Adeoye Babatunde specialises in macro policy analysis and is a Senior Lecturer in the Department of Economics at the University of Lagos (UNILAG), Akoka. In this interview with IKECHUKWU ONYEWUCHI, he argues that the pressure on government is the effect of years of mismanagement.
What do you make of the increased pressure on government in recent times, especially on matters of internal security and the economy?
FOR the insurgency in the North East, we know how badly Boko Haram destroyed the economy. All these things work together. Where there is no security, how do you expect investors to come; how do you attract Foreign Direct Investment (FDI)? Without FDI, how would the economy grow? That is why I was disappointed with the statistics produced by the last administration. I knew that most of the figures being rolled out from that administration in terms of the growth profile of the economy regarding the macro aggregates were all false. This was because there was the problem of insecurity especially in the North. We had Internally Displaced Persons (IDPs) and a lot of others who were killed. But now we can see that to some extent, if not totally, that level of insecurity has reduced. Some of the displaced are finding their footing. It is a plus. That is one of the reason the president is going round to tell the world that Nigeria is secure for investments.
For the militancy in the Niger Delta, we must stress that the issue is political. And politics cannot be discussed without economics; it is Political Economy. Those people are fighting because power has shifted from the South South to the North. They can no longer enjoy all the things they used to enjoy in the past. But the major issue in the region is that the leaders misappropriate funds. What level of development can one see in the region? The people are suffering. But I think this is the time for them to wake up. They need to restrategise and not vandalise pipelines, as they are presently doing.
How can government get out of this tight economic situation?
For the economy, it is unfortunate that we have a deaf government. What is happening to the exchange rate is a manifestation of the theory of demand and supply. We all know there is scarcity of Dollar and there are a lot of factors responsible for that. When there is scarcity of any product, the next thing is for the price to go up and that is why the Naira keeps falling. We have been hearing different views on the way out, but I was disappointed in some people who were proposing devaluation. On the surface, devaluation appears to be the next option—the easy way out.
But we must look at the history of devaluation in Nigeria. We have never devaluated the currency and the Naira remained the same. Nigeria has never gained from the policy. Devaluation means you deliberately bring down the value of your currency vis-à-vis foreign currency. You can do that if you don’t have anything to export and you do not produce anything. But the question is, what does Nigeria produce? We are a mono-product economy that depends only on oil. We are producing virtually nothing. We can import anything in this world.
When Ibrahim Babangida came in 1986, the first thing he did was to devalue the currency. Immediately he did that, the Naira became very volatile, and since then, we are unable to get out bearing.
That is why I like the style of president Buhari. Devaluation is the style of the International Monetary Fund (IMF), but we do not have what to sell at the international market. We are not competitive.
Government intends to recruit 10,000 more officers into the security forces; don’t you see that as having potential to increase the wage burden?
It is beyond the economy, as it has wider implications. But anything that would encourage the maintenance of security is the best way to go. If the military and paramilitary outfits feel they are short of personnel, government has no option but to recruit more officers.
But we must answer a fundamental question nonetheless. Should we put our lives in danger because we don’t want to spend money or spend money on security so that we can have peace? What we must do is to look at all the loopholes in government’s finances and block them. There are a lot of sharp practices going on, especially with ghost workers. If government can plug the loopholes, we should have enough to pay new workers.
How best can government manage the economic cost of reintegration in the Northeast as well as policing the Niger delta in the wake of dwindling oil revenue?
There is no way government can do without such things. The issue of social security is very important. Despite the fact that government is in a tight corner, the revenue is not there. But government should not shy from its responsibilities. Within what we call social objectives, government should find a way to bring in the needs of these people. As long as they are there, they constitute a burden to the society, not only to government. They constitute a threat to the survival of the system. Government must find a way to reintegrate these people into the system. But there are a lot of competing objectives with very meager resources. That is why government needs a set of policymakers who would prioritise needs as they unfold. We are talking about the needs that we see, what about those that we do not see. Do we know the challenges that would come after we address the ones we are currently facing? We hace delath with the outbreak of Ebola and are battling with Lassa fever. We hear of Zika virus, too. All these are shocks in economics, but there must be an absolver.
How best do you think government can address the currency crisis away from the insistence on not to devalue?
Government must find a way to bring FDI into the system. That cannot be achieved without fixing some fundamentals, chief of which are security, infrastructure and ease of doing business. We must look at the models from other emerging economies and compare books. These are some of the issues.
We must also look inwards genuinely and become self-suffienct as an economy. One of our problems in Nigeria is our tastes and preferences. We like luxury items. Until when we are able to reduce that taste and force rich people to pay more for their ostentatious living, we wont get it right. Government can increase the tax on luxury items, ban others and strategise on how to help local industries to emerge. All these are necessary so that we can be competitive in the international market.
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