economy’s structure, resuscitate local manufacturing, and expand job creation for our citizens.

    Take rice imports, for example: why should we keep allocating scarce FX to rice importers when vast amounts of paddy rice of comparable quality produced by poor hardworking local farmers across the rice belts of Nigeria are wasted, and farmers are falling deeper into poverty while we export their jobs and income to rice producing countries abroad? Few decades ago, Nigeria was one of the world’s largest producers of palm oil but today, we import nearly 600,000 metric tonnes while Indonesia and Malaysia combined export over 90 per cent of global demand. Under these circumstances, I believe it is appropriate, and in fact, expected, that the CBN contributes to protecting the jobs and incomes of local farmers, using some of the same principles Western Economies use to justify the protection of their farmers through huge subsidies.

     

    Curb inflation

    In order to tackle inflation, we must first understand what kind of inflation we have in Nigeria. Is it demand-pull, with too much money chasing few goods, or cost-push where supply constraints result in few goods in marketplace? Our analyses at the CBN suggest that we have cost-push inflation in Nigeria. Indeed, we currently have several supply constraints that can be christened “Three Problematic Fs”: Food: Low harvest, disease outbreak, northeast crisis, etc; Fuels: High electricity, PMS, and Kerosene prices; and forex, high demand and low supply of FX

    Given this analysis, it is easy to see why the CBN is doing a lot to ease these supply constraints. In response to recent calls by notable persons and groups on the CBN to reduce the country’s high lending rates, I think it is important that I share my views on this issue. Let me first state that I have long been a believer in low interest rates. In fact, when I unveiled my vision for the CBN on resumption of duty in June 2014, reducing interest rates was one of my cardinal priorities. Yet, it is important that we discuss this issue based on facts, rather than politics and/or emotions.

    First, interest rates are a veritable tool for curtailing inflation and with inflation at over 16 per cent; the CBN would be abjectly failing in one of its key mandates if it cuts interest rates at this time. Second, for those who say we need a rate cut to spur growth, we need to be reminded that high inflation is inimical to economic growth. Indeed, many empirical studies including at the CBN Central Bank of Nigeria – 2014 and 2017 – have estimated the threshold level for Nigeria at which inflation becomes significantly growth retarding to be 10 – 12.6 per cent. With Nigeria’s at 16.1 per cent, one must question the judgment of cutting interest rates at this time. Finally, I think it is important to underscore that interest rates reflects not just the cost of capital but also the cost of doing business, and so, we need to also look at interest rates from the perspective of the lender. Given that most banks have to individually provide security, power, and other infrastructure, it is not surprising that some of these costs are passed on to customers in the form of high interest rates. Notwithstanding these facts, we will continue to use moral suasion to encourage commercial banks to be more considerate in interest charges on customers.

    Let me note at this juncture that one of the reasons the CBN ventured into development banking was to minimise the effects of high interest rates on customers particularly in some select sectors of the economy like core manufacturing, agriculture and micro small and medium enterprises. This push started in 1977 with the Agricultural Credit Guarantee Scheme, and since then, the bank has intervened through various developmental initiatives, all at single digit interest rates. To date, the CBN has disbursed over N393 billion in 490 projects under the Commercial Agriculture Credit Scheme. The CBN has also disbursed over N29 billion under the Anchor Borrowers programme, N150 billion under the MSME scheme, and N236.4 under the Power and Aviation Intervention Fund. In addition, through its Refinancing and Restructuring Facility (RRF), the CBN has disbursed over N400 billion to core manufacturers through the restructuring of their loans in DMBs into longer term facilities, thereby helping to stimulate the economy with immediate liquidity for growth of the manufacturing sector. Combined, these schemes have created over 6.7 million direct jobs and a lot more indirect jobs.

     

    Strong policy coordination

    Finally, in times like this, there is usually the need for strong policy coordination between the key aspects of economic policymaking space. In Nigeria, this would include fiscal, monetary, exchange and trade policies, which must be targeted at protecting farmers, companies and industries that are committing resources to support government’s drive to diversify the economy away from oil and fossil fuels.

    I am not unaware of the short-term pains we are all going through right now. But I urge you all to use it as an opportunity to look inwards, diversify our economy, produce locally, and create jobs for our unemployed youths. We are a resilient and hardworking people. Since gold only glitters after it has gone through enormous heat, I am confident that out of these difficulties would come our very best ideas and decisions. We definitely cannot survive as a people by importing everything and anything. Even when we disagree about the way forward, we need to treat each other with respect and fairness. We cannot keep suspecting one another and impugning motives for people’s actions.

    Well, ladies and gentlemen, you would agree with me that whatever you do, even in good faith, someone else would have a different idea. We should, therefore, never lose sight of what is important. We should remain resolutely committed to the course and be motivated by the achievability of our desire to strengthen the macroeconomic management space and performance.

    Fittingly, to end my address I will lean on the sagacity of Abraham Lincoln portrayed in these words:

    “It often requires more courage to dare to do right than to fear to do wrong.” Hence, “neither let us be slandered from our duty… nor frightened from it by menaces of destruction… Let us have faith that right makes might; and in that faith let us to the end dare to do our duty as we understand it.

     

  • Recession to end this year, says Emefiele

    Recession to end this year, says Emefiele

    Central Bank of Nigeria (CBN) Governor Godwin Emefiele is optimistic that barring further shocks, Nigeria will exit the economic recession by December.

    Emefiele believes that with sustained efforts by the CBNand other monetary and fiscal authorities, the economy will bounce back before long.

    Delivering a lecture titled “The dilemma of monetary policy and exchange rate management in a recession: Potential options for Nigeria”  at the Second  Homecoming of the Department of Economics, Faculty of Social Sciences, University of Nigeria Nsukka (UNN), at the weekend, the CBN boss foreclosed the possibility of cutting benchmark interest rate from 14 per cent. Doing so, he said, would amount to failing in the apex bank’s responsibilities.

    He said the regulator would rather encourage commercial banks to be “more considerate in interest charges on customers”.

    Emefiele explained that with inflation rate still hovering above 16 per cent, the CBN would be failing in one of its key mandates if it cuts interest rates.

    The CBN-led Monetary Policy Committee (MPC) is expected to hold all rates constant, tackle inflation and consolidate on recent gains in the foreign exchange market as it meets today to review events in the global and domestic space.

    “Interest rates reflect not just the cost of capital but also the cost of doing business, and so we need to also look at interest rates from the perspective of the lender. Given that most banks have to individually provide security, power, and other infrastructure, it is not surprising that some of these costs are passed on to customers in the form of high interest rates,” he said.

    The CBN boss challenged tertiary institutions to focus on research that will boost economic development, and assured all that the CBN will work with stakeholders in education to stimulate research for the overall good of Nigeria.

    Emefiele, who is an alumnus of the institution, was concerned that the educational sector had lost its glory, noting that any country desirous of growing should focus on its health and educational sectors.

    On the economy, he said: “The growth indicators are there for us to see. In January 2017, inflation was 18.8; now inflation is down to 16.24. By fourth quarter of 2016, growth was negative 1.72 per cent, first quarter of 2017, growth had improved to negative 1.52 per cent, which means we’ve seen an improvement in growth by 1.2 per cent, if we see another 1.2 per cent growth in second quarter, we are out of recession,” he said.

    The CBN governor said the economic crisis had its roots in the external sector, following the continued slide in crude oil prices since the second half of 2014 as it impacted the country’s foreign exchange receipts and fiscal position, undermining the funding of the foreign exchange market. The recession could further be traced to  a long-standing culture of under-investment in domestic productive capacity, lending itself to decayed infrastructure, worsening conditions for doing business and persuading banks to channel credit to the real economy. According to Emefiele, in view of the global shocks, the nation officially slipped into recession after the second quarter of 2016 when the Gross Domestic Product (GDP) dipped by 2.06 per cent. “The growth rate declined by 1.70 percentage points compared with the contraction of 0.36 per cent recorded in preceding quarter and lowered by 4.41 percentage points compared with the growth rate of 2.35 per cent recorded in the corresponding quarter of 2015.”

    He said the fluctuations in the exchange rate (depreciation/appreciation) equally had great consequences on output, inflation and other components of aggregate demand, which directly impact the welfare of the ordinary man in a consumption and imports-dependent economy like Nigeria’s.

    Emefiele, who received the award of national development as a distinguished alumnus of the department, said while efforts were being made by the CBN and other bodies to get the country’s economy out of the woods, there were some policy options that could futher quicken the process.

    According to him, the government needs to spend more money in rebuilding infrastructure, explore more opportunities for Private Public Partnerships (PPP), pursue growth-enhancing fiscal policies and jumpstart agriculture and agribusiness.

    Others are: exploration of opportunities for more revenue, pursuit of non-oil exports, introduction of import reducing policies and curbing inflation, which stands at over 16 per cent presently among others. He said the nation’s propensity to import had also had damaging effects on the economy, noting that the CBN “believes that it is high time we started looking inwards and stopped supporting the importation of items that we can produce locally using Nigeria’s hard-earned Foreign Exchange”.

    The convener of Concerned Nigerian Professionals and Entrepreneurs Forum (CNPEF), Mr. Emeka Ugwu-Oju, who is the organiser of the event, said the lecture had come at the most auspicious time and would provide tentative road map to the future of the nation’s dream.

    He said professionals were bothered about the seeming indifference of the academic community (both staff and students) on burning national issues, such as the agitation for self determination and political/economic restructuring.

    “Intellectuals and professionals should be at the forefront for developing options for national renaissance and growth,” Ogwu-Oju said.

    Vice-Chacellor Prof. Benjamin Ozumba  described Emefiele as one of the best alumni of the university.

    Ozumba said: “Economists play vita role in any country as they determine what the economy of any country will look like.”

  • ‘The challenge of security, peace in times of economic recession’

    ‘The challenge of security, peace in times of economic recession’

    To Prof John A. Ayoade of the BOWEN University in Iwo, Osun State, political power can be reconfigured, though not without resistance, but it is not as easy to reconfigure the economy. The professor Emeritus, in this article, entitled:  “The challenge of peace and security in times of economic recession: The Nigerian experience”, says Nigeria must adopt a mission to drive a renewed vision and elect visionary leaders to truly evolve as a nation.

    Nigeria has been a political enigma from its colonial origin. It is not an organic whole and it has failed all efforts at integration, although the colonial founding fathers never intended it to be integrated. Unfortunately, their Nigerian successors invested more in the division for sectional political advantage. This was because shortly before political independence, politics as a process of allocation of powers and national resources has been appropriated as an allocation enterprise for sectional interests.

    With time, the gap between national and sectional interests widened to a point that national interest tended towards zero. This was worsened by the fratricidal internecine conflicts between and among the various sections of the country. What was the hope of Africa at independence became the sick man of Africa which suffered a military coup within six years of independence and became a subject of international mediation, first at Aburi, Ghana and later, in Kampala, Uganda. The likes of such countries as Gabon and Ivory Coast were availed diplomatic opportunities to meddle in the domestic affairs of Nigeria. A country which had hitherto prided itself as an expert in brinkmanship was at the verge of ‘sinkmanship’. The hope to join the higher League of Nations at independence vanished.  Succour came only after three years of civil war which was followed by a hurried post-conflict peace that did not address the causes of war.

    The conflict which has been simmering since then only awaits a trigger that is not too remote in the Nigerian political firmament. The drums of conflict are beating louder, publicly daring the authorities of the Nigerian State. As if the issues will go away, the Federal Government is carefully avoiding addressing the issue directly.

    The on-going political altercations arise from the fact that Nigeria has not evolved into a nation and neither has it attained a stage of integration that can drive development. As far back as 1947, the late Chief Obafemi Awolowo said that Nigeria was a mere geographical expression. It was, in fact, a country of diverse nations.

    Much later, he advised that the Nigerian Constitution should be constructed along the lines of the nationalities comprising Nigeria. Nigerians agreed with the country’s diversity. They however optimistically played it down by extolling the aspiration of unity in diversity when in reality it is a progressively diversifying diversity. As it turned out, the adversarial nature of the country continues to manifest in the continual incessant demand for the creation of new states from the old sates based on cultural differences and incompatibility. The language of demand on all occasions was so antagonistic that it is strange that resultant sates remain components of the same federation professing unity in diversity.

    The country of three regions at independence now stands at thirty six states with a recommendation by the 2014 Constitutional Conference that it should be increased to 54 states. Nigeria therefore operates a curious political arrangement of unity by division or, more appropriately, division in unity. It will appear that secession itself is an extension of the demand for the creation of separate states. Secession is only a difference of scale and not type because both are rooted in incompatibility. The multiplication of states in a country with a fixed boundary is an indication of a fissiparous relationship which is the root of national poverty and recession.

    By 2015, about two-thirds of the thirty six states could no longer meet the salary needs of the state civil service. The situation proved the point that most of the states were mere civil service states as petty traders and food sellers suffered shrinkage in their sales and income. The situation also proved the fragile nature of the economy because governments in Nigeria are the single largest employers of labour with a weak private sector. The prominent visibility of the public sector in employment is a result of the high profile and privileges of the colonial civil service. The post-independence successive governments in Nigeria did not help matters because they often vaunted the omnipotence of government without encouraging the diversification of skills, entrepreneurship, and public-private partnership. In the past, communities established secondary schools, constructed roads, and awarded local and overseas scholarships.

    Of recent, the governments arrogantly asked communities to hands-off such developments. It suddenly became an offence for parents/teachers associations to be involved in the development of the schools.

    The demand for the creation of states is both an indication of diversity as well as the conception of the state as a milk-cow. Most of the demands are based on the propensity to have a share of the ‘national cake’. The lexicon of the demand for new states shows very clearly the consumerist goals of the protagonists. Little or no attention is paid to social and economic viability of states but the income derivable form the federal purse.

    Occasionally, one hears such pious phrases and clichés like bringing government close to the people; equity; ethnic geo-political balance and federal presence among others which sidestep economic realities. All such demands are based on ethnic or geographic competition for siphoning federal resources. The end result is the mushrooming of unviable mini-states that serve only the needs of the political elite of such states. It is no surprise, then, that Nigeria has one of the highest per capita costs of governance with very high overhead cost, high recurrent cost and little capital cost. There is therefore relatively little national infrastructural investment resulting in mere subsistence governments.

    The different constitutional efforts for political integration have not yielded positive results because the benefactors devised the measures. These measures include the zoning of political offices, federal character, rotational presidency and other equalisation measures. Let us look at the zoning of political offices first. Zoning is neither a constitutional, nor statutory requirement. It was a device introduced by the defunct National Party of Nigeria (NPN) in the Second Republic. It is therefore more of a conventional advisory to political parties. It could enhance electoral appeal of a political party in contrast to another party that does not adopt the zoning formula. Being voluntary and advisory, the implementation has been haphazard. The lack of clarity of its implementation was one of the political shibboleths of Dr. Goodluck Jonathan’s bid for a second presidential term.

    First, there was the definitional problem of a second term. Second, there was the problem of observance of an agreement duly entered into. Finally, there was the problem of which was the legitimate zone to present the presidential candidate. Apart from the particular problem arising from the Jonathan presidency, zoning is also not necessarily clear-cut in a multi-party situation since each political party could decide its order of zoning.

    Thus in 2015, the All Progressives Congress (APC)  selected Mohammadu Buhari from the Northwest while the Peoples Democratic Party (PDP)  selected Dr. Jonathan from the Southsouth. Each party’s zoning arrangement may therefore contradict, which means, in effect, that zoning may be mutually neutralised by the parties.

    The much celebrated constitutional federal character requirement for appointments was meant to serve as mortar for the various nationalities. The constitutional clause was to the effect all executive bodies should mirror the diversity of the country by ensuring that appointments are made from all geographical parts of the country. The executive bodies must be representatively reflective of the plural nature of the country, such that no part of the country dominates the government while other parts are excluded or under-represented. At the drafting stages, this was conceived as the non-exclusion principle. The aim is to create a sense of belonging and a sense of collective ownership through participation.

    The clause therefore became an employment bill for the political class and a rationale for bloated executives. Nigeria therefore has a very high ratio of executive to the population that gulps funds for development. It has therefore contributed to national poverty and recession.

    Apart from that, it has not worked as the expected political adhesive or coagulant of diverse nationalities. It would have been strange if social homogenisation resulted from such ethnic polarisation. In fact, it could not have served that purpose because the ethnic groups or the geopolitical groups which are proxies of the ethnic groups form the basis of allocation. The application of federal character, therefore, inadvertently prioritises ethnicity and consequently, a source of acrimonious disagreement among the nationalities who complain about the computation and weighting of the federal character requirement.

    A major consequential source of complaint is that quantity is not synonymous with quality, such that arithmetical equality does not translate to qualitative equality. Neither is federal character interpreted to cover less divisive factors of diversity like ideology and stages of development of the various parts of the country.

    The trend of the discussion so far, is that the root of poverty and recession lies in the structure and administration of the Nigerian state. There is an incongruity between the design of the country and the post-independence vision and mission of the country. Such a mismatch is clearly demonstrated in the relationship between the purpose of federalism and the practice of federalism in Nigeria. The practice of federalism in Nigeria is bedeviled by the boss syndrome which results in the hierarchical ordering of the governments of the federation rather than the co-equality of governmental jurisdictions.

    This is complicated by the misperception of the role of government as the dispenser of personal, ethnic and sectional advantages. The system operated as if private sector productivity was either optional or unnecessary. And worse still, the political elite divided the country into political fiefs called states to multiply salary pay-points and inadvertently reduce the capacity of the resultant states to drive development. Nigerian governments became veritable harbingers of poverty by multiplying salary pay-points. Extractive political institutions as we have depicted above, tend to produce extractive or rentier economic systems. Even if there is growth under extractive institutions, they cannot endure because growth requires innovation which ipso facto, results in creative destruction that will destabilise established power relations. The established elite will therefore resist innovation. Extractive regimes also tend to make instability inevitable because they generate fierce competition, forcing the extractive elite to defend its unmerited privileged position. The contingent outcome of instability is decline of productivity which tends to end up in poverty.

    Neither has Nigeria attained the level of clear functional statehood. The fragility of the Nigerian state as depicted above has made scholars at different times to describe it as a soft state or a failed state by others. The state is a complex entity and there is hardly an agreement on its purpose and scope.

    For the purpose of analysis, the state can be seen roughly as a dichotomy with internal and external aspects. Its internal aspect is represented by the government while the external aspect is the country. The government is the highest ruling authority and executive agent of the country. Being the highest authority, it possesses internal sovereignty and the extent quality of its rule of the domestic society is a function of its legitimacy which determines the nature of state-society relations or the relations between the decision-maker and the decision-taker.

    Jean Bodin, espousing the juridical view of the state, identified the chief mark of state sovereignty as the power to give law to all citizens, generally and singly. Thus, the state is vested with the power to create, interpret and enforce the law. In addition to the power to legislate for all, it also has the sole power of coercion or the monopoly of legitimate force such that in the view of John Austin, the state is the superior commanding the inferior. The control of force is a consequential power to strengthen legislative power. All, except the agents of the state are disarmed, private armies are prohibited and the power of constraint is domiciled in the state alone. The monopoly of force has however not prevented dissidence in Nigeria because domestic weakness arising from unresolved national question and political power configuration is exploited different elements in the country. The state monopoly of force is challenged at different times and places.

    For more than two decades, the Niger Delta militants have challenged the authority of the Nigerian state and have succeeded squeezing some concessions for laying down their arms. But, this has been temporary as the success has become an incentive for more armed challenge. Similarly, from about 2009, a group known as the Boko Haram employed Islam as an instrument to challenge the authority of the Nigerian state in the Northeast zone. At some point, they controlled about 14 local government areas and hoisted their flag with intent to create an Islamic State. It was a challenge of the sovereignty and territorial integrity of Nigeria. The power of the state to guarantee peace and security to the citizens is also regularly threatened by gangs that infested Nigeria with kidnapping for ransom.

  • ‘The challenge of security, peace, in times of economic recession’

    ‘The challenge of security, peace, in times of economic recession’

    To Prof John A. Ayoade of the BOWEN University in Iwo, Osun State, political power can be reconfigured, though not without resistance, but it is not as easy to reconfigure the economy. The professor Emeritus, in this article, entitled:  “The challenge of peace and security in times of economic recession: The Nigerian experience”, says Nigeria must adopt a mission to drive a renewed vision and elect visionary leaders to truly evolve as a nation.

    Nigeria has been a political enigma from its colonial origin. It is not an organic whole and it has failed all efforts at integration, although the colonial founding fathers never intended it to be integrated. Unfortunately, their Nigerian successors invested more in the division for sectional political advantage. This was because shortly before political independence, politics as a process of allocation of powers and national resources has been appropriated as an allocation enterprise for sectional interests.

    With time, the gap between national and sectional interests widened to a point that national interest tended towards zero. This was worsened by the fratricidal internecine conflicts between and among the various sections of the country. What was the hope of Africa at independence became the sick man of Africa which suffered a military coup within six years of independence and became a subject of international mediation, first at Aburi, Ghana and later, in Kampala, Uganda. The likes of such countries as Gabon and Ivory Coast were availed diplomatic opportunities to meddle in the domestic affairs of Nigeria. A country which had hitherto prided itself as an expert in brinkmanship was at the verge of ‘sinkmanship’. The hope to join the higher League of Nations at independence vanished.  Succour came only after three years of civil war which was followed by a hurried post-conflict peace that did not address the causes of war.

    The conflict which has been simmering since then only awaits a trigger that is not too remote in the Nigerian political firmament. The drums of conflict are beating louder, publicly daring the authorities of the Nigerian State. As if the issues will go away, the Federal Government is carefully avoiding addressing the issue directly.

    The on-going political altercations arise from the fact that Nigeria has not evolved into a nation and neither has it attained a stage of integration that can drive development. As far back as 1947, the late Chief Obafemi Awolowo said that Nigeria was a mere geographical expression. It was, in fact, a country of diverse nations.

    Much later, he advised that the Nigerian Constitution should be constructed along the lines of the nationalities comprising Nigeria. Nigerians agreed with the country’s diversity. They however optimistically played it down by extolling the aspiration of unity in diversity when in reality it is a progressively diversifying diversity. As it turned out, the adversarial nature of the country continues to manifest in the continual incessant demand for the creation of new states from the old sates based on cultural differences and incompatibility. The language of demand on all occasions was so antagonistic that it is strange that resultant sates remain components of the same federation professing unity in diversity.

    The country of three regions at independence now stands at thirty six states with a recommendation by the 2014 Constitutional Conference that it should be increased to 54 states. Nigeria therefore operates a curious political arrangement of unity by division or, more appropriately, division in unity. It will appear that secession itself is an extension of the demand for the creation of separate states. Secession is only a difference of scale and not type because both are rooted in incompatibility. The multiplication of states in a country with a fixed boundary is an indication of a fissiparous relationship which is the root of national poverty and recession.

    By 2015, about two-thirds of the thirty six states could no longer meet the salary needs of the state civil service. The situation proved the point that most of the states were mere civil service states as petty traders and food sellers suffered shrinkage in their sales and income. The situation also proved the fragile nature of the economy because governments in Nigeria are the single largest employers of labour with a weak private sector. The prominent visibility of the public sector in employment is a result of the high profile and privileges of the colonial civil service. The post-independence successive governments in Nigeria did not help matters because they often vaunted the omnipotence of government without encouraging the diversification of skills, entrepreneurship, and public-private partnership. In the past, communities established secondary schools, constructed roads, and awarded local and overseas scholarships.

    Of recent, the governments arrogantly asked communities to hands-off such developments. It suddenly became an offence for parents/teachers associations to be involved in the development of the schools.

    The demand for the creation of states is both an indication of diversity as well as the conception of the state as a milk-cow. Most of the demands are based on the propensity to have a share of the ‘national cake’. The lexicon of the demand for new states shows very clearly the consumerist goals of the protagonists. Little or no attention is paid to social and economic viability of states but the income derivable form the federal purse.

    Occasionally, one hears such pious phrases and clichés like bringing government close to the people; equity; ethnic geo-political balance and federal presence among others which sidestep economic realities. All such demands are based on ethnic or geographic competition for siphoning federal resources. The end result is the mushrooming of unviable mini-states that serve only the needs of the political elite of such states. It is no surprise, then, that Nigeria has one of the highest per capita costs of governance with very high overhead cost, high recurrent cost and little capital cost. There is therefore relatively little national infrastructural investment resulting in mere subsistence governments.

    The different constitutional efforts for political integration have not yielded positive results because the benefactors devised the measures. These measures include the zoning of political offices, federal character, rotational presidency and other equalisation measures. Let us look at the zoning of political offices first. Zoning is neither a constitutional, nor statutory requirement. It was a device introduced by the defunct National Party of Nigeria (NPN) in the Second Republic. It is therefore more of a conventional advisory to political parties. It could enhance electoral appeal of a political party in contrast to another party that does not adopt the zoning formula. Being voluntary and advisory, the implementation has been haphazard. The lack of clarity of its implementation was one of the political shibboleths of Dr. Goodluck Jonathan’s bid for a second presidential term.

    First, there was the definitional problem of a second term. Second, there was the problem of observance of an agreement duly entered into. Finally, there was the problem of which was the legitimate zone to present the presidential candidate. Apart from the particular problem arising from the Jonathan presidency, zoning is also not necessarily clear-cut in a multi-party situation since each political party could decide its order of zoning.

    Thus in 2015, the All Progressives Congress (APC)  selected Mohammadu Buhari from the Northwest while the Peoples Democratic Party (PDP)  selected Dr. Jonathan from the Southsouth. Each party’s zoning arrangement may therefore contradict, which means, in effect, that zoning may be mutually neutralised by the parties.

    The much celebrated constitutional federal character requirement for appointments was meant to serve as mortar for the various nationalities. The constitutional clause was to the effect all executive bodies should mirror the diversity of the country by ensuring that appointments are made from all geographical parts of the country. The executive bodies must be representatively reflective of the plural nature of the country, such that no part of the country dominates the government while other parts are excluded or under-represented. At the drafting stages, this was conceived as the non-exclusion principle. The aim is to create a sense of belonging and a sense of collective ownership through participation.

    The clause therefore became an employment bill for the political class and a rationale for bloated executives. Nigeria therefore has a very high ratio of executive to the population that gulps funds for development. It has therefore contributed to national poverty and recession.

    Apart from that, it has not worked as the expected political adhesive or coagulant of diverse nationalities. It would have been strange if social homogenisation resulted from such ethnic polarisation. In fact, it could not have served that purpose because the ethnic groups or the geopolitical groups which are proxies of the ethnic groups form the basis of allocation. The application of federal character, therefore, inadvertently prioritises ethnicity and consequently, a source of acrimonious disagreement among the nationalities who complain about the computation and weighting of the federal character requirement.

    A major consequential source of complaint is that quantity is not synonymous with quality, such that arithmetical equality does not translate to qualitative equality. Neither is federal character interpreted to cover less divisive factors of diversity like ideology and stages of development of the various parts of the country.

    The trend of the discussion so far, is that the root of poverty and recession lies in the structure and administration of the Nigerian state. There is an incongruity between the design of the country and the post-independence vision and mission of the country. Such a mismatch is clearly demonstrated in the relationship between the purpose of federalism and the practice of federalism in Nigeria. The practice of federalism in Nigeria is bedeviled by the boss syndrome which results in the hierarchical ordering of the governments of the federation rather than the co-equality of governmental jurisdictions.

    This is complicated by the misperception of the role of government as the dispenser of personal, ethnic and sectional advantages. The system operated as if private sector productivity was either optional or unnecessary. And worse still, the political elite divided the country into political fiefs called states to multiply salary pay-points and inadvertently reduce the capacity of the resultant states to drive development. Nigerian governments became veritable harbingers of poverty by multiplying salary pay-points. Extractive political institutions as we have depicted above, tend to produce extractive or rentier economic systems. Even if there is growth under extractive institutions, they cannot endure because growth requires innovation which ipso facto, results in creative destruction that will destabilise established power relations. The established elite will therefore resist innovation. Extractive regimes also tend to make instability inevitable because they generate fierce competition, forcing the extractive elite to defend its unmerited privileged position. The contingent outcome of instability is decline of productivity which tends to end up in poverty.

    Neither has Nigeria attained the level of clear functional statehood. The fragility of the Nigerian state as depicted above has made scholars at different times to describe it as a soft state or a failed state by others. The state is a complex entity and there is hardly an agreement on its purpose and scope.

    For the purpose of analysis, the state can be seen roughly as a dichotomy with internal and external aspects. Its internal aspect is represented by the government while the external aspect is the country. The government is the highest ruling authority and executive agent of the country. Being the highest authority, it possesses internal sovereignty and the extent quality of its rule of the domestic society is a function of its legitimacy which determines the nature of state-society relations or the relations between the decision-maker and the decision-taker.

    Jean Bodin, espousing the juridical view of the state, identified the chief mark of state sovereignty as the power to give law to all citizens, generally and singly. Thus, the state is vested with the power to create, interpret and enforce the law. In addition to the power to legislate for all, it also has the sole power of coercion or the monopoly of legitimate force such that in the view of John Austin, the state is the superior commanding the inferior. The control of force is a consequential power to strengthen legislative power. All, except the agents of the state are disarmed, private armies are prohibited and the power of constraint is domiciled in the state alone. The monopoly of force has however not prevented dissidence in Nigeria because domestic weakness arising from unresolved national question and political power configuration is exploited different elements in the country. The state monopoly of force is challenged at different times and places.

    For more than two decades, the Niger Delta militants have challenged the authority of the Nigerian state and have succeeded squeezing some concessions for laying down their arms. But, this has been temporary as the success has become an incentive for more armed challenge. Similarly, from about 2009, a group known as the Boko Haram employed Islam as an instrument to challenge the authority of the Nigerian state in the Northeast zone. At some point, they controlled about 14 local government areas and hoisted their flag with intent to create an Islamic State. It was a challenge of the sovereignty and territorial integrity of Nigeria. The power of the state to guarantee peace and security to the citizens is also regularly threatened by gangs that infested Nigeria with kidnapping for ransom.

    It started in the Niger Delta as a strategy of the militants to press their case. Oil workers were abducted and killed when ransom was not paid. Now kidnapping has become a national menace with kidnappers demanding huge ransom in foreign currency and even establishing detention camps within the city. With these threats, the Nigerian state appears to be losing claim to its raison d’etat which is the guarantee of the lives of citizens and property. The loss of empirical statehood explains the scanty inflow of foreign direct investment (fdi) and consequential heightening of poverty.

    It is not only the juridical function of the state that has been challenged. Equally so, is the physical property of the state which is the fact that the state is an area with a government, population and a means of keeping order. The citizens are part of that physical state because they live within the geographical boundary. Membership of the physical state is normally compulsory for all that live within that geographical boundary. Obedience to the laws is mandatory, disobedience is punishable, and secession attempt is treasonable.

    Of recent, even the physical extent of the Nigerian state is not sacrosanct. There are open and audible announcements of intention to secede from the Nigerian state in the finalistic language of no return. The Federal Government is handicapped in confronting the open breach by the reality of the extra- constitutional configuration of the country rather than by dereliction.

    Nigeria therefore exhibits all the signs of a sub-optimal state driven by extra-constitutional considerations and consequently unable to perform the minimal constitutional duties of statehood. It continues to muddle along because of a demonstrated unwillingness to deal with the fundamentals of building a state from the congeries of nationalities at war with themselves.

    The complex dilemma of Nigerian state is that the architecture of political power is not coterminous with the architecture of the economy. The troubling paradox is that the area that is perceived to be less economically endowed exercises political control over the economy because there is unequal distribution of power and unequal distribution of resources.

    Unfortunately, while political power can be reconfigured, although not without resistance, it is not as easy to reconfigure the economy. Although political power is required to reconfigure political power, power is hardly ever conceded or freely transferred particularly in a conflict-ridden polity where power confers immeasurable advantage. Power, by its nature, never lacks patronage because it is highly sought after, even more so in a deeply-segmented society.

    The resultant negative effect of the high pitched competition in such societies is poor and/or sub-optimal decision-making. Parties negotiate all issues and since every sectional actor wants the maximum benefit, facilities are sometimes splintered below the level of functional efficiency or located most inappropriately while crucial decisions fail the rationality test. Even the punishment of crime is seen through ethnic and regional lenses. The Nigerian governance system is a conducive environment for breeding poverty and violence. Poverty derives, in part, from maladministration just as violence could be a product of bad administration and perceived inequity

    Nigeria is a paradox. It is the seventh most populous country in the world and the sixth largest producer of petroleum in the world. One is tempted to say that it has no reason to be poor. However, the lack of good governance, general insecurity, and stupendous accountability challenges pushed her into the league of the poor. One hundred and twelve million Nigerians making 67.1 per cent of the population lived below poverty line by 2016.  Poverty has maintained a steady increase with 54.7 per cent in 2004; 60.9 per cent in 2010; 60 per cent in 2015 and a whopping 72 per cent in August 2016. Nigeria is not just one of the poorest countries; it is also one of the most unevenly developed countries of the world. The poverty prevalence in the country ranges from 46.9 per cent in the Southwest to 74.3 per cent in the Northwest and Northeast. Another source puts the national average at 46 per cent while the prevalence of the six geo-political zones is as hereunder: Southwest (19.3 per cent); Southsouth (25.2 per cent); Southeast (27.36 per cent); Northcentral (45.7 per cent); Northeast (76.8 per cent) and Northwest (80.9 per cent).

    The average for the South comes to 23.95 per cent while the average for the North is 67.8 per cent which is nearly triple the average for the South. The sharp contrast between North and South is one of the causes of political instability in Nigeria. Even when the North has been broken into nineteen states and the South into seventeen states, the threat of the North remains. Nigerians continue to complain and fear Northern political clout, Northern numerical superiority and Northern political advantage. Whenever Northern prowess is contrasted with Southern human and material resource advantage, southerners feel that they derive less than their contributions to the Nigerian state. That feeling of deprivation is a source of socio-political tension in the country. Be that as it may, there is evidence of affluent poverty throughout the country. Most houses on the major streets of Nigeria are defaced with shops for retail pure water. Able-bodied college graduates sell telephone recharge cards and commercial motorcycles called ‘okada’ or ‘Going’ have replaced taxis and buses on our streets. Nigerians now take jolly rides on ‘okada’ making telephone calls and sending text messages as the go. I believe that some can now even take a nap as the ride.

    Both structural political and economic imbalance threaten the peace of the country. It is equally important to factor into this discussion that political conduct shapes and is shaped by political context. It is more interesting to go behind the formal structures into the actual processes of politics.

    Karl Marx appears to have correctly stated that men make history although not in circumstances of their own choosing. He therefore identifies mutuality between structure and agent. Every action is therefore a product of the mix of structural and agential factors. We have taken some space to explain the structural factor which is the setting in which social, political and economic events occur and are meaningful. It is necessary to look at political conduct defined as the actor’s conscious effort to realise his goal. In commenting on the Corruption Perception Index (CPI), Transparency International (TI) confirmed that the lower – ranked countries are ‘plagued by untrustworthy and badly functioning public institutions like police and judiciary’. This is a conflation of structure and agent. Oftentimes neither structure nor agency alone can explain a phenomenon. For example, the rate of unemployment in Nigeria rose from 10.4 per cent in 2015 to 14.2 per cent (11.549 million people) in 2016 but it is not every unemployed person that engaged in crime just as some employed people also engaged in crime. This means that crime can be explained from both structural and agential perspectives. It must be emphasised, though, that work is the best route out of poverty and according to Guy Ryder, the International Labour Organisation (ILO) Director-General, ‘access to decent work opportunities for all … is the most effective way to increase participation, lift people out of poverty, reduce inequality and drive economic growth’.

    Nigeria ranked very low on Good Governance, Global Peace and Corruption. The World Bank identified six key indices of good governance as follows:

    • Voice and accountability
    • Political stability and lack of violence
    • Government effectiveness
    • Regulatory quality
    • Rule of law
    • Control of corruption.

    Good governance is simply the legitimate socio-political citizen expectation from the state and which the state has responsibility to deliver. The Ibrahim Index of African Governance in 2016 ranked Nigeria in the 33rd position among 45 countries in 2016 putting Nigeria in the last thirteen African countries. On Global Peace Index, Nigeria ranked 151 out of 163 countries in 2014; 151 in 2015; 149 in 2016; and 149 in 2017. Nigeria’s best performance was in 2016 and 2017 with a placement in the last fifteen (15) countries. It is axiomatic that a population with adequate basic needs is most unlikely to resort to violence to solve problems. We may therefore say that, to some extent, that violence is a possible sign that basic needs are not met. Nigeria has about 3.3 million internally displaced persons which is Africa’s largest ranking behind Syria and Columbia on a global scale. Nigeria’s performance on Corruption was equally poor. In fact President Muhammadu Buhari was blunt when he said that ‘Corruption will kill Nigeria unless Nigeria kills corruption’. Corruption has grown to mega heights and Nigeria is better identified by corruption than by her national flag. Even as early as the 1980’s Alhaji Shehu Shagari saw the need for suggesting an ethical revolution to combat corruption. Unfortunately, the desire was not backed by political will.

    I want at this stage to argue that our conception of violence is too narrow. We often see violence only as actions that draw blood, destroy life and limb. There are however actions that sap more blood over time from a larger population.

    I include corruption, poverty, and bad governance among such slow, soft and sure incapacitation agents. We have said a few things about soft or silent violence. We may now turn to hard violence which within a short time snuffs out lives, displace populations and disrupt economic activities. Nigeria has had quite a number of such violence in recent history. They include: the Maitatsine; the Niger Delta militants attack; the Boko Haram insurgency; kidnapping and the recent Nnamdi Kanu’s demand for Biafra. All of these are insurrections that take advantage of the domestic weakness of the state. The state has a compulsory hold on citizens and when that hold loosens by acts of commission or omission, citizens who have reasons, genuine or otherwise, resort to self-help.

    It is the natural opportunistic moment. Thucydides said in his book entitled: The Peloponnesian War “Of the gods we believe, and of men we know, that by a necessary law of nature they rule wherever they can”. The Niger Delta crisis is a product of illogical neglect resulting in on-going illogicality of demands. Curiously the ancient Nigerian Mineral Act allocates the ownership of all minerals on land and below to the government. The law is an example of the greed of the modern state. The law would perhaps have been better to also include all moving creatures on land including the people. The law almost equated the State with God as defined in Psalm 24.1 which states ‘The earth is the Lord’s, and all its fullness, the world and those who dwell therein’. Three things are wrong with this massive appropriation. First, the nationalists opposed it when the British passed the ‘obnoxious’ law in 1944 but they did not abrogate it after independence. Second, it failed the test of history because in the First Republic, the derivation formula gave 50 per cent of the proceeds of minerals to the land/state of origin. The explanation for the present 13 per cent wobbles against precedence. Third, any law that does not have a human face does not belong in the human race. Derivation is not a pocket money concession from a higher authority to a lesser authority. It is a right to restore the mining areas to a tenantable position, as it were. Finally, the law violates the ‘golden rule’ of treating others as one would like to be treated. At the Afe Babalola Committee of the National Political Reform Conference in 2005, the question was asked whether the North would have accepted 13 per cent derivation if oil were discovered in Kaduna rather than the Delta. Significant members of the Committee quibbled rather than answering the question directly. The above queries easily turn the law into an instrument of expropriation.

    The reaction of the Niger Delta militants from Isaac Boro to date threatened the survival of the Nigerian State. The reality of modern statehood is that bad laws must still be obeyed until those laws are changed. Violation of a bad law is an offence just as the violation of a good law. There are however two avenues to changing a bad law. It is either changed via persuasion and due process or by violent means outside the realm of law. Whenever the second option is adopted, the law will take its toll because it is a challenge to the sovereignty of the state.

    Maitasine and Boko Haram are different in cause, course, modus operandi and ideology. While the militants operated on principally on grounds of rights, justice and equity, Matasine and Boko Haram advanced a sectarian position. They argued for a supposedly purer Islam. It was clear in the case of Boko Haram that the goal was territorial and religion was a camouflage for territorial ambition. This was a clever choice because religion is one of the most difficult institutions to confront. Religions are meant to be divine orders beyond disputation. To dispute it is to incur divine wrath which must be avoided by all believers. Religion is therefore, the most effective agent of socio-political mobilisation. Apart from the appeal to spirituality, Boko Haram was not successful at propaganda. It argued that western education was a sin without proposing a viable alternative. Its tactics and strategy also contains elements of weakness. It bombed churches and mosques thus violating Islamic laws that make non-combatants immune from attack and protect Muslims from attacks by fellow Muslims. It employed a scatter strategy of attack in Abuja, Kano, Bauchi and Potiskum among other areas. Although it struck terror in the public, it did not advance its goal in terms of consolidation. The kidnapping of the Chibok schoolgirls was a strategic blunder that earned Boko Haram negative international attention. As long as the girls were held captive, Boko Haram remained in the international media. Boko Haram strategy was very destabilising resulting in mass movement and contributing to large camps of Internally Displaced Persons (IDPs). Its activities lasted that long because of the lack of cooperation of the host communities partly because of the fear of reprisals and partly for political reasons. By December 2016, Boko Haram was declared officially degraded. This is not to say that it is gone for good. By the nature of insurgencies which have no central command, every fighter tends to become a General still fighting on. Insurgencies last long. Chinese communists fought for 28 years, Vietnamese communists for 30 years and Sandinistas for 18 years. So, it is not yet Uhuru from Boko Haram.

    Another source of insecurity in the Nigerian state is the terrorism of kidnappers. It started as a tactic of the Niger Delta militants to fund arms purchase, force the oil companies out and earn money to run the organisation.  They kidnapped expatriates and got the employers to pay ransom for their release. It eventually escalated and gangs developed in other parts of the country, including faraway Northern Nigeria. It soon became the most lucrative business that was not quoted on the stock market. The telephone became the most effective facilitator of kidnapping with a war against the middle and upper classes. The qualification for kidnapping is the ability to pay huge ransom. Information is required for a successful operation and the recent communication explosion has aided the nefarious act. Instagram, Facebook, WhatsApp and email among other means  have become sources of required information and those who are unwary expose themselves.

    The last and perhaps the most difficult of these threats confronting Nigeria is the recent Nnamdi Kanu phenomenon. Kanu established the Independent Peoples of Biafra (IPOB) to demand for the sovereign state of Biafra. He was incarcerated for that demand and he is currently on bail. He has been playing host to youths who want the actualisation of Biafra. The older and more experienced Igbo are treading softly. The experience of the civil war cannot easily go away. The Yoruba often warn in like circumstances that those who witness Sango (god of thunder) disappear underground will not insult Oba Koso. Any Igbo born after 1970 can only learn about the civil war from moonlight stories told after a good meal of pounded yam. That is different from direct experience. It is only when myths are tested against reality that they are validated. Just recently, Kanu instructed the people of Anambra to shun the November 18, 2017 governorship election as a sign that the Igbo have nothing to do with Nigeria any more.  The National Publicity Secretary of the All Progressives Grand Alliance which is the ruling party in the state, Mr. Ifeatu Obiokoye, wrote that the call was ’irresponsible, and devoid of intellectual focus’.  He went further that Kanu had no authority to speak for the Igbo of the Southeast. Obiokoye emphasized that the Biafra concept was a metaphor for the demand for equity and fair play in the Nigerian state and not a separate movement. He continued: “We are concerned about the continued existence of Nigeria under the present structural arrangement.” He finally advised Kanu to drop the ‘Emperor’ perception of himself. Biafra is not new to Nigerian political narrative.  Secession had always been used as a bargaining tool in Nigerian politics. It was Ojukwu’s blunder to go beyond threat that led to the civil war.

    Nigeria has a quantum of security challenges. The Federal Government has to be strategic in handling those challenges. Some require constitutional adjustments, others require mere legislation, while yet others require negotiation. In adopting any of these measures, political actors must place country above self and clan and place tomorrow above today and yesterday. Nigeria must adopt a mission to drive a renewed vision and elect visionary leaders.

     

  • ‘N88b debt, recession threaten metering’

    ‘N88b debt, recession threaten metering’

    Over N88 billion debt owed by customers and the economic downturn are responsible for the slow metering of consumers in Ikeja Electric Plc, The Nation has learnt.

    The firm’s Head of Corporate Communications, Mr. Felix Ofulue, said Ikeja Electric has a robust metering programme but owing to the  recession in the country coupled with the huge debt, which is in excess of N88billion, the metering programme has been slowed down. The debts are owed by all categories of customers, including  maximum demand customers.

    He confirmed that the firm has metered all maximum demand (MD) customers in line with the directive of the Nigerian Electricity Regulatory Commission (NERC),  noting that such metering goes on regularly as new MD customers come on board.

    He said Ikeja Electric, despite the problems facing the firm, is committed to metering all its unmetered customers within the stipulated time in the metering prpgramme.

    He added that it wouldn’t be possible for all customers to be metered at the same time because of the huge cost involved. He appealed to customers that have not been metered to be patient as they would be metered.

    For the unmetered customers,  he said the company has an established billing method approved by the industry regulator (NERC) for  them, based on factors, such as the customer’s consumption over time and availability of power supply within the particular month for which the customer was billed.

    “All our feeders connecting our consumers without prepaid metered have been metered, which will enable them to get fair estimated bills.

    ‘’Notwithstanding, we are metering our consumers in Ikeja GRA  and I want to assure all our consumers that they will all be metered,’’ he added.