Juju
musician of the Lagos music scene of the late 1950s through the early
1970s, Ayinde Bakare, lamented the austerity measures of the First
Republic. His song, in Yoruba, roughly translated to English, says:
“This austerity measure is burdensome. It affects me; it affects you. It
affects the young; it affects the old. It affects the baggage porter;
it affects the journeyman. It affects the workman; it affects
merchants.”
You could say it was a time of democratic
poverty. But then, Bakare did not include politicians, civil servants
and the military, who had relatively stable and regular income, at that
time. But the austerity measures that will soon be unleashed on
Nigerians will forgive only government contractors and the overpaid
political class, some of whom earn above N240m annually, and still get
handsome kickbacks. Civil servants and the military will suffer the same
fate as Nigerians on Main Street this time.
The
Federal Government’s austerity measures include a reduction of the
crude oil benchmark for the 2015 Appropriation Bill from $78 to $73.
Some think $55 should be more realistic. There will less money to spend.
Foreign trips by civil servants would be curtailed, except when
sponsored by foreign bodies for training; Ministries, Departments and
Agencies would be streamlined; there will be a more effective tax
collection regime; and a Luxury Goods Tax would curb the use or
consumption of luxury items like private jets, yachts, and champagne. By
the way, will the Presidential Fleet be pared down? Or, don’t 10 (or
11) aircraft seem like a luxury?
Some of these measures are
laughable, though government must be commended for resolving to divert
funds to growth sectors, like infrastructure, human capital development,
and agriculture. Austerity measures shouldn’t end with eliminating
waste, luxury, reducing comfort, or foregoing indulgencies. To borrow
the classic definition of economics, it should be the rational
allocation of scarce resources strategic reordering of resources to
fundamental sectors of the economy. Policymakers may need to take a peek
at the work notes of the late Obafemi Awolowo.
Nigerians got
the grim reports that the global oil price has drastically reduced to
N$80, and sometimes below, from a recent high of $100. Nigeria’s
External Reserves dipped from $39.1bn to $37.1bn between October and
November. Lower oil revenue will adversely affect the oil subsidy. The
negative multiplier effect of the expected hike in costs of transport
and production will spin the tail of inflation. It will get worse, now
that a more realistic Central Bank of Nigeria is auctioning the dollar
at N162, as unconfirmed reports say the dollar sold between N183 and
N186 at Alade Market, Ikeja, Lagos, last week.
A report claims
that the CBN is making more dollars available to the market. But moving
the official exchange rate from N158.41 to N168 is evidence that the CBN
doesn’t have much dollar to sell. This action mops up naira liquidity,
increases interest rate, and reduces effective demands for the imported
goods that Nigerians buy with their expensive dollar. It will also set
the economy on the road to recession.
The balance of payment
deficit of Nigeria’s chronic import-oriented economy will become more
acute now that America is not buying oil like before. In any case, the
price is dipping. You know that Nigeria imports nearly everything – from
industrial machinery, to stretched limos, toothpick, and Pringles.
The
cycle keeps going on, like a dog chasing its tail. The CBN Monetary
Policy Committee has moved interest rate benchmark from 12 per cent to
13; raised the bank Cash Reserve Requirements for non-government
deposits from 15 to 20 per cent, but retains that of government at 75
per cent.
Just look at the wreck that state agencies – like the
Federal Executive Council, an insensitive cahoot; the Federal Ministry
of Finance, with its head in the clouds; the Ministry of Petroleum
Resources, a bystander in its own affairs; the Nigerian National
Petroleum Corporation, haven of intolerable inefficiency; and the
Central Bank of Nigeria, the unwitting financial fire brigade– have made
of Nigeria, and making life, oh, so tough for the citizens.
The
Lagos Chamber of Commerce and Industry rightly complains that the hike
in the exchange rate and interest rates would adversely affect business,
just as it reiterates, for the umpteenth time, the need to diversify
the economy. The LCCI demands that the Federal Government must stabilise
the economy, minimise the dislocation, make the economy sustainable,
and cushion the effects of the oil price slump.
On its own part,
the Nigeria-British Chamber of Commerce, worried at the dizzying fall
of the price of crude oil, offers its EXPORT NIGERIA initiative to
diversify Nigeria’s export trade. The initiative will supply ethnic
foods and other needs of Diaspora Nigerians, especially in the United
Kingdom. The Fisheries Society of Nigeria is crowing that it exported
fish worth over $53m this year.
When presenting the 2015
Appropriation Bill to the Lagos State House of Assembly, Governor
Babatunde Fashola observed: “Our resources have been severely and
adversely affected by the management, and lack of transparency of the
Federal Government and its agencies, of the nation’s oil proceeds.” To
borrow a tongue-in-cheek phrase from Anthony Lewis of the New York
Times, the accounting of Nigeria’s oil revenue is as clear as sludge. A
former CBN Governor Lamido Sanusi couldn’t tell exactly how much was
lost from the NNPC coffers. Fashola reveals that monthly receipt from
the Federation Accounts Allocation Committee has dropped.
Fashola
alleges that the Federal Government owes N51bn of the N59bn that his
government spent on rehabilitating Federal roads in Lagos State. He adds
that the Federal Government also owes Lagos an accumulated N673.67bn
pension funds. One agrees with the Lagos State chapter of the All
Progressives Congress that questions the Federal Government’s panic
measures barely two months into a reversal of oil prices. What has
government done with the long roll of oil revenue over the years? Why
wouldn’t the external reserves and the excess crude account serve as a
buffer, at least, in the short-term?
But realistic policy
planner should have seen this price dive coming. Film footages on the
Cable News Network and other international television networks had shown
protests, riots, and arson by the near-subversive, and in-your-face
OCCUPY groups in Western Europe. What you see now is the domino effect
of the debt throes and economic slump that affected the West, and caused
prime ministers of some southern European countries to lose their jobs.
King Juan Carlos of Spain recently lost his job to his son.
The
protests spiralled to richer Western countries like America. Remember
OCCUPY Wall Street? Even off-duty British policemen joined in the street
protests against austerity measures proposed by Her Majesty’s
Government. French voters brought in socialist Francois Hollande to
replace President Nicholai Sarkozy because of his policy of
privatisation, deregulation, and austerity measures.
The
Structural Adjustment Programme, the austerity measures conjured by the
International Monetary Fund for Nigeria, for the government of military
President Ibrahim Babangida, is coming back in another garb. France and
Germany compelled southern European countries, like Portugal, Italy,
Greece, and Spain to swallow the bitter pill of austerity measures. It
is the turn of the oil producing Third World countries that drove the
West to drink with the 1973 oil embargo, to drink from the poisoned
chalice.
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