Love,
business, family, religion, art and patriotism are nothing but shadows
of words when a man is starving." O. Henry, 1862-1910.
The Federal Government of Nigeria is doing a wonderful job fighting
corruption. The last time this monster was tackled, head-on in this
country, was in 1984, by the same Head of State Buhari.
Then as now, the price of crude oil created the havoc. Then, as
now, there were discordant views about whether or not the government
should devalue the currency or not. Those on the left wing of Nigerian
politics, the Nigerian Labour Congress and socialists who arrogated to
themselves the love of the masses, were against devaluation of the
currency.
The usual argument is that it will lead to inflation which will
negatively impact the masses. The only price increase the NLC favours is
wage increase because in their own books of economics wage increases
don’t increase the cost of production of goods and services. That one
sided and somehow inaccurate reading of economics has always been at
play in this country – led by many who either never studied the subject
or failed it.
However, the Federal Government might be making a drastic mistake
if the leaders think that fighting corruption is substitute for putting
food on the table. The two are not mutually exclusive and prolonged
starvation might even undermine the fight against corruption. Hungry
people everywhere don’t care who is jailed. Unless, this perceived
monomania is corrected, neither the battle against corruption nor mass
starvation will succeed in the long run.
President Buhari must turn his attention to the economy. NOW! The
truth is “No government deficit [or any other measure known to man] can
create inflation unless the quantity of money [in circulation] goes up.”
(G. Haberter, in INFLATION, ITS CAUSES AND CURES, VBQ, p 103).
Everybody knows that the classical definition of inflation means too
much money chasing too few goods – irrespective of whether those goods
are imported or produced locally.
Nigeria remains an import-dependent nation; and we all contributed
to making it that way and we have not even started to control our
appetite for imports. As long as imported goods constitute a significant
percentage of our consumption, we must be prepared to find the dollars
to import those products.
On Wednesday, February 17, 2016, the PUNCH tucked into page 28 a
story which should have been headline news instead of the usual “EFCC
said” stuff. The report by Femi Asu read as follows. “Nigeria’s March
crude programme is struggling to find outlets, with some 25 million
barrels still unsold even as the April programme is expected to start
arriving this week.”
For those who might not fully grasp the meaning of that report, it
needs to be explained fully because it illustrates the catastrophe
confronting us as a nation. Twenty five million barrels unsold, given a
budget calling for export of 2.2 million barrels a day means that the
country might not dispose of eleven days production.
So on volume alone the deficit is 35 per cent. Simultaneously, the
budget was benchmarked on $38 per barrel. Instead the March deliveries
are going for $32 per barrel or 16 per cent less. Altogether, Nigeria
will suffer revenue deficit on account of crude oil of close 22 per
cent, after all deductions have been made. That would have been bad news
enough. But, January and February sales were also below budget levels.
So, by the end of the first quarter, the nation would have suffered
a deficit of close to 25 per cent for the period under review.
Meanwhile, the non-oil revenue sources have not started to deliver the
surplus that would cushion the impact of the fall in crud oil income.
Adding to the nation’s economic woes is the rapidly dwindling external
reserves which had been reduced by close to 23% in the last one year and
are unlikely to rise in 2016.
Every economic index known to man calls for an urgent decision to
be made by the Federal Government before all control is lost. A
conference held last week had the Governor of Edo State stating his
opposition to devaluation. He was ably supported by the Labour
representatives present.
However, they failed to tell Nigerians what government is supposed
to do when imports exceed the foreign exchange earnings of the country
and what is to be done when the external reserves run out or get so low
as not to be able to support our level of imports or external payments.
Often forgotten is the fact that some states of Nigeria, the Federal
Government, banks and private companies have incurred loans denominated
in dollars and which they must find dollars to repay.
The dollars are not forthcoming in the quantum required to meet our
obligations. President Buhari had been focusing on the battle against
corruption and on external affairs. There is no discernible individual
in government who is responsible for the economy. The Vice President who
had made some comments on economic policy had ended up confusing the
nation.
He was the one who first announced that N8 trillion would be spent
in 2016; that the 2016 Budget now languishing in the National Assembly,
will be based on Zero Sum method and that the nation targets $25 billion
loan to help fund the budget. The first two had turned out to be mere
play on words the third will depend on whether or not foreigners and
even Nigerian investors have confidence in our ability to manage our
economy.
The acid test of whether a nation can manage its economy is the
health of its currency. Right now, even the best propagandist the
Federal Government can appoint cannot convince Nigerians and the global
community that all is well. A free-falling currency is a sign of deep
trouble and nothing keeps investors away better than that.
Even now, the free-fall of the naira is partly caused by capital
flight. Those who had adopted a wait and see attitude, wanting to see
how this government will manage the economy, are no longer waiting
because they have seen enough. Dr Arthur Burns, the Chairman of the
Federal Reserve Bank in the USA, equivalent to our Governor of the
Central Bank, once said that if a nation allowed an untenable economic
situation to persist for too long, suddenly, there are no good options
left.
Nigeria is slowly but surely approaching a situation where there
are no good options left. Even now, the options have been reduced to
few. But, another delay will spell doom. The Federal Government must act
now – or hand Nigerians to unpredictable fate.
