Thursday 5 November 2015

Aren’t We Flying Blind On This Economy?

President Buhari
by: Niran Adedokun

I am not an economist; in fact, I do not have the head for economic and strong financial stuff. They confuse me, make me dizzy. However, I got some education, so I can think, I am a Nigerian and I live in Nigeria, so I can feel that things are getting increasingly difficult in the country.

I agree that it is a tough time globally, and that the fall in the country’s oil revenue is a present challenge but I do not think our leaders are doing the best possible to ameliorate the state of the economy.

To put it mildly, I opine that the five months of President Muhammadu Buhari’s administration has left Nigeria flying blind on the economic front. And this is not the time to remind us about the rot that he met; Nigerians should get over that worn out sentiments and let us move on. What matters is that we are in the sixth month of a new administration whose economic direction remains hazy. I am persuaded to contemplate that there is confusion in high places currently and I do not speak without cause.

At the end of June 2015, the Central Bank of Nigeria released a list of 41 imported items thenceforth excluded from access to facilities on the Nigerian foreign exchange markets. This means that importers of those items could no longer buy foreign currency from official channels including the CBN, commercial banks and Bureaux de Change to transact business with their suppliers.

Importation of these items was however not banned. This implies that users of any of the items were free to source for their forex needs through alternative means. This, to my mind, is an open invitation to currency speculation and rent seeking, a point which the CBN itself acknowledged when it alleged that large volumes of cash were being transported through the borders following its restriction policy. But this is just by the way.

In justifying the restriction, the CBN governor, Godwin Emefiele, spoke about the need to shore up the country’s foreign reserves and diversify its economy. He said to the media: “…we are spending huge money (sic) importing things we can produce locally; it is affecting our foreign reserves. Nigeria spends N1,3tn on average(sic) annually to import consumable goods such as rice, oil, etc which can be produced locally… Even if it is $1 that we spent in importing toothpicks, I am saying that it is shameful that we have to import toothpicks…. It is shameful and I think we need to stop it. Current situation calls for self-sufficiency.”

Honest Nigerians will agree with Emefiele on all scores here. I am particularly happy that he mentioned rice. If I recall correctly, Nigeria, by the estimation of the immediate past Goodluck Jonathan administration, was on the way to becoming self-sufficient in rice by 2017 with the prospects for gaining export potential shortly after. The partial ban on rice in the encouragement of the growth of Nigeria’s rice value chain should therefore make sense.

But what do we make of the decision of the Comptroller-General of the Nigeria Customs Service, Col. Hameed Ali (retd.) to, by himself, lift the ban on the importation of rice and re-introduce import duty payment at land borders. I heard Ali justify this obvious disincentive to local production with the reason that smugglers have continued to flout the ban across the land borders and so it was better to allow the product to come in and earn revenue in these hard times.

So, I thought Nigerians should ask Ali, who has no credential to that office other than the President’s confidence in his ability to sanitise the NCS, why inefficiencies in the service and immediate pecuniary gains should contribute to the truncation of long term plans for self-reliance. With agriculture still being one of Nigeria’s highest non-oil export earners, any policy that harms local farmers is counterproductive especially for a produce with which the country has made significant progress.

Even then, why do we have this blanket restriction? While self-sufficiency is desirable and should be the dream of every Nigerian, we cannot achieve it by a single magic wand such as this monetary policy.

Like with the stories of cement and rice, well-laid out, well-executed plans which take natural gestation , reversal of infrastructural deficiencies as well as reasonable costs of borrowing into consideration , would be more productive than the impulsive handing down of restrictions in areas where the country has not even started out with any investment plan.

For example, I recently read that crude palm oil, one of the items on the CBN list, is a raw material used by manufacturing concerns involved in the production of food and consumer goods like vegetable oil, biscuits, noodles, chips, margarines, shortenings, cereals, washing detergents and cosmetics among others.

While it is true that Nigeria could be self-reliant in this produce, this is not a dream for the immediate. At the moment, Nigeria is said to have a short fall of 900,000 tonnes between local production capacity and consumption. The road to self-sufficiency on this produce as I gathered, is the cultivation of 300,000 hectares of land and an estimated $10bn investment over a minimum period of 20 years! Those would be years of not just mouthing but deliberate collaboration between all stakeholders including governments, banks and communities. Do we have such plans? Not likely, but we have imposed policies that make these raw materials difficult to procure.

The likely consequence is that these companies will seek their forex needs anyhow with sure increase in prices and then inflation, followed by a possible lay off of workers in large numbers.

In addition to unemployment and increase in the incidence of violent crimes that will attend the former, is what I see as the further burst in the Federal Government‘s revenue expectations. With the continuous dip in the cost of crude, the government has put a lot of hope on taxes from companies, but how will this materialise when a sizeable number of these companies are battling to remain in business.

I am also inclined to suggest that the restriction of access to foreign exchange would invariably make monsters out of operating agencies and engender an atmosphere for corruption, the same thing that the President has staked a substantial part of his five months to fight.

Although finding ways to circumvent such restrictions is the natural order in the circumstance, a story in a recent article by Azu Ishiekwene reinforces my conviction. In the article, entitled, “Sanusi on Point: There’s Danger Ahead”, Ishiekwene told of a manufacturer who needed $1000 to replace a damaged spare part in one of his machines. After two weeks of running from his bank to the offices of the Standards Organisation of Nigeria with requests for him to meet near impossible conditions and bills mounting, he was advised to “contact a guy in SON office, who offered to ‘sort him out’ if he could pay N65, 000 in a bribe; that is roughly one quarter of the black market value of the $1000 he needed to transfer.”

This is the exact thing that a government exposes its citizens to when it places unrealistic restrictions and refuses to make decision whose urgency are gaping. For instance, Buhari insists he would not remove subsidies on fuel consumption, he has also refused the proposal for the sale of the country’s perpetually moribund refineries, but retaining subsidies has not stopped the manipulation of the price of petrol for as high as between N100 and N120 is some parts of the country and those refineries continue to run at a loss, yet the country keeps them like they were some invaluable ornament.
As the Emir of Kano, Muhammadu Sanusi 11, said recently, Buhari needs urgent help with the economy. I hope he will get that help now that he has a cabinet. Members of this cabinet must be sure to tell the President the truth about every situation. Of course, there are chances that the President may want to listen to his own voice, but ministers who have convictions must speak out and save Nigeria’s badly haemorrhaging economy before night falls.

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