A one-point solution to Nigeria’s economic crunch- Part 1

The declaration by the Central Bank of Nigeria (CBN) after its last Monetary Policy Committee (MPC) meeting that Nigeria is on the brink of recession is questionable because what constitutes economic recession in the industrialised economies of the West doesn’t apply to Nigeria. Nigeria’s economy operates on completely different undefined economic principles. That is why the economy keeps rolling and Nigerians remain upbeat and optimistic in the face of worst economic hardship. Reality is, for some time now, Nigeria’s economy has been in recession mode. All the indices of recession are manifest in Nigeria.

The 2014 revaluation of the economy, on paper, showed that Nigeria is the biggest economy in Africa but in reality, poverty reeks in the land as, virtually, all the indices of national development are negative. Nigeria’s human development index (HDI) in 2014 was 0.51 (low development) and that was the highest in 10 years running beginning from 2005. The HDI in 2005 was 0.47; 2010 was 0.49 and 2013, preceding 2014 was 0.50.

The economic crunch stems from absolute low productivity in industry and agriculture. Consequently, mass unemployment, mass underemployment, high inflationary rates, and low purchasing power, among other symptoms of recession manifest. Productivity is the one and only solution to the economic crunch. I will come back to this later on. This economy has not experienced real growth for about three decades, indeed, since 1985, when the Structural Adjustment Programme (SAP) was introduced as a solution to the economic woes of the mid-1980s.

Real growth ought to reflect in the life of the people and not merely on paper. Nigeria’s avowed economic growth is artificial; only the business people are beneficiaries. Nigeria’s obtuse economic contradictions have stirred scholars to think of a new economic formulation that allows poverty and GDP boom to co-exist.

Nigeria’s economy is a classic model of a mismanaged economy, which is now studied in universities abroad. Graduate unemployment, for instance, started around 1983. What we are calling imminent recession today is the climax of a progressive economic downturn that has never been addressed. The situation is getting out of control.

Successive governments mesmerised Nigerians with bogus propositions of roadmap that were trashed no sooner than the administration exits office. And, surprisingly, even at this material time, Nigerians are asking for a roadmap that would lead the country out of the doldrums. But only knee-jerk measures that offer no lasting solution are being dished out.

Many uninformed Nigerians have placed the blame on President Buhari and the All Progressives Congress (APC) that is now in power. But I keep telling people that neither Muhammadu Buhari nor Goodluck Jonathan, whom he succeeded, is to blame for the anomie. They can only come in with a lasting solution.

Nigeria’s problems actually started on October 1, 1960. Buhari and Jonathan merely inherited a mountain of economic woes. The situation is such that even when leaders like Buhari and Jonathan, have good intentions, the operating system frustrates them. The system seems to have been programmed to fail. The change that Buhari promised, which Nigerians are eagerly expecting, is not new. Nigerians have been expecting change since 1960 without getting it.

For instance, as far as I am concerned, arguments about fuel subsidy removal or retention are irrelevant because there ought not to be any talk of subsidy removal or retention in the first place if Nigeria has modern functional refineries. As far as this economy remains comatose, whether or not subsidy is removed or retained wouldn’t make any difference. The only solution to the subsidy distraction (whether real or imagined), is to build modern refineries like in other oil producing and non-producing countries.

Kenya and Japan don’t produce oil, but they have refineries that are functional. Japan alone has 29 refineries. The countries are not wasting precious time debating subsidy or no subsidy on imported petrol. Nigeria must have modern functional refineries if she ever wants fuel scarcity to end. The refineries could be private or public.

Similarly, the deluge of arguments that the fuel scarcity is caused by forex unavailability to importers is nonsensical. It amounts to knocking the head that did nothing and leaving the buttocks that messed. As far as I know, fuels scarcity has intermittently plagued Nigeria for over three decades. It eases out sometimes but resurfaces most of the times. As a result, the official price of petrol only obtains mainly in Lagos and Abuja. The price in other locations across the country has always been higher. Marketers sell at whatever price they like.

Truth is that fuel scarcity is not caused by forex crisis otherwise what caused the scarcity over the decades when forex was not a problem? By the way, how come that less than a week after the Federal Government announced increase in the pump price from N86.50 to N145, fuel suddenly became available everywhere? Truth is that fuel was available but was hoarded by the marketers to pressurise government to hike price. And once that was done, they released the already stocked fuel. But the Vice President, Yemi Osinbajo has clarified that what has been done is not deregulation; meaning that “subsidy” is still in place.

Again, the solution to Nigeria’s undeterminable economic reality is not in devaluing the naira or adopting a “flexible exchange rate” to make it palatable. Fuel scarcity is caused by lack of local production and the near 100 per cent dependence on imported fuel.

By the way, why should there be two parallel exchange rates in Nigeria? I have travelled to over 30 countries around the world and more than 40 cities; I have never come across where foreign exchange is a major issue like in Nigeria, not even in smaller African countries.

My experience is that if you want to change your money in other climes, you go to a bank or bureau de change. In other countries, the gap between the official and “black market” is negligible. But here, the two markets are miles apart, thereby, forcing greedy investors to seek for naira devaluation.

Still, you are warned in other countries to go to official channels for forex, for doing otherwise is criminal. What is the rationale for a “flexible forex” policy that allows two parallel exchange rates?
To be continued.