A plethora of headwinds have hit the nation’s economy, with ominous signs about growth prospects just as analysts warn against further delay in addressing issues assailing economic activities in the country. The President stated the obvious when he admitted on the sidelines of the recent India-Africa summit in New Delhi that the economy was in dire straits, with grave consequences for the fulfillment of recurrent expenditure obligations. Specifically, the rising inflation, currently at 9.4% has defied liquidity tightening measures, amid rising unemployment. Five months into his tenure, President Buhari has no more time to waste before fixing the economy. The Nigerian economy is big and the potentials are limitless. The challenge for the government is to recognize the urgency of articulating a blueprint and setting the machinery in motion to put the economy on the path of recovery.
Inadvertently, there seem to be too many policy reversals and inconsistencies. Besides, non-release of the 2015 capital vote, expected to complement monetary policy measures and boost the economy, non-activity in the Open Market Operations (OMO) may have sent a signal to the banks that tougher times are in the offing. Also as crude oil prices hit $44.3 per barrel, stakeholders in the oil and gas sector have expressed worry over its effect on national earnings, especially as the funding deficit has been put at $2 billion yearly. The directive by Buhari, which kicked off the full implementation of the Treasury Single Account (TSA), tightened liquidity in the financial system, jerking up interbank money market rates as it reached year highs of over 100%. The CBN at the last Monetary Policy Committee (MPC) meeting raised concerns over the slowing economic growth, which hit 2.35% amid weak consumer and investment spending, due to government’s non fiscal support.
Rescuing the nation from economic collapse, demands implementation of new economic models, as the existing models have failed to generate sustainable development for the country. The government must avoid embracing measures that end up impoverishing Nigerians, while satisfying donors like Paris Club, London Club, IMF/World Bank, among other global institutions. A case in point is the delisting of Nigeria from the Emerging Market Government Bond Index by the US financial institution, JP Morgan. To all intents and purposes, this is an orchestrated blackmail to force a third devaluation of the naira. The insistence on devaluation of the naira as a basis for economic development is a bogus tactics of pauperization and enslavement, and a re-echo of the infamous Structural Adjustment Program (SAP) and the havoc it wreaked on the Nigerian economy. Nigerians must rally round the government in its efforts to save the naira, and thereby the nation’s economy.
If foreign investors are desirous of the well-being of Nigeria, they should focus on capital investments that facilitate socio-economic development. Unfortunately, the production, costing, marketing, control and regulation of Nigeria’s natural products are controlled by the west. As if this is not enough, China, the emerging world economic power, is also turning Nigeria into the junk-yard of its products and services. As a people who must take their destinies in their hands, Nigerians should think out models that consider the financial health of their economy rather than worry over an exploitative global world order built on the lopsided economic and financial relationship foisted by western financial institutions.
Nigeria must have short, medium and long-term developmental goals. Fortunately vice president Yemi Osinbajo, who has responsibility for the economy as Chairman of the National Economic Council (NEC) is well aware of the nation’s challenges and the need to fix things quickly. At the 21st Nigerian Economic Summit Group (NESG), Osinbajo rightly acknowledged that the implementation of strategies that would pave the way for economic recovery would involve tough choices. However, such tough choices must not involve what has not worked for Nigeria. Rather, tough choices should begin with appropriate planning. It is hard to explain for example, how in the entire 2015 financial year, no money has been released for capital projects across the federation. Construction companies have retrenched workers, suppliers are suffering loss in stock value and consumers cannot afford purchase prices. Given global conditions, oil price uncertainty will continue and the 75% dependence on oil revenue will soon vanish, leaving behind, dilapidated infrastructure, rising unemployment, illiquidity, and huge debt burdens.
To be sure, Nigeria’s chronic economic weakness is caused by the willful excessive fiscal deficits substituted for withheld Federation Account (FA) oil proceeds and that the economic malaise will only clear when FA dollar allocations are converted to non-inflationary naira revenue through deposit money banks by means of the managed float system. That way, conducive economic conditions will quickly evolve just as the humongous but idle domestic bank credit potential will begin to be accessed at internationally competitive interest rates thereby laying the foundation for diversified and enhanced non-oil revenue generation. All in all, it is a national shame that more than 55 years of commercial oil production during which period oil proceeds have accounted for over 50% of the annual budgets on paper since 1974, the Federal Government’s willful but inappropriate handling of the oil proceeds has made the economy today incapable of self-reliantly sustaining the operations of the petroleum industry and providing catalytic infrastructure across the various sectors.
Thus it is necessary for the Buhari government to break away from this pattern and embrace a culture of productivity, followed by a weaning of the nation off its dependence on oil revenue. The government should foster an environment that would pave the way to a competitive, diversified and self-reliant economy. Such an economy must be anchored on agriculture and manufacturing. Nigeria must turn the page and return to the land; to an era when the economy was driven by cocoa, cotton, rubber, among other cash crops. Such crops would therefore constitute a buffer for the nation against the volatility of the international prices of oil. A true diversification of the revenue base should be predicated on freeing the nation’s full capacity in a true federation if Nigeria would ever thrive.
The government must also intervene in the regime of high interest rates to enable the citizens meet the financial needs of their involvement in agricultural production, solid minerals and manufacturing. Also, the government must pay attention to critical infrastructure such as electricity, roads, communications and ports. Agriculture and manufacturing cannot take place when communications and transportation systems needed to facilitate commerce are lacking. The government’s announcement of its intention to set up a fund for infrastructure, to facilitate easy funding of critical areas of the economy, especially power and roads is certainly a good idea. The challenges however require heavy capital outlays beyond the ability of conventional funding sources, hence the need for a more comprehensive strategy.
It is a great misfortune that successive governments have remained wedded to fiscal and monetary policies that sabotage national economic progress. The Buhari administration should break the cycle now. Above all, saving the Nigerian economy from collapse goes beyond just repudiating Western models. The government should lead by getting the nation’s priorities right and creating the right environment to unleash the unlimited potentials, resourcefulness and creativity of the Nigerian people.
