ECONOMIC REDEMPTION: WHY IS GOVERNMENT UNCARING?
BY HENRY BOYO
This week, we will feature excerpts from comments of three regular readers who obviously agonise on the seeming aloofness of government and its Economic Team to the selfless and realistic suggestions made in this column to induce economic growth and rescue millions of our countrymen from the jaws of poverty.
The first contribution is from Ariyo Akinlosotu who wrote as follows:
“I am always impressed by your articles in the media. Though you are always drawing attention to the need for the monthly allocations to the three tiers of government to be dollarised, it is never too much. The simple reason is that the continuous payment in Naira (the substitution) has stunted the country for over 20 years now. Nigeria's rebasing of its GDP to $510B is a joke. If our country had not lagged in growth, the economy would have been 3 times bigger. Remember that in 1980 Nigeria was the twentieth largest economy in the world! It aches me that a country in which the Federal deficit is barely 2 percent of GDP, the States are borrowing in double digit rates and the private sector at 20-25 percent rate of interest. It is absurd, putting it mildly. That is the curse of the substitution!
Many pundits have argued that a weaker naira would boost exports. There was a one off benefit in 1986 when the naira was devalued but ever since, devaluations have not led to consistent double digit growths in exports. If it had, oil exports will today barely account for a third of total exports.
The opposite - a revaluation-is actually what is now needed; if this is coupled with single digit interest rates, the country can grow at more than 8% for the next 20 years lifting tens of millions into the middle class.
If the oil derived portions of monthly allocations are dollarised, it will lead to an immediate Naira revaluation and a benign tightening in money supply which will help in slaying the nauseating and needlessly high underlying inflation that plagues the economy. A stronger naira and low single digit interest rates will lead to an investment boom.
Manufacturers will lose their timidity and import first class machinery which will boost their productivity and enable them to become internationally competitive. Low interest rates will enable them to borrow and expand production rapidly and before long the Nigerian market will become too small for them. Then an export boom can commence. They can take on the world.
The high interest rates and weak naira have been the bane of productivity in Nigeria. Imagine the productivity boost in the housing sector, for instance, if mortgage rates were 7%; people would rather buy houses than buy vacant plots and build piecemeal. So developers, rather than build estates and sell empty plots would now build blocks of flats or houses and sell. People who otherwise could never have owned a house in their lifetime can capitalise on low interest rates and buy built up properties. Developers will consequently be encouraged to increase productivity in order to catch up with strong demand.
Former CBN Governor, Charles Soludo wanted to dollarise payments in 2007 but Yar'Adua stopped him after the state governments whinged that they did not understand this new financial invention. We are still paying the price till this day. Let us hope the new CBN governor does the needful. It is about time the country also enjoys tigerish growth rates.
Another reader, Uchenna Ekenwa also wrote as follows:
“Present managers of the economy don't know a thing about economic management and don't seem to agree to superior argument.
Each time I read your column, the next question that comes to my mind is “is it that the CBN doesn’t read your column or cannot have a discourse with you on your suggestions on how to make Nigeria economically viable” or “is it that CBN management are just reluctant to do the right thing for Nigerians” or “is it that the CBN boss follows the norm rather than deviate from a practice that keeps setting Nigeria primitively backwards?”
You mentioned banks and the economic team, but I do not think they are the problems of the economy but the CBN. The goals of the CBN’s governor determine the direction the economy will take. If the CBN boss wants economic development and growth, he will introduce expansionary policies that will reduce unemployment and uplift the real sector from its comatose state.
I have asked myself severally this question “How is the MPR (Monetary Policy Rate) of 12% determined, such that its determining elements have remained constant over the years? Is it that there are no variable element(s) in its calculation? Was it political or administrative fiat that has left the economy in limbo? Was it personal interest on the part of former CEOs of some banks, latter-day CBN Governors, trying to create a market lead for their erstwhile banks?
I, sometimes, say to myself, why do we complain so much about maladministration, yet things aren’t changing, but little did I know that most government policies through its agencies are not really meant for the masses but for the few that are bent on keeping Nigeria’s economy backward while they continue to live on falsehoods. The present Finance Minister, Dr. Ngozi Okonjo-Iweala, is a good example on her job creation of 1.8m in 2013, so was President, Goodluck Jonathan, on electricity when he chatted with CNN in 2013.
Resolving our economic challenges shouldn’t be too much of a task, but will the devil allow a change without a fight? Cartels are everywhere and they are making so much money from a moribund system and they are the devil!
Finally, another reader of this column Soni Lam also commented as follows:
“... on the external front, government sits on bountiful reserves of over $40bn which earns little or no yield, while the same government ironically indulges in seeking external loans which conversely carry unusually high interest rates for what are actually risk free sovereign debts.” This is what I call “follow follow economics”. No ingenuity in developing home grown economic derivatives that yield real growth and development; while small businesses lack access to funds, our commonwealth lies in the European vaults thereby giving European businesses enough liquidity to push us out of competition.
If only a fraction of the $40bn reserves is pumped into the Nigerian economy, activities will spring up and the multiplier effect will more than bounce our economy into real productivity, but will our government listen to patriotic local economists? Prof. Aluko (of blessed memory) barked and barked about the unprofitability of adopting the Bretton woods model and he was regarded as being senile. When will our government listen to patriotic calls without branding them as opposition bickering?”
Regrettably, critics of ‘this column’ revel in disparaging assaults rather than intellectual interrogations of our advocacy; consequently, I will not disturb readers with excerpts from such emotive distractions.
Save the Naira, Save Nigerians!!