Professor Chukwuma Soludo said the new government should improve on its information management. To me he was right on point. The three men in charge of dissemination of government’s information in the persons of Lai Mohammed, Garba Shehu and Femi Adesina are masters of doublespeak and creation of confusion. Until today, the government has not been able to say in unambiguous terms how it is ending subsidy regime and deregulating the downstream sector of the oil industry.
The government has also failed to articulate its diversification strategy on agriculture as well as providing an economic blueprint for a way out of the country’s economic conundrum. Soludo, like everyone spoke openly against the simplistic recourse to heaping blames on the past government. The new government has failed to explain the true picture neither of the economy nor on how to go about solving the problems. Blaming the previous administration of Goodluck Jonathan for most of the economic problems and almost all its failures will not solve the problem. Nigerians have heard all those excuses before and expect the government to go for solutions and leave Jonathan to face his own problems.
Solving the problem
Nigerians must accept the fact that the solutions to the country’s economic problems will not be an easy fix. The nation is without foreign savings, which is the first deadly sin of Goodluck Jonathan and his thieving officials. It is the immediate root cause of Naira’s woeful situation in the forex market against established currencies like dollar. According to the IMF, if Nigeria had saved $900bn in its foreign reserve, the Naira will exchange at a Dollar apiece today. But then, we are not expecting such outlandish savings and fantastic exchange rate. Naira at 150/dollar is still good to go. Which means a modest savings of $60 billion would have seen us through. But under Jonathan, and depending on which sources of figures you choose to believe, Nigeria earned N51trn and actually saved $18bn but later shared it among states. The money was squandered. Between January and July 2014 alone, NNPC realized $20.91 bn for the sale of 191m barrels of crude oil. The money simply vanished and is today a subject of investigation. Presently the price of crude oil remains low, no fault of the previous government, while the activities of vandals and militants ensured the government could not pump enough barrels of oil to meet production target that is the bench mark for 2016 budget. We must also not lose sight to the real reason for Nigeria’s recession, which is global economic recession that caused low demand of energy by China, India and the United States.
Emir Sanusi and the subsidy regime
His Royal Highness Emir Sanusi was right on point. The CBN is allowing the Naira to weaken against established currencies in the interbank market while at same time allocating dollars to some industry operators, mostly party men and dubious companies owned by CBN officials, senior civil servants, ministers, traditional rulers and business men. This way, CBN will participate through periodic intervention (buying or selling forex) on the side of the naira while appointing primary dealers that will be dealing directly with CBN. The primary dealers will now be the one to deal with other secondary dealers in the interbank market. Each of the 10 dealers will receive a minimum of $10m daily for his/her trading activities with priority placed for LCS from commercial banks ,raw materials, plants, equipment and even school fees! That is where the regime of forex fraud is planned which Emir Sanusi shouted about.
The Emir said the truth. The government is wasting money and abetting corruption by subsidizing foreign exchange. Individuals and companies with links to the Presidency apply for forex in the name of importing critical machinery and simply sell the currency in the open market and make some cool billions from the comfort of their offices and homes. The CBN said the new rate is market driven. But anyone who is conversant with the system will tell you that the market driven by market forces is on paper only. There is an unseen fixed rate from which the CBN assisted the primary dealers to smile home with billions of naira daily.
Problem with subsidy
The major issue Nigerians have with anything subsidy is its distortion that allows individuals and companies to steal money with the tacit approval and assistance of the government in power. Jonathan created oil subsidy thieves and allowed some PDP fat cats to fleece the nation. In his own way, Buhari has stopped oil subsidy and opened forex subsidy and allowed APC thieves to steal the nation blind. Subsidy is synonymous with corruption in Nigeria. In serious climes, governments only subsidize research and development , production, education and health. It is done in a manner that benefits no one but the intended targets.
In Nigeria government saved N16bn from petroleum subsidy and wasted it on forex subsidy. Two wrong ways trying to block wastes. When government decided to improve on rice production, it did it by granting subsidy on imports through duty waivers to Dangote and Stallion group. It was the same with sugar. Government subsidized sugar import instead of subsidizing its production. A subsidy is supposed to be a removal of some burden for the overall interest of the country not individuals. British government subsidized BP in form of tax break to allow it carry research on renewable energy. United States subsidized farmers by buying their products at a reasonable price that will give them marginal profit from their production efforts.
Salvaging a currency of an economy that is facing recession is not going to be an easy task nor is it an individual concern. Real success can only be achieved through adding and subtracting dose of one policy or another while observing market response to each policy for further adjustments. This is a work that needs an economic team. The tragedy is Nigeria has an economic team made up of lawyers, a case of calling a carpenter to solve a plumbing problem. It is evident today that the monetary policy of CBN is not working when one looks at the key performance and success indicators.
A monetary policy is supposed to contribute to economic growth. But the nation has officially entered recession this quarter of the year. The policy is supposed to lower unemployment. But there is not only unemployment in all sectors of the economy, hundreds of factories are closing shop and sending thousands of Nigerians to the job market. A monetary policy is also supposed to maintain a predictable exchange rate regime and firm up the value of the Naira. Today even a blind man knows the Naira is far from being in stable condition.
So if the purpose of new CBN monetary policy is not yielding results, why not change the economic team, go back to the drawing table and start the process all over again. As for Emir Sanusi and Soludo, the duo should be praised for their timely intervention and not to be hounded by the federal government.