CBN Governor And Job Creation By Sam Nda-Isaiah
In Godwin Emefiele’s maiden statement as the new Central Bank of Nigeria governor, he said job creation would be his topmost priority. That should gladden everybody’s heart except that the person who has the real responsibility and power to work the big ideas that can create the humongous number of jobs needed to bring Nigeria back from the brink is the president himself. And, clearly, from what the world knows about our president, he doesn’t even know there’s a problem. In spite of that, there are many things the CBN governor can do to reduce the very serious threat that now stares at us.
The mantra has been that it is unemployment that has made threats like Boko Haram, Biafra, armed robbery, kidnapping and related crimes flourish. Crime is the fastest-growing enterprise in Nigeria today. But what do you expect for a country with an unemployment figure of 48 million people? And, every year, 1.5 million graduates are added to this frightening figure. Indeed, what do you expect from a country that has 52 per cent youth unemployment? We cannot pretend that we are not in very serious danger. And if we don’t begin to solve this problem, a catastrophe worse than Boko Haram awaits this nation very soon. Nigeria has no choice. We must begin to tackle this problem at once. Nigeria’s unemployment rate is the biggest national security threat facing this country at the moment because it is at the root of most crimes.
Only big and bold ideas can tackle an unemployment figure of 48 million people. In Nigeria, it is even more so. The first thing to know is that there are no 48 million jobs available to give in Nigeria today. They have to be created. The best way therefore to go about it is to churn out and nurture policies that would create millions of small businesses. Typically, a small business creates between one and five new jobs. So if, for instance, the CBN governor can seriously get round a policy that will create 10 million small businesses in five years, we would be looking at creating between 10 million and 50 million new jobs. This is really the kind of bold move that can salvage this country at this critical juncture.
Anyone who is a student of nations should know that Nigeria is at a very dangerous crossroads at this very moment. A nation with 48 million unemployed people, and most of them youths, is a nation at the verge of implosion. Nobody should pretend about that.
A second obvious way of creating jobs in millions in an economy like this would be to embark on a massive housing programme. Nigeria currently has a housing deficit of more than 17 million units. Unfortunately, because of the kind of interest rates banks in Nigeria charge – which for all intents and purposes is sheer madness – the end products are usually beyond the reach of the average Nigerian. Constructing housing units in millions will create millions and millions of new jobs. Engineers, architects, landscaping professionals, quantity surveyors, estate agents, electricians, masons, block moulders, florists, food vendors, furniture makers, tile makers, kitchenware and toilet ware makers and sellers, mortgage bankers, insurers and many, many more would be engaged. The easiest way this can succeed will be for the president to use money outside the banking system because of the high interest rates from the banks. And one obvious source would be the pension fund which is now more than N4trillion. Pension funds are meant to be invested and reinvested in such ventures in any case. Malaysia has done marvelously well in this respect. So if the government borrows, say, N3 trillion at very low interest rate, it will be able to pay back after the houses have been sold to people at affordable prices. But this will be successful only for a president who knows that there is no difference between stealing and corruption. This is because any president who would do this must watch the money trail and ensure that all funds borrowed from such sources are repaid with interests. President Jonathan’s record does not recommend him for this.
The only successful way of taking this kind of bold idea of building millions of houses through the banking system would be through quantitative easing (QE). QE, in plain language, is creating money mainly for the creation of massive economic activity. But QE, which in the layman’s term means printing money, cannot coexist in a milieu of absolute corruption like Nigeria. QE even at the best of times comes with risks and, for a country with the governance standard of Nigeria, it is even riskier. Extra money can only be printed to create massive economic activity or else you run the grave risk of destroying the local currency as a result of uncontrollable inflation. But creating money to build one million housing units, for instance, will be just fine because jobs will be created and massive economic activity will be engendered. With QE, massive imports should be discouraged and local manufacturing and production encouraged, which will be just in order as cement, tiles, furniture, etc, could and should be produced within the country, further creating more economic activity. The printed money must not be used to service government debts or to pay salaries. Worse still, and this affects Nigeria, it must never be stolen. Even though QE is always risky and unpredictable, it has helped to stabilise most of the economies of Europe, Japan and the United States during economic crisis. The boldest example of the application of QE to solve a drastic problem was by the United States, in the five years following the financial crises of 2007. The Federal Reserve injected a whopping $2.7 trillion of new money into the economy in two rounds of QE. The IMF and several top economists were in agreement that the operation was a success. Obversely, it is the irresponsible printing of money by Robert Mugabe in Zimbabwe to fund government deficits and pay salaries, including funding his government’s corruption, that destroyed the Zimbabwean currency and economy.
Another surefire way the new Central Bank governor can stimulate job creation will be to drastically support the manufacturing sector, and what the manufacturing and productive sectors need at the moment even more than electricity is drastic reduction of interest rates from the commercial banks. No country where the manufacturing sector has grown has our kind of irresponsible interest rates. Any economy that wants to create new jobs through the creation of new businesses and bolstering the manufacturing sector must take a very close look at its interest rates. The current interest rate in Nigeria of over 20 per cent is scandalous. Exchange rate is also another variable that impacts very seriously on the manufacturing sector. The current naira exchange rate is also anti-business. The reasons normally adduced for the kind of high exchange rate we have is to encourage exports but we know that our very poor exchange rate is just a product of sheer incompetence of government. Nigeria’s exchange rate should not exceed $1 to N80, for starters. We have heard about this exchange rate-induced export for too long but all that we have seen is the collapse of our manufacturing sector as manufacturers are unable to replace vital spare parts and replace obsolete machines with modern ones.
A piece of advice free of charge to the CBN governor: since our main income comes from crude oil and oil is dollar-denominated, he should share allocations to all the three tiers of government and parastatals in dollars. Charles Soludo attempted this during his time but he didn’t carry it through. In order to check the risk of capital flight, all the tiers of government should be issued with dollar certificates instead of the raw dollar cash. Since they would have to exchange the dollar to the naira, more dollars would now be chasing the naira and this would immediately strengthen the naira. And, with a stronger naira, interest rates would come down. And the effect of a stronger naira and lower interest rates would boost the manufacturing sector and help create several new businesses, as Nigerians are basically business people. In the process, millions of new jobs would be created and the middle class reestablished.
There are many more strategies the CBN governor can employ in his quest for job creation, and he could do one or a combination of the above, but what he needs most importantly is courage and the political will of his bosses. I remain pessimistic about the latter because I know the place of corruption in Jonathan’s government. All the same, I wish him good luck.
Too Many Arrests, No Consequences
A small piece of news that almost went unnoticed came at the weekend: it’s about the police in Imo State arresting six people over the discovery of two improvised explosive devices in a church in Owerri. This is supposed to be a very big news item. It could give us a clue about the serial bombings this nation has witnessed. But from what we know of this government, nothing will happen to these suspects. Since the Jonathan government came, we have heard about the arrests of people with shiploads of ammunition, plane loads of ammunition and lorry loads of ammunition, but nothing came out of each. We have heard about the discovery of bomb-making factories in places like Kaduna and Plateau states and nothing came out of them. Are we then surprised that high crime and terrorism have taken over our country? Jonathan has a few months left but they are critical months. The president will need to start punishing all crimes. That is the only way nations are run.
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