Restructuring, not devaluation, is the issue
The dominant issue in public discourse of late has been the long running debate on whether or not to devalue the naira. The CBN and the Federal Government have stoutly refused to even consider the prospects of devaluation. On the other hand, many economists and sundry stakeholders have demanded for devaluation as a way of managing the monetary policy crisis resulting from Nigeria’s dwindling resources and pressure on the naira. The debate acquired a heightened urgency recently when the outspoken former governor of the CBN, now the Emir of Kano, Sanusi Lamido Sanusi, added his weighty voice to the call for devaluation. Predictably, his intervention has elicited a great deal of interventions. The CBN responded by re-stating its own opposition to devaluation. Many commentators have weighed.
The first inclination of this newspaper was to ignore both parties because their positions do not reflect the depth of logic and thorough analysis of the issue at hand. But the issue is very important and should be addressed. As a result Business Hallmark is breaking its earlier policy of ignoring the debate by getting involved. The truth is that Nigeria is facing very grave economic challenges.
The loss of value of the naira is a symptom of those challenges, it is not the cause. It is not even the main problem. The core problem facing Nigeria is that of a country that has gradually lost relevance as an economic agent capable of producing goods and services. We, therefore, believe that the first order of business for anyone who is seriously concerned with the issue of halting the drift is to address the issue of our lack of competitiveness and not merely the issue of the value of the naira.
For the last three decades, the naira has gradually lost value. There are many Nigerians who will still remember that there were times when the naira was more valuable than the dollar. From that position the naira attained parity with the dollar, and gradually the slide continued unabated. In the ’80s and early ’90s, it traded at under ten naira to the dollar, but a series of economic misadventures succeeded in making the naira a very weak economic competitor to the dollar. The fate of the naira mirrors accurately the fate of the Nigerian economy in the last three decades. From being a country of hope and promise, the country has increasingly become a parasite and a net importer of goods and services as well as a mono-product economy.
In such a rent-seeking regime, it was inevitable that the national currency will lose value. It is pathetic reviewing the performances of previous governments in economic policy management. Attention has always been fixed on immediate problems without long term perspectives. Such short-termism is at the core of the problems facing the country today. For those who do not know, Nigeria has become a parasite, a country that embarked on rapid de-industrialisation. For over two decades now, industries which were built by military administrations and the succeeding civilian regimes to provide alternatives to importation, all declined and withered away.
The only surviving industries today are trading outfits. As a result, Nigeria has become a net importer of everything under the sun. Aba used to be a promising model and the hope for the future. All manners of goods and products ranging from shoes, belt, etc were manufactured in Aba. In Nnewi, Anambra State, a manufacturing hub also emerged. Batteries, tyres, motor parts and assorted other materials were being manufactured and gave hope to the future. But today, Nigeria has degenerated into an urban ghetto. About five motor assembly plants were built in Nigeria in the ’70s. Anambra Motor Company which assembled Mercedes-Benz lorries, the Peugeot plant in Kaduna, the Volkswagen plant in Badagry, Lagos and the Leyland assembly plant in Ibadan have all collapsed.
Today, Nigeria has become the highest importer of cars on the African continent. The question to ask is why? What went wrong? What happened? Why has a country with so much promise deteriorated so sharply to become a net consumer of goods and services? The answer is simple, oil and its unsavoury consequences. The rise of oil as a primary commodity and foreign exchange earner for Nigeria has had a calamitous consequence on the Nigeria nation.
It has made the country rich but also contributed to our laziness.
It toppled Nigeria’s growth and made her dependent on one commodity. It is, therefore, inevitable that the collapse of oil prices would have calamitous consequences on the economy.
A different approach to managing the oil wealth existed but in the event, Nigeria chose the lazy option. Other countries that chose differently, especially Sweden, saved its oil money and only benefited from the interest. Nigeria did not do that, rather it ate up the capital and the interest. Today, it has become a beggar and debtor nation.
The position of Business Hallmark newspaper, therefore, is that the debate on the devaluation of the naira is distracting; the debate should be actually on the future of Nigeria.
Should we continue to operate a country of nebulous federalism, where resources are shared monthly by parasitic states to feed an over-ballooning population of ill-educated and ill-prepared populace or should we redefine our country, restructure it in such a manner that there will be competition and effective utilization of resources? How can a country with little resources like Nigeria maintain such a large retinue of public officials?
What does 36 states actually mean and what do they contribute to productivity? These are questions that beg for answers and these are issues that should agitate public debate. The truth is that the value of the naira is unsustainable as at today. However, devaluation is just one side of the coin. If we devalue without restructuring the economy and restructure the country fundamentally, it is doubtful if we will achieve any meaningful progress. Devaluation will then become a fruitless journey without a destination in mind.
The Chinese just ended their five-year policy review conference, Nigeria should adopt a similar position; we should look at our country and determine its future. Too many things are wrong with the system.
Educational policy should actually be reviewed in order to produce students who can actually add value. Part of the problem of the country today is that a number of Nigeria’s educated elite are unable to add meaningful value. An unproductive elite is a danger because it is parasitic. There is an urgent need to review the financial system. The financial system in Nigeria today is mind-boggling; the interest rate at 25 to 30 percent is simply unimaginable and has created a perpetual cycle of delinquency in the credit market. Interest rate is part of the problem why Nigeria is not a productive economy.
It is only rent-seeking businessmen and traders who can leverage such credit at that interest rate and meet its obligation. No productive endeavour can survive on such interest rate regime. Our fiscal managers for the last three decades have also lacked requisite depth and understanding of Nigeria’s economic needs, and the approach has been high in theory and low in practice. We need to fundamentally restructure the financial architecture of the Nigerian economy in order to create a structure that will be productive and capable of transforming Nigeria into a major productive hub. Nigeria’s population is projected to reach 300 million by the year 2030 thereby making her the third most populous country in the world. No country of that size can survive without a domestic productive capacity. Nigeria must become a productive economy and grow her own food. She must manufacture her own goods and services if she must succeed. Our position on the issue of the devaluation of the naira, therefore, is that it must be taken as part of a holistic approach to redefining our economic fundamentals; doing it in isolation will be a recipe for failure.
On that score we are in agreement with the Federal Government. However, we disagree sharply with it that non-devaluation is a complete policy option. It is not; rather it should be part of a broad policy option. We urge President Muhammadu Buhari to immediately constitute the economic team of his government, announce the National Economic Adviser, ministers of National Planning, Finance, Trade and Investment, and empower them. Without it, we are afraid that it will not be the CBN that will devalue the naira. The market will do it. And there is nothing Messrs Emefiele and Buhari can do about it.