The Nigerian economy remains unfavourable to the existence or survival of a mass of Nigerians. That is the fact that the government and its sympathisers don’t want to see, hear, or be told. Those who live in the corridors of power and are beneficiaries of just the crumbs from the table often shout at critics more than those who live inside the hall, where the cake-sharing is carried out.
Some people are not even close to the corridor, but tribal or religious affinity with the President or his vice or ministers makes them protective of the principal agents. They are suffering like outsiders but are beclouded by mundane relationships. Unfortunately, the principal actors have sworn never to listen to the news or read newspapers. They do not care for feedback from sources outside their circle, but it does not pay them. They want to hear that the IMF has reported that Nigeria has cleared its indebtedness to the institution, but do not want the report that the World Bank stated that 75 per cent of Nigerians in the rural areas are living below the poverty line, even when the two reports appeared within the same period.
The Nigerian economy remains weak, weighed down by debts and debt servicing, constrained by low productivity, low consumer spending, high inflation, and a weakening exchange rate. Criticism of the economy is well placed, and the establishment of a shadow government by Pat Utomi to provide an alternative economic route is in order. It will not only keep government policymakers on their toes but also provide them with a variety of policy options to consider and choose from.
As the government moves towards completing its second year and with only one year left for effective governance, a mid-term assessment of the political economy must be undertaken by the government itself. The results can then be considered with private reports. Of course, the fourth and last year will be for the campaign and elections.
The report that the country no longer owes the IMF is a cheering one, and we can hope that the country stops borrowing and starts repaying loans owed to other banks and financial institutions. Albeit, one knows that the need to clear IMF debt was hinged on the opportunity for the Fund to support new loans from other sources. The country owes the World Bank over $5bn with new loan approvals on the table. The World Bank loans are for the long term and for future generations to pay. There are more short- to medium-term loans. What is of main concern now is the debt servicing, which gulps a large proportion of funds available for development.
For transparency and accountability, there should be a public publication of the debts, the use and outcome or achievements of the objectives. In core macroeconomics theories, the Diamond model or overlapping generation model posits rightly that at any time in a nation, there are two generations, namely the old and the young. The old generations engage in capital formation while the young generation provides labour, such that there is continuous production and capital accumulation. In the Nigerian case, the government (old generation) seems bent on debt accumulation for the future generation, with resultant perpetual underdevelopment. As soon as Olusegun Obasanjo’s government cleared the debts of his predecessors, his successors rebuilt the debt, and with vengeance.
Economists would say there is nothing wrong with borrowing and further justify the statement that even advanced economies are huge debtors. The statement is wrong without the caveat that such borrowings are for production and employment generation. The Nigerian governments borrow money for consumption, for sundry expenses and for looting. That is why there have always been negative relationships between debt and development.
Consumer spending remains weak because Nigerian workers are among the least paid workers in the world, despite the recent monthly minimum wage of N70,000. In real terms, the minimum wage is lower than the pre-minimum wage period. This is because inflation was much lower than now. The costs of living continue to rise. Unfortunately, the middle class, which used to assist the very poor with funds, has virtually been wiped out under the same dispensation.
The low wages and salaries also serve as disincentives for commitment to work optimally. Low productivity and poor work ethics have been part of our problems, and the need to solve this problem becomes imperative if we are to increase outputs and grow the economy. The education system is also weak in terms of curriculum, manpower, teaching, and learning environment. Contrary to the opinion of the Minister of Education that the mass failure in JAMB reflected the ability to curb examination malpractices, the results reflect the serious weaknesses in our education system from primary to tertiary level. Low inputs into the education system will inevitably bring out low or poor outputs.
There is a need for an educational summit on the way forward. With the rapid fall in the quality of education, the growing number of out-of-school children, high rate of dropouts in schools, the continuous decline in number of qualified teachers and lecturers due to poor learning environment and remuneration, etc, it is apparent that we must chart new viable ways to improve and sustain education. The Minister of Education has made some policy statements recently, and it is important to discuss these before they become laws.
Price stability is a major objective for economic growth. Inflation has been a recurring problem because of high costs of production that are related to high interest rates; sharp increases in the costs of power and transportation, as well as, shortage of goods, particularly food items, arising largely from insecurity. The solution will be a deliberate fall in interest rates by the Central Bank of Nigeria’s action, and a fall in costs of power, which may include a specified and legalised subsidy regime in the short term while looking for ways of cheap power sources and supply in the medium term. Enforcement of transportation fares in agreement with road transport associations and solving issues of insecurity through a scientific, technical, and social policy focus are imperative.
The government must work towards revaluing the weak naira, and one important way is to reduce the importation of goods and services or increase the exports of goods and services. I have stated that one of the reasons for unfulfilled promises of foreign direct investments is the weak domestic currency, apart from inefficient electricity. A country that cannot guarantee continuous capital formation from domestic resources would need support from foreign direct investments. Foreign investors are not interested in the volume or value of returns on investments in local currency, but the values in foreign currencies.
The policy of supplying crude oil to Dangote Refinery and others, as well as the public-owned refineries, is in the right direction. It has significantly reduced the forex required for the importation of goods. The current moves to promote the use of local inputs in production and the government’s decision to purchase and promote the purchase of Nigerian-made goods and services are all geared towards reducing pressure on foreign exchange. However, the government must be ready to revalue the currency to derive the benefits of a strong domestic currency, which will be at the expense of the monetisation of crude oil money.
Since COVID-19, the government has engaged in conditional cash-transfer programmes to assist consumers. How efficiently the exercise was carried out is contentious, but clearly, it has not been effective. If it were effective, the programme would have been stopped long ago, but the government is in the process of another round of the exercise. There is an indication that the government borrowed funds from the World Bank or another financial institution to execute the programme.
I can confirm that the conditional cash-transfer programme has made millionaires of those who administered the funds and pauperised the would have been beneficiaries. The emphasis on government intervention in the economy should be shifted to improving production and employment generation. When people can earn income, they will consume the outputs produced, which consequently leads to the trinity of production, income generation, and consumption.
A government should be concerned about the failure of some of its policies, as pointed out by critics and policy reports, rather than rationalising or hunting down the critics. An honest evaluation of the criticised policies could bring out a worthy solution.
