Economy On Its Knees As Recession Bites By Emmanuel Nwachukwu
It is hard to find anyone in Nigeria today that is not affected one way or another by the worsening state of the economy. The goodwill that ushered this government to power has all but evaporated. In my recent VISITto Nigeria, I overheard a conversation between two roadside hawkers on the rising cost of living in the country and when one mentioned the word “change”, the other retorted angrily, “Holy ghost fire kill that change”!
Nigerians have become beggars because of the lack of work and non-payment of salaries. Even those that are lucky to receive their salaries regularly have seen their pay slashed by as much as 50 per cent. Our hospitals have become mere consulting centres where patients go to die because of the lack of basic medical equipment. With inflation spiralling out of control, because of the rising cost of inputs, business activities in Nigeria are gradually grinding to a halt. Standard&Poors Global Ratings downgraded Nigeria five levels into junk territory on September 16, saying the economy had performed worse than it expected because of the attacks on oil facilities and President Muhamadu Buhari’s FOREIGN EXCHANGE policies.
At the root of our current economic challenge is the lack of liquidity in the system, due to the huge reduction in revenue receipts from oil. At the height of the oil boom in 2013/14 oil was trading at $110 a barrel. Today, oil prices have plummeted by 60 per cent, from $110 to $44 a barrel and oil production has dropped dramatically from 2.3m barrels a day in June 2014 to 1.4m barrels, a reduction of 40 per cent. Whilst this colossal drop in oil receipts is primarily responsible for this recession, the lack of urgency and ineptitude of government in managing the decline in oil revenue has exacerbated an already dire situation.
We need a bold economic plan that will involve a mix of monetary and fiscal policy measures to get us out of this quagmire. The government will need to embark on a massive infrastructure building programme, unprecedented in our history to address the current economic crisis. This will involve the construction of thousands of kilometres of roads; the revamp and modernisation of our entire railway network and the building of over a million units of social housing in partnership with state governments and the private sector. This will inject the much needed liquidity into the system and create millions of sustainable jobs for Nigerians. We have to spend our way out of this recession. Western Europe did it under the Marshall Plan that restored full employment to its citizens after the 2nd World War; Brazil did it in the 1990s and the UAE of which Dubai is an emirate is doing it today. The Obama administration used “quantitative easing” to inject liquidity into the US economy in 2008/09 to stave off recession. We should not be afraid to borrow, provided projects are well thought out. The gains from the investment will more than pay back any borrowing, if the programme is properly planned and structured.
It is however paramount that the government “follows the money”. The civil servants and public officials that stole previous allocations are still in the system; they have not gone away, thanks to a corrupt judicial system.
It is not enough for ministers to tell us that things will turn around at the end of the year. The millions of unemployed graduates and youths roaming the streets with no prospects, no money and no hope need to hear from their Commander-in-Chief his plans for addressing their situation. They need to hear something more concrete from the government, not wishy-washy promises that amount to very little. The President needs to articulate the government’s strategy for getting us out of this recession, together with timelines and deliverables.
Industrialisation is the way forward for Nigeria and we need to pursue this aggressively. We need to move away from the lazy dependence on fossil fuels and solid minerals we simply dig up from the ground and send abroad for others to process, with no value added. We need to create industrial zones that government can support with grants, low cost loans and 24hr power. We have the greatest need for power and should be leading the research on solar technology and building the world’s largest solar plants here in Nigeria. Sadly, the academia has served Nigeria badly. Allegations abound of vice-chancellors that practically looted their institutions, diverting funds meant for research to themselves.
One of our biggest problems in Nigeria is that policies are not well-thought through before they are rolled out. In these challenging times, the government should have no business sponsoring pilgrimages to Mecca or Jerusalem. We have enough Christian and Muslim billionaires who are more than capable of doing this through charitable trusts.
We seem to be repeating the same policy mistakes on exchange rate we made in the late ‘80s and early ‘90s that led to recession. Running a dual exchange rate regime poses great risks to the economy. It is not unreasonable to assume that those who are able to obtain the dollar at government preferential rate of N197, faced with the choice of investing in their factory or selling the dollars at the current rate of N420 will most likely do the latter. Businessmen, anywhere in the world, would do the same, given the same arbitrage opportunity. It is common sense. This policy will make banks, businesses and individuals who are able to obtain dollars at the preferential rate very rich and lead to the scarcity of the essential goods the policy is designed to benefit.
Like most Nigerians, I find the kerfuffle between the executive and the Senate president a huge distraction, especially at a time when new laws and amendments to existing laws are urgently needed to address our various challenges.
There is an urgent need therefore to look inwards at government spending to release the much needed resources for critical infrastructure. Our leaders should lead by example. The President should not be maintaining a fleet of presidential jets in the current economic climate when the Prime Minister of Britain, the world’s fifth richest economy, travels with British Airways on official engagements. Governors should not be asking civil servants and pensioners that have not been paid for several months to be patient when they and state legislators are the first to collect their own wages.
The incoherent message coming from the Finance Minister, Kemi Adeosun, and the Central Bank of Nigeria is quite troubling. There is a sense that the economy is on autopilot whilst ministers are at a loss what to do. At a time like this, the President desperately needs the best brains around him, wherever he can find them. The present Governor of the Bank of England, Mark Carney, is a Canadian citizen, headhunted from Canada. President Muhammadu Buhari needs seasoned economic advisers to help with policy formulation and implementation, not PhDs without any proved and verifiable experience. With no job, no money and no hope, the potential for civil unrest looms.
Nwachukwu, an international business analyst based in London, wrote in via email@example.com