Op-Ed.
An economy stuck in the mud
Nigeria’s economy has been driven into the mud by the recalcitrant President Tinubu-led APC government with the over 200 million Nigerians at their mercy. If they do not face reality and roll up their shorts and sleeves to pull out the Nigerian vehicle, it might just sink.
No amount of globe-trotting will do it for us. There is serious house cleaning required.
First, Nigeria is already in a debt trap, where it must continue to borrow in order to ‘breathe’ and has no ‘equity’ for capital expenditure by which the economy grows.
Total public revenue is insufficient to service the national debt. Future crude oil output has been substantially mortgaged for debt repayment. Tomorrow is being eaten up. The debt trap is deepening. The evil day is only being postponed.
Second, there is the popular saying that one should cut one’s coat according to one’s cloth and that when there is a challenge to the family or any entity, remedial action must start with the head who must rally everyone, put prudential measures in place, set the example in sacrifice and in the protection of the most vulnerable (such as children and the elderly) and proceed to work harder.
President Tinubu and his team seem to miss this point. Profligacy is still the order of the day. There are no far-reaching austerity measures to plug the cost of governance and leakages in the flow of national income. There is no evidence of efficient resource allocation.
Instead, Mr. President and other political officeholders continue to live in opulence and ostentation while the people roast in penury. It is estimated that more than seventy-five percent of the Nigerian population is now multi-dimensionally poor, with some unable to find food for days.
President Tinubu defiantly assembled the largest cabinet in the history of the Federal Government of Nigeria, when the country was in dire straits, financially. This is the wrong time for jamborees and globe-trotting with bloated contingents and expensive protocols. It is not the time for renovating the Vice President’s residence for the outrageous sum of N21 billion, for buying expensive bullet-proof vehicles, for adding a yacht or another aircraft to the Presidential fleet or for condoning the repugnant remuneration of legislators and other political office holders while approving only N70,000 as the monthly national minimum wage.
It is not the time for opaque, big-ticket, contracts, such as the Lagos–Calabar Coastal Highway and the Badagry – Sokoto Highway, when many interstate highways – more critical to commerce and internal security – remain non-motorable all over the country.
Third, if truly focused on economic revival, President Tinubu and his team would have concentrated on tackling internal security and domestic production of essential goods and services, which are virtually collapsing. He would have radically overhauled the non-performing ownership and management of the Nigerian National Petroleum Company Limited (NNPCL) which, instead, seemed to have his backing, before Naira flotation and fuel subsidy removal, given that most policy outcomes depended on the efficacy of the NNPCL.
For example, the Naira exchange rate cannot improve without curbing the theft of crude oil and without reactivating the moribund refineries for domestic production and distribution of fuels.
But no one is known to have been prosecuted for misappropriation and for the massive offshore crude oil theft while our OPEC production quota remains unmet
Food inflation is approaching 50 percent and composite inflation is 40 percent. This level of hyperinflation cannot be resolved by palliatives, most of which end up in the wrong hands. The focus should be on security for farmers to return to their homesteads and farms – all-year and mechanized farming.
Fourth, President Tinubu and his team ignored the fact that a non-competitive, unproductive, and largely unpatriotic society, with an abundance of leeches, does not embark on unguarded price liberalization. Instead, they blindly take cues from the IMF, the World Bank, and other Western institutions without regard for our economic history and market peculiarities.
It was a huge mistake to float the Naira and to remove the corruption-ridden fuel subsidy without investigating and addressing fundamental issues as well as without any concrete measure to alleviate the consequent hardship on the populace.
May be, in floating the Naira, the government intended to end the era of multiple exchange rates and arbitrage but it failed to reckon that the problem is not exchange rate duality, per se, but its bastardization by the authorities and their collaborators in the private sector.
It also failed to reckon that the demand for foreign currencies is inelastic among Nigerian ‘big men’ and launderers of illicit funds bent on converting their huge Naira holdings to stable currencies.
They did not realize that the expected gain from fuel subsidy removal would be more than reversed by Naira devaluation as there would be no consequential export to hedge the inevitable free fall of the currency.
You cannot leave the Naira to market forces and, at the same time, control the price of commodities! Now, the government is secretly liable for greater subsidy payment than ever!
In our view, as harsh as it may seem, the better way out of the fuel price cum fuel-subsidy quagmire is to adjust to free-market pricing than to give the NNPCL any pretext for continued importation and opaque fuel subsidy payment. Yes, despite the consequential rise in general price levels, a new macro-economic equilibrium would, sooner than later, be attained – earlier than is, otherwise, possible! Anything else would still leave both the treasury and Nigerians panting.
But this option would be most beneficial if the Dangote Refinery and other local refineries could procure crude oil locally, in Naira.
If they would listen, the government should limit its role to (1) uninterrupted supply of crude oil to local refineries (2) a well-supervised cost-plus-profit Pricing Agreement (3) vigorous campaign and promotion of complete price deregulation – with emphasis on the positive impact on the exchange rate, inflation, and capital expenditure, and, (4) measures to cushion the inflationary content of deregulation.
We condemn the hide-and-seek game between the government and Dangote Refinery on pricing, which is grossly insensitive to the dire situation. Fuel subsidy is no longer sustainable. There is no money and the NNPCL already owes $6.0 billion to suppliers, mainly due to exchange loss, arising from the thoughtless precipitate flotation of the Naira. Fuel importation must be banned.
Fifth, President Tinubu and his team are taking the resilience of Nigerians for granted. With more and more anti-people policies as well as frivolous, trumped-up charges against journalists, protesters, and opponents, the team is frittering away the critical trust, goodwill, and collaboration between the government and the people without which nothing can work.
