WHEN President Goodluck Ebele Jonathan assumed duties over one year ago, he pledged an economic transformation agenda that would redress the ills of the past and thereby promote the fortunes of the economy, on a sustainable basis.
Specifically, the aim of the transformation agenda was to create a strong, healthy, and high-income economy that will underpin much of what its citizens value and desire in life.
One of the strategies evolved to achieve the objective was the inauguration of an economic team made up of technocrats, businessmen and politicians.
Essentially, the team was mandated to, among other things, create an enabling environment that could attract foreign investors into the economy, but with curious silence on building good prospects for the local players.
With the Finance Minister, Dr. Ngozi Okonjo-Iweala serving as the Coordinating Minister of Economy, not quite a few Nigerians were optimistic that a new lease of life would soon be enthroned in the country.
Top government officials regaled around the globe with success stories about the management of the economy, moreso with economic growth rate being put at over 7.1 per cent — the third highest in the world after China and India.
But analysts, at the weekend, bemoaned the manifest “growth without development” saga being experienced by the populace, even as the ruling class and their collaborators in the private sector continued to revel in assessed opulence.
Indeed, despite high economic growth rate being brandished over the years, the reverse is the reality in terms of development, as manifest challenges in governance continued to compromise otherwise good intentions of budgetary provisions.
Micro-economic stability remains a victim of business-unfriendly monetary and fiscal policies, with the naira depreciating in the foreign exchange market almost on a daily basis, with the attainment of single-digit interest rate becoming a pipe dream.
The Director-General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf puts it succinctly: “The Nigerian economy presents a curious paradox.”
He explained: “Fiscal and monetary policies often work at cross purposes and have therefore not adequately impacted the prospects of the economy. The democratic structures and institutions, and the key players in the political space, rather than offer hope for a solution, have become a part of the problem.
“It is difficult for an economy to work in a society where there is a total collapse of values, which should form the very foundation of a normal society. It is also difficult for the citizens to have access to basic needs of life in a society with weak institutions.
“At the root of this national tragedy is poor governance quality; manifesting in lack of moral and intellectual authority, at various levels of leadership, to give direction.”
The Lead Director of Centre for Social Justice, Eze Onyekpere affirmed that a review of key monetary and fiscal policy indicators reflect discomforting scenario of the nation’s economy.
“The naira is depreciating by the day and currently exchanges for over N160 to the
dollar while the growth of foreign reserves has stagnated and is even being diminished.
“We currently have less than $38 billion in foreign reserves. The inflation rate is in double digits and is stated to be 12.7 per cent for the month of May 2012, while the National Bureau of Statistics has warned that the hike in electricity tariff, attendant downward pressure on crude oil prices and the high exchange rate could fuel further inflation.
“Lending rate to the real sector of the economy is also in double digits and indeed in excess of 20 per cent. The real unemployment rate is alarming despite statistics churned out by the National Bureau of Statistics. It should be in the neighbourhood of 50 per cent of the population who are qualified, willing and able to work. The
growth statistics is also troubling.
“Essentially, with no concrete and visible human and material development, coupled with a falling naira value in an import-dependent economy; it has become extremely hard to believe the growth figures that are in excess of six per cent being churned out by NBS. Indeed, the Finance Minister, Ngozi Okonjo Iweala recently warned Nigerians of the possibility of deep recession.
“Since money that should have been used for human and infrastructure development is being stolen and frittered away on a daily basis, the bottom is knocked off the implementation of fiscal policy,” he said.
The Managing Director of Lagos-based Marina Business School, Olayinka Odutola said ample evidence abound that the economic managers are falling short of expectations.
“The evidence is all over. If the economic managers have done a good job, why should we have rising unemployment, increasing poverty, high inflation, very weak naira which has been falling with impunity against the dollar, in the past few weeks? These are not encouraging signals at all. Why should the populace be suffering in the midst of plenty?
“We have been talking of financial reforms and a lot of energy and resources have been concentrated towards this. However, we have not paid the same attention to real sector reform. Even the few interventions from the CBN to the real sector, like the aviation sector bail-out fund, is presently being investigated by the House of Representatives due to the weighty allegation that some of the airline operators of the fund were believed to have diverted same to other purposes that are totally outside the contemplation of the fund provider. Where then does this take us?
“For us as a nation to achieve anything meaningful in terms of development, reform of the real sector is sine-qua-non. This will go a long way in tackling infrastructural deficit challenges. It will inevitably bring down the cost of doing business in Nigeria, which is currently too high as compared with many other developing countries, and emerging economies.
“Paradoxically, the ranking of Nigeria as one of the countries with the fastest GDP growth rate in the world has not translated into development! The increase in GDP has not translated into significant reduction in unemployment, while the state of infrastructure still remains parlous, fuelling increase in poverty, diseases and related scourges.
“Meanwhile, the gap between the rich and the poor keeps widening by the day, leading to various social vices and increasing insecurity as already highlighted,” he added.
Ayo Olatunde, a Lagos-based analyst, expressed concern over security challenges assailing the economy.
The key sectors of the economy did not present outstanding performances. Efforts by the private sector to take the driver’s seat of the economy grew, but were crippled by the challenges of insecurity of lives and property.
The frequent reports of wanton loss of innocent lives and investment have significantly scaled down the enthusiasm of foreign investors and the productive population.
The economy has not picked swiftly as envisaged, and the political class has not paid more attention to the business of governance with the required will power.
It is clear that no one with good sense of responsibility would say that the economy managers of Nigeria have done well because there is no indication to show that the economy is well managed.
A long-term serving council member of the Manufacturers Association of Nigeria (MAN), Dr. David V. C. Obi said the cascading fortunes of Nigeria’s economy could be better appreciated with an excursion into the country’s socio-economic history.
“After independence, Nigeria’s industrial landscape was the biggest in Africa. In fact, the nation was more industrialised than Malaysia, Indonesia and some East European countries, among others.
“In the 70s, the Olusegun Obasanjo regime, during the military era, established some automobile assembly plants around the country. Job opportunities were created while technological transfer was facilitated.
“Today, all the auto plants have closed shop while industrial estates vanished, with churches and warehouses for imported goods taking over from the ruins of the manufacturing plants.
“The rot set in when the Structural Adjustment Programme (under Gen. Ibrahim Babaginda, 1985-1990) was initiated in 1986, which ensured the continued depreciation of the naira.
“This, in particular, sounded the death knell of the industrial outfits, as we erroneously put in place, an economic strategy that would have been more suitable for an export-oriented economy — that has high volume production for external market.
“Also, it is not possible to grow the economy under the current interest rate regime.
“Until we have interest rate at single digit and naira brought to its highest realistic level, we will merely continue to be a country of lenders and currency exchangers without production base,” he explained.
Ikem Isiekwena, reacting on behalf of the “1,000 Points of Light”, a non-religious and non-partisan social initiative, lamented the unsavoury mortgaging of the future of younger Nigerians. He assertsed:
“That the majority of Nigerians are disillusioned and despondent is not state secret. That many generations to come will suffer anguish is a source of collective shame. That the two phenomena are somehow linked is the first realisation to be reached about the current state of Nigeria.
“One need only look out the window to see exactly how waste and mediocrity have sustained a generation starved in the circle of poverty of hope, ideals and the basic necessities of life. A generation that has no business in the pursuit of a good life can but only worry about daily survival from a short, nasty and brutish end.
“Our population, in the overwhelming majority, lives on less than a dollar a day. Decaying and obsolete infrastructure left by the colonialists is being replaced with redundant white elephants. The railways built by Lord Frederick Lugard and his compatriots have served generations of Nigerians far better than the budgeted trillions we read have been “invested” in our railways by our recent leaders.
“With a crumbling educational system, our children will not compete with their Chinese, Indian, Botswanian or Ghanaian counterparts. A nation with abundant energy resources, yet its people lack power.
“In extreme poverty, the ignorant are nurtured in social and religious intolerance - our diversity becomes a brutal burden, and a harvest of distrust, hate and blood. Our resources are a curse to us, yet prosperity for few. This few, the ruling class, will ensure this blind prosperity is sustained, while we the young majority will complain, again and again. But that is today. What of tomorrow?”
An Economist, Henry Boyo, pointed out that with an inflation rate of 12.7 per cent according to statistics from the National Bureau of Statistics for the month of May, and a relatively Monetary Policy Ratio pegged at 12 per cent, SMEs with their great potential for economic growth and employment generation will continue to remain prostrate, as a result of CBN’s payment model, noting that no economy has been known to grow with inflation and cost of funds at such high rates.
“Inflation is a silent plague, which gradually erodes the purchasing power of all income earners. The poor and those with static incomes are, of course, the major losers when this happens. Regrettably, instead of confronting this failure, the CBN, who has the prime responsibility for establishing price stability through its monetary policy model, has in reality become the instigator of inflation and price instability.
“The aim of monetary policy everywhere is to reduce inflation, foster a benign rate of cost of funds so that industries, particularly SMEs can borrow at between five and seven per cent and thereby stimulate rise in employment, create demand and grow the economy. Obviously, our CBN has failed to achieve these objectives with their monetary policy model since the mid 1980s,” he added.
Another economist and financial analyst, Dr. Kennedy Izuagbe noted that the free fall of the naira should not be a surprise to every discerning economic unit.
According to him, “as long as our productive capacity remains non-existent and a political class devoid of sound economic management skills, it could be worse. The CBN is doing its best in my own opinion, but I do think that the extraneous factors exerting pressures on the naira are more of political than economic issues.”
“Even for the increasing interest rates, poor infrastructure is still a central issue. As long as there is poor infrastructure, which accounts for over 50 per cent of the cost of doing business, interest rates will continue to increase. The options are clear. The government must be embrace fiscal discipline, block all the leakages in governance and weave time tested and home grown policies to move the economy forward,” he added.
Features of the Nigerian Economy
Bleeding profusely from corruption, and with observed no consequences for the perpetrators.
Collapsed basic infrastructures have collapsed, which weakens the capacity of the private sector to create jobs and wealth. It is tragic that a population of over 160 million have to depend on public power supply of less than 4000 megawatts.
Over 80 per cent dependent on imports for its basic requirements.
SMEs are almost completely disconnected from the mainstream of the nation’s financial system
Cost of funds is one of the highest in the world;
Weak inter sectoral linkages.
Over 70 per cent of the nation’s budget (at the various tiers of government) is committed to recurrent expenditure.
Unethical businesses are thriving while the ethical ones are struggling for survival.
Dependent on a single commodity for over 90% of its foreign exchange earnings, and thus highly vulnerable to global shocks.
Politicians and bureaucrats are wealthier than the entrepreneurs, because politics is more of a business than a call to service.
Over centralisation of the political structure diminishing the drive and incentive for political competition among states and led to complacency because of the ready source of revenue from the centre.
The public sector is crowding out the private sector in the credit market. Interest rate on government bonds and treasury securities is one of the highest in the world.
The government has a major difficulty in ensuring protection of lives and property.
Unbridled importation of finished without regard to extant regulations.
Does not provide level playing field for investors.
Actions and inactions of many public officials are driven by self interest than interest of the people and the nation.
Indigenous entrepreneurs are increasingly being marginalised because of the challenges of access and cost of capital.
•Source: Lagos Chamber of Commerce and Industry
Nigeria’s 24-member Economic Management Team
• President Goodluck Ebele Jonathan, Chairman.
• Finance Minister, Dr. Ngozi Okonjo-Iweala, coordinator of the team
•Vice President Mohammed Namadi Sambo, Vice Chairman
• Minister of National Planning
• Minister of Trade and Investment
• Minister of Power, Minister of Petroleum Resources
• Minister of Agriculture
• Minister of Works
• Minister of Education
• Minister of Health
• Minister of State, Finance
• Minister of State, Health
• Governor, Central Bank of Nigeria
• Chief Economic Adviser to the President
• Special Adviser to the President on Monitoring and Evaluation
• Director-General, Budget
• Director-General, Debt Management Office
• Director-General, Bureau for Public Procurement
• Director General, Infrastructure Concession Regulatory Commission
• Honourary Adviser on Agriculture and Governor of Adamawa State, Muritala Nyako
• Honourary Adviser on Finance and Governor of Anambra State, Peter Obi
• Honourary Adviser on Economy and President, Nigerian Economic Society, Chairman, Stanbic IBTC Bank Plc, Atedo Peterside
• Chairman of Zenon Oil, Femi Otedola
• President, Dangote Group, Alhaji Aliko Dangote
• Managing Director, Access Bank Plc, Aigboje Aig-Imoukhuede
• President, Manufacturers Association of Nigeria, Chief Kola Jamodu
The Economic Management Team was inaugurated on Thursday, August 18, 2011.
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