Economy: Let’s do it right!

“In the medium to long-term, addressing truly economic transformation becomes imperative. Alignment between annual budget, medium-term framework and long-term national plan needs to be put in place; there should be a legal provision to issue dollar coupons to state governments as often advocated by economist Henry Boyo, to reduce or eliminate liquidity problems and bank’s dubious profits”– Sherriffdeen A. Tella.

THE above is an excerpt from the concluding part of a recently published article in the Punch Newspapers titled “Addressing Nigeria’s Bleak Economic Outlook in 2015”; the author Sherifdeen Tella, is a Professor of Economics at the Olabisi Onabanjo University. Tella’s endorsement of this column’s advocacy for a reformed payments system provides a refreshing reassurance that the totality of our minds has not become ensnared in a lethargic spell that restrains us from rational judgement.

Sadly, the proposal for the adoption of dollar warrants or coupons for the allocation of dollar derived revenue has been in the public domain since 2002. Indeed in August of that year, my colleague, Adaigofua Ojomaikre and I made a formal presentation on the beneficent economic multiplier impact of abolishing the “traditional” process in which the CBN unilaterally fixes a Naira exchange rate, before creating fresh Naira values as allocations in replacement of distributable dollars.

In our presentation to the National Economic Intelligence Committee (NEIC), we explained how this unfortunate payments strategy poisons the system and makes inclusive economic growth unattainable.

Not surprisingly, NEIC Council members did not fault our observations and conclusions on the destabilising impact of the surplus cash syndrome instigated by CBN’s monthly injections of hundreds of billions of additional Naira values into the money market. They recognised that such a payments process ‘inadvertently’ also engenders a systemic Naira surfeit which instigates disturbingly high rates of inflation as well as oppressive interest rates which restrains the real sector, particularly the Small and Medium Enterprises which are the critical drivers of job creation and increasing productivity.

However, over six months after our presentation, NEIC’s prompt answer to our request, for a feedback on their proposed further consultation with President Olusegun Obasanjo and critical members of the Economic Management Team, was the bewildering content of their letter of March 25, 2003, which read as follows: “The National Economic Intelligence Committee acknowledges receipt of your letter dated 8th March, 2003, on the above subject matter. Also the two attached papers: Economists as Soothsayers and Nigeria’s Unlimited Supplies of Capital were received. The NEIC notes that you have already contacted Mr. President and the Governor of the Central Bank on the same subject matter. This development forecloses further consideration of your proposal by the Committee until Mr. President concludes his consultation on the matter.”

Subsequently, undeterred, my colleague and I sent copies of the paper titled “A Liberalized Foreign Exchange Market: “A Proposal for a Liberalized Foreign Exchange Market in Nigeria and its Economic Benefits” (see www.lesleba.com) to the Heads of Department of at least 12 Nigerian Universities for evaluation and feedback; sadly, there was no response or acknowledgment from our Ivory Towers, even though the mails were all delivered by DHL courier.

Indeed, the Head of Economics in a prime Nigerian University hurriedly shooed us out of his office, after we introduced the object of our mission. Similarly, NISER’s (Nigerian Institute for Economic and Social Research) concluding response to our paper in their letter of December 2, 2002 is as follows: “The study does not recognise the constitutional provision for the collection and maintenance of the Federation Account.” Also, “The study suggests that earners of dollars (public and private) should be able to sell when necessary through their bankers. I think this may further compound the existing information asymmetry in the foreign exchange market especially, if for example, the three levels of government – federal, state and local governments – are allowed to trade with their revenue allocations (in dollars) at the foreign exchange markets through their bankers.”

Over 12 years have rolled by since our engagement with NEIC and NISER, and despite unceasing advocacy in weekly Newspaper columns and countless interviews on Radio and Television, surprisingly, the Academia has remained inexplicably mute despite the clear reality that existing monetary strategies were making our people poorer in spite of best ever “foreign reserves” accumulation, existing, simultaneously, unexpectedly with a weaker Naira!

The foregoing may explain why I consider Prof. Tella’s recent public endorsement of the proposal for adoption of dollar warrants as a very courageous decision, which probably distinguishes him as a true scholar and a great respecter of truth.

Hopefully, Tella’s intervention will bring forward other lovers of truth to support the adoption of a reform that has the potential of positively changing our lives, by throwing overboard the oppressive burden of ever surplus Naira, so that low inflation and interest rates will become achievable to drive consumer demand and spur rapid industrial expansion with more job opportunities.

The Economic Management Team certainly recognises that high inflation and interest rates are the wrong medicines for an economy that has possibly over 50 million unemployed citizens, with youths constituting a high proportion of the jobless, but regrettably, the EMT appears unwilling to stand on the side of the people by also affirming that the adoption of dollar warrants will rapidly realign the factors of production for inclusive economic growth which favour Nigerians.

Furthermore, the CBN also has a statutory responsibility to adopt any monetary strategy that would facilitate the attainment of its core mandate, which is minimal inflation (1-3 per cent) and supportive cost of funds (3-7 per cent). Clearly, the current payments model has so far failed in this respect and certainly has no chance of redeeming our economy. Incidentally, both The Guardian and Daily Independent Newspapers obviously recognise this reality as they have repeatedly carried several editorials expressing support for the adoption of dollar warrants for allocations of dollar denominated revenue rather than the liberal printing of Naira substitutions. Regrettably, the government has turned deaf ears!
• Boyo is a public finance analyst.