Thursday 23rd February, 2017
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How Nigeria's economy defies logic

How Nigeria's economy defies logic

The Finance ministry and CBN are trading words over the reduc­tion of interest rate. The finance minister Kemi Adeosun specifically asked the Monetary Policy Committee (MPC) under CBN to cut inter­est rate below the current 14% in order to stimulate growth by the real sector. The CBN Gover­nor, Godwin Emefiele declined the request. The nation is in trouble. Here are two members of the economic team, trading words in public. The two per­sonalities who are supposed to work together as a team to save the nation’s economy are busy flexing their egos. The minister who supervises the CBN is as­serting her authority, while the CBN Governor who is heading MPC and the apex bank is pro­tecting his independence. In the process it is the nation that suffers.
My take is that the minister is right on point. In recession, the best thing to do is to lower the interest rate so that money can get into the hands of peo­ple and the real sector to drive growth. But whether high or low interest, the truth remains that Nigerian banks are not lending to the real sector at all. The banks are deep into rent seeking business, financ­ing consumption by politicians instead of financing production and business. A typical Nige­rian bank will rather purchase billions of Naira luxury cars for National Assembly members than to finance equipment for a rice milling company. Unless we change the mentality and orientation of Nigerian banks, we will never make progress. And we cannot achieve that when the two most important members in the economic team are drawn into an ego war.
Central banks around the world are reducing interest rates and printing currency while en­couraging people to buy bonds. Japan is at zero rate, while UK, after Brexit is at 0.25%. The US Federal Reserve Bank is push­ing interest rate to a negative low and will start charging peo­ple for saving. Keeping interest low and its benefits is a subject of macroeconomic debate, but keeping it high only leads to depression market and slow growth. Why is Nigeria doing it differently from other econo­mies, pushing interest high and slowing on public spending? Answer is because Nigeria op­erates a dysfunctional economy with imperfect markets. Like l said earlier, even the 14% in­terest rate is merely on paper. Interests are up to 40% among secondary lenders with very short tenor while banks charge as high as 30% with hidden charges . Another reason is the apex bank is anything but in­dependent. The CBN loses its regulatory powers and control to politicians. Powerful indi­viduals negotiate their interests to their advantage with the full approval of CBN while the oth­er Nigerians go with the CBN rates, most times inflated by commercial banks. Credits also go to sectors that are unpro­ductive, with it being diverted for consumption purposes by politicians and those close to them. The statistics bureau also claimed that inflation is 17% on energy and food items while in actual fact it is hovering around 80-90% . With these imperfec­tions, CBN is not to be relied upon with the kind of people running its affairs.
A CBN governor that al­lowed CBN vaults in Lagos, Kaduna, Kano and Abuja to be emptied of their dollar con­tents and given to politicians to finance elections is not some­one to rely on with our mon­etary policy. The truth is the CBN is merely reacting to our economic problems instead of making conscious efforts at solving them. Nigeria is such an undisciplined, corrupt and law­less country that needs differ­ent sets of economic laws and theories to make her function. No fiscal and monetary policy adopted by the CBN will work because of the peculiar Nige­rian character. I am going to mention some examples here.
When you talk about infla­tion, the Nigerian behaviour is so bizarre that there is nothing in the text books of Econom­ics to deal with it. Where else in this world will sellers in­crease prices of goods not be­cause there is rise in demand or cost of production but be­cause of approaching festive season? Which economic law can explain import substitu­tion where the enforcer in chief is himself is averse to anything resembling Nigeria?
Take a look at the President for instance, from his shoes, wrist watch, clothes, cars, eye glasses and perfumes and tell me one that is made in Nigeria. He visits foreign hospitals and sends his children to foreign schools and takes his vacation abroad. So how can economic laws on international trade and comparative advantage work on Nigeria?
How about a CBN exchange rate policy driven by a CBN governor that selected primary dealers that collect $10m daily at official rate only to sell to secondary dealers and make cool billions from the comfort of their homes? Is this not the reason brilliant technocrats like Charles Soludo, Ngozi Okonjo-Iweala and Sanusi Lamido Sa­nusi ended up as catastrophic failures, leaving the nation far worse than they met it? How can a nation develop when its mainstay, the oil is operated by a company that keeps two books, one for the nation and the other for thieves? Nigeria lifts 2.3m barrels of crude oil daily as official receipt and an­other 800,000 barrels daily to be shared by party men, NNPC officials, Customs, military and militants. How can such a na­tion develop? How can a na­tion have power supply when its people are blowing pipes that deliver gas to thermal sta­tions while others are stealing vital cables and transformers for personal gains?. There are thousands examples you can add. Nigeria with this character will never grow. Development is simply a mirage to such a nation. It is a tragedy the man entrusted with so much hope to save this land is turning out to be a big let-down. Nothing can save this land.
Say ‘No’ to sale of national as­sets
Ordinarily there is a lot of sense in selling assets during financial troubles. The country can always come back after re­covery to build more assets and return to normal life. That is if you are dealing with a serious country, not Nigeria. There is no sense at all in the planned sale of NLNG, refineries and other national assets by a na­tion that is governed by thieves, from LG, State Governors, leg­islators and the president and his family and friends. Whatev­er is realized from the sale will be stolen in a matter of months.
There are serious revelations of corruption going in the Pres­idency, National Assembly and states with with anti- corrup­tion agencies appearing help­less because of our weak cor­ruption laws and sheer volume of cases everywhere.
Nigeria must be the most corrupt nation on earth. I am against the sales because Ni­geria’s situation is not so help­less that it lacks people and institutions that are willing to lend her money. The country is only facing economic reces­sion, not economic collapse. This is not the first time it faced recession. Nigeria was in reces­sion in 1983, 1985, 1999 and always came out of it stronger. Selling national assets is a lazy and defeatist approach to solv­ing ordinary economic prob­lems. Nigeria is not the only nation facing recession. Angola and Venezuela are in a worse situation and are coping well without hawking their national assets.
The world itself is facing re­cession. President Muham­madu Buhari has not demon­strated enough honesty and ability to safeguard national wealth for Nigerians to trust him with such money. Ignore the National Assembly with their endorsement of the ex­ercise. It is a self-serving move with the knowledge that the more money in the nation’s cof­fers, the more will be available for the dishonorable members to steal. Dangote is also an in­terested party. When the assets are sold to him he knows the way to bribe officials and take possession of the assets without paying the full prices.
 

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