Saving Naira From Further Depreciation, By Nasiru Suwaid
This incident happened a few years back, the setting couldn’t have been more inappropriate, the interviewer shouldn’t have been much more a wrong choice, the platform wouldn’t have fit such a rare opportunity and occasion to explore the mind of one of the Nigeria’s greatest radical economist, in fact, normally or presumably, were the session to have been as it is expected, it should have been a certain Boason Omofaye at the studio of Bloomberg’s Africa Business Weekly, asking the questions. Yet, far from the norm, it was in the studio of a local radio station in Kano, the media interaction was conducted, in fact, it was rather, a vernacular or Hausa language morning show, when Professor Ibrahim Ayagi, the former Chairman of the Nigerian Economic Intelligence Unit was definitively asked a simply question, to confirm or deny the acclaim by many an economic or public affairs observer, the claims on corruption against the administration of Chief Olusegun Obasanjo.
Tried as the celebrated fellow could, he just could not give a definitive answer, because, as he averred, he does not have a definite proven evidence of graft prosecuted and convicted, but, he could not affirm whether no money was stolen. To me, the interview was a fiasco and a huge disappointment, but more importantly, it has since helped defined my world view of a typical Nigerian economist, as lacking in strength of character except but a few and it is defining the crisis of confidence bedeviling Nigeria’s monetary policy. Basically, the problem of the Nigerian economy is that it does not produce much revenue and spends much more beyond its earnings, thus, a deficit budgetary situation, because, much of the government spending is on the recurrent expenditure, non productive sector of the economy. Thus, what the economy needed was to find a way of encouraging production, but, such measures are within the realm of fiscal policy instruments, rather than monetary policy measures.
Unfortunately, the Central Bank of Nigeria last week introduced measures, to directly reduce the demand for much needed Foreign Exchange and indirectly, encourage production by banning the import of certain goods that could be easily produced in the country. The problem though is that the mere denial of Foreign Exchange currencies to the public, could not stop such desire for cheap imports or even encourage as an incentive to manufacturers to produce such goods, because, in most instance, there is basically no alternative to such imports, as the infrastructural challenges of production in Nigeria has virtually killed-off most of the industries. Despite the generally erroneous impression made by the last administration, about having created a diversified economic base, premised on a services sector that has reached up to 50% of the Gross Domestic Product, an unrealistic projection, because, unlike in the western economies, Nigeria services sector is only consumptive, does not save as a source of cheap loans to the economy and hardly earns any foreign exchange returns to augment crude oil receipts.
Indeed, the leadership of Nigeria’s apex bank was not just appointed recently, in fact, it has been part of the last administration’s profligate past, what with the many unserviceable bail outs and bad loans given, which has coalesced to raise internal debt status of the nation. But by its central bank’s new policy, expressing the exploration of a new monetary direction, you would have thought it just resumed yesterday, yet, had the prices of exported crude oil remained relatively high, such an ‘impotent’ resort to influencing fiscal policy could not have arisen at all, because, basically, although a central bank is supposed to be independent, it is expected that the individual appointed by a ‘particular’ administration, mirrors its economic vision and outlook, on what it entails to manage its monetary policy. Unfortunately, for the current chair of the apex bank, the economic vision of the last administration is all about managing success of high oil earnings, when the economy is rosy and resorting to unsustainable loans to fund non-productive sector wage bills.
One of the contradictions of the last administration was that it preached reform, yet it never had the character to implement it, rather, the non-productive recurrent expenditure spending blossomed into an unmanageable monster, destroying productivity, encouraging corruption and entrenching waste. Meanwhile, funny figures and fraudulent schemes where concocted and trumpeted as having being effected to tackle unemployment, when the necessary tools and requirements for profitable production are just not available, but, what can truly save the naira in these lean times low oil earnings, it is very simple, which is having a much smaller government, better economic production infrastructure, having a forcefully character in the chair of the apex bank and a much diversified economy. Indeed, just imagine had Professor Ayagi denied corruption in the Obasanjo administration and followed it with a powerful argument, not many would have believed him, but a lot would have been convinced of the attestation.
That is how to convince the markets, it is how to drive economic policy by capturing the attention but most especially, the trust of the investor, local or foreign, not merely through fraudulent spin but cogent and concrete argument, posture and imagery to elicit respectability so much, as to motivate individuals to part with their hard earned money, to put it in schemes that probably creates wealth, it is the basic tool to effectively managing an economy.
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