Nkemdiche: Economy: We had been here

NIGERIA’S seeming intractable financial challenges of the previous couple of years are a replication of the acute financial challenges that had confronted the country between 1967 and 1970. This is not de ja vu; we have been here before. Between 1967 and 1970 the sovereignty of Nigeria had been threatened by armed rebellion from the South Eastern part of the country. Petroleum exploration and exploitation activities, which were essentially domiciled in the South East, had virtually ground to a halt; thus impacting negatively on the country’s export earnings. There were nation-wide dislocations in other economic activities. Whole communities were dislodged and rendered homeless as other citizens lost their businesses and houses. Hundreds of people were killed or maimed in single incidents as countless Nigerians became refugees in their own country. National morale had hit an all time low. By the third quarter of 1967 Nigeria had come under pressure, due to dwindling exports, to devalue her £(N); Nigeria had been at the time under the Sterling Group led by the British Pound.

    In the previous couple of years, Nigeria’s sovereignty has come under threat by insurgents in the North Eastern part of the country. Petroleum exploration and exploitation activities in the South-South are, at best, epileptic due to vandalism; thus impacting negatively on the country’s export earnings. There are massive economic dislocations in virtually all the Northern States. Whole communities are being dislodged and rendered homeless in the North East as other citizens are losing their businesses and houses. Hundreds of people are being killed or maimed in single incidents as countless Nigerians become refugees in their own country. Once again, national morale is at its lowest. In recent months, following the latest downtrending prices of crude oil, Nigeria is being pressured to yet devalue her grossly undervalued currency, naira. 

  Surely, the resemblance between Nigeria’s 1967/70 scenario and her extant scenario could not be closer. This striking resemblance takes on an uncanny hue when we call to mind that the dramatics personae who had presided over the country’s finances between 1967 and 1970 had similarly been endowed with prime ministerial powers, by virtue of also being the then vice-chairman of the Federal Executive Council; much in the manner that the incumbent minister of finance is endowed with prime ministerial powers, by also being the coordinating minister. On a personal level, both de facto prime ministers each had a string of academic certificates that qualify them for the ultimate academic title. But while the one would-be professor had a strictly classroom background, the other had interspersed classroom tutorials with extensive laboratory sessions. This significant difference, apparently, largely explains why the one effectively discharged the high office of a de facto prime minster, while the other as yet makes heavy weather of it. 

   No, this is not de ja vu; we have been here before. And Nigerians, middle-aged and above, would have little or no trouble recalling that the 1967-1970 financial challenges had been excellently managed without even once devaluing the national currency nor resorting to foreign loans. The then de facto prime minister and his team had accomplished this feat by substantially downsizing imports to bare essentials; reducing government expenditure; and empowering local manufacturing. Details of how they had gone about this could be obtained in the full text of a lecture entitled “The financing of the Nigerian civil war and its implications for the future economy of the nation” delivered by Chief Obafemi Awolowo, Vice-Chairman of the Federal Executive Council and Federal Commissioner (Minister) for Finance under the joint auspices of the Geographical Society and the Federalist Society of Nigeria at the University of Ibadan on 16th May 1970. Some excerpts from the lecture would suffice. 

  “In pursuance of the policy of conserving our foreign exchange reserve, we had had to cut down heavily on our imports. The importation of certain items of luxury goods was completely banned and so was that of many items of necessaries which we were satisfied could be produced locally. Items of goods which were considered necessary, but which were not being produced locally were allowed to be imported, either without licence or under licence. For the purposes of the latter, a high-powered Import Quota Allocation Committee of officials was set up to ensure that licences were not issued in excess of freely available foreign exchange reserve minus the amount required for the purchase of military hardware …” 

   “From the middle of 1967 or earlier, there were persistent speculations that the sterling might be devalued… Consequently when Britain actually devalued its currency, unilaterally and without consultation with the members of the Sterling Group, on the November 18, 1967, I already had clear in my mind what the implications of this action would be for the Nigerian economy, and also what the effects of devaluation or non-devaluation of the £N to the country’s economy would be also. Nonetheless, I quickly arranged a meeting with my officials and the Governor of the Central Bank to argue the matter… Powerful arguments were marshalled for and against the devaluation of the £N. But in the end, we decided not to devalue; and whatever might have been the theoretical argument to the contrary, subsequent events have shown that we were wise not to have devalued…”

    Students of Finance and Political economy would find the lecture a priceless reference material. The lecture provides illumination on how to manage financially challenged fledgling economies, of which steering clear currency devaluations is key. In another seminal lecture, entitled: “How to achieve economic freedom in developing countries” delivered as the first lecture in the University of Lagos annual lecture series on the 15th of March 1968, the acclaimed financial genius had suggested to developing countries to regard currency devaluation as a plague. Nigeria’s 28 years experience with currency devaluation bears out the aforesaid: currency devaluation is indeed a veritable plague; not only to the least developed countries, but also to middle-level in-come countries. Even the big bear, former USSR belatedly learnt this lesson decades ago when it of a sudden unilaterally reflated its virtually worthless currency to near parity with the leading currencies in Europe at the time. 

   Without a shred of doubt, the late Chief Obafemi Awolowo remains the best Finance Minister Nigeria has ever had; it is therefore reasonable to regard him as an authority on financial matters, all the more so in the areas where experience has exhaustively vindicated his financial judgments. Borrowing liberally from Awo’s School of Finance, therefore, it could be said that the answer to resuscitating and growing our ailing economy must consist in the following: 

Downsize imports to bare essentials; 

Eradicate capital flights;

Downsize government’s expenditure; 

Aggressively protect national currency; 

Make energy and power supply self-sufficient; 

Empower local industries based on national comparative advantage; 

Coordinate and interlink industrialisation; 

Purposefully protect local manufactures; and

Domesticate technologies relative to local manpower. 

   The efficacy of the above policy-mix had been proven.        

 It had worked excellently in the years 1967 to 1970; it will work just as excellently today. A well thought-through holistic and focused industrialism is the path to sustainable economic growth. The Coordinator-in-Chief’s current prescriptions of accumulating huge foreign reserves with scant attention to largely dysfunctional infrastructure; generating internal revenues from taxes, levies and duties; and devaluing the national currency cannot stabilise let alone grow Nigeria’s unwholesome economy. This has become all-too-evident. The economy is groaning under the yoke of the ineffectual antidotes. Madam Coordinator, stop making heavy weather of our present financial challenges; you are not expected to re-invent the wheel. Simply borrow copiously from history, because we have been here before. 

• Nkemdiche is a consulting engineer in Abuja.