Just Before The Economic Retreat By Dave Lafiaji

When, sometime ago, Professor Wole Soyinka called on President Buhari to urgently organize an economic conference on the deleterious state of the national economic situation, the message that rang out from that call was: “Mr President, you need help!”

Although the presidency has stated that it was not convening any emergency economic conference, the holding, next week (Monday and Tuesday), of a 2-day economic retreat in the presidential villa in Abuja suggests that the President was after all not unmindful of the call to take a serious, hard look at the management of our nation’s economic affairs at this crucial moment. 

However, holding a retreat is the easy part of the game; the tough part is accepting and implementing the pertinent (even if brutal) recommendations of such assemblies. 

Over the past decades, Nigeria, as everyone knows, has amassed a huge store of think-tank research outputs, policy recommendations and resolutions drawn from all manner of conferences, summits, forums; in addition, international organizations, notably the International Bank for Reconstruction and Development alias (World Bank) and the international Monetary Fund (IMF) regularly turn in recommendations to the government. In May 2014, Nigeria even burned through billions of Naira of good funds to bring the World Economic Forum to Abuja for goals that were best understood by the sponsors of that jamboree. The Nigerian Economic Summit Group, a standing government think-tank, also organizes an annual economic summit. What has been the return on investment in these periodic efforts (or rituals)?

There is little evidence that the intellectual resources garnered from all these efforts found much or any use in the economic management strategies of the past administrations.  As a matter of fact, most of the viewpoints that have been repeatedly canvassed but defiantly ignored, to our peril, by successive administrations, military and civilian, after 1979, remain valid and are there for all to see.

The possibility of occurrence of Nigeria’s current situation of an unraveling economy and a melting national currency has long been foreseen and feared, but the successive political leaderships have mostly pretended that it could not or would not happen. That is why Nigeria has been living a double-life, living an unreal life in a real world, living “rich” while the metrics show it is indeed a poor country.

Since the early 1970s, the leaderships had been living under the grand illusion that Nigeria was a wealthy country, whereas Nigeria only had the potential to be wealthy — a potential that has up till now been mostly wasted. Even then, the Murtala-Obasanjo regime did not fall victim to that illusion, judging by that government’s life-style; it adopted a “low-profile” policy. As you would recall, General Obasanjo, as head of state, rode a Peugeot 504 and Murtala, and, before his death, rode an old-model Mercedes 230. Yet, that period remained a most triumphant era for Nigeria’s foreign policy, with the nation enjoying high international esteem.

No sooner had power been handed back to civilians than the new rulers threw away “low-profile” and went ahead to indulge in what Onyeka Onwenu once described as the “squandering of riches.”

Apart from the interlude regime of General Buhari in 1984-85, successor-governments, military and civilians, continued and deepened the squandering/looting of our commonwealth/national riches. As a matter of fact, if the pillaging of the Nigerian people’s wealth was previously carried out in cottage-industry proportions, the scourge gradually evolved into a full-blown industry of its own, attaining industrial-scale proportions, with impunity, until President Buhari stepped forward.

Nigeria’s umbrella for the rainy day has in effect been stolen by the devourers, and we are now only scrambling to find a solution but the rain would not stop for us to fix our problem. In the circumstance, let the truth be told: we would probably get wet first before we get dry again.

You would recall that when Ms Christine Lagarde, the IMF Managing Director, visited Nigeria in January this year, she made it clear that Nigeria did not need an IMF loan as, “it has all it takes in terms of its material and human resources to overcome its financial problems independent any loan from IMF.” With that answer, Ms Lagarde, in my opinion, was telling Nigerians that if our leaders managed our resources prudently, we had no business begging anyone for loan. As a matter of fact, who, do you think, would lend even a defaced dollar bill to a country where 2.1 billion dollars of funds earmarked for arms procurement purposes got shared by devourers like Christmas cake or Ileya rams? Or where the legislative arm of government (the National Assembly) would earmark 4.7 billion naira to squander on the purchase super-luxury automobiles without thinking much of it? What manner of governance structure makes that possible?

If we are not willing to dismantle and re-fit such a structure, for how long shall we continue to head the wrong way and hope/pray to arrive at the right destination? This is the contradiction that Nigeria has struggled with for most of its post-independence existence.

With the right frame of mind and the political will to do the right thing, the solutions to Nigeria’s conjoint problem of dislocated economy and melting Naira are fairly straight forward and simple but would initially be tough on the wealthy class. The truth is that if an economic miracle must occur to turn the current situation around for us, we must begin now to manufacture that miracle ourselves.

The government has a wide a leverage in dealing immediately with the currency situation and obtaining immediate (or near-immediate) result. The government knows or must be told that those putting the heat on, shooting down (the value of) the Naira, are not the genuine industrial and commercial enterprises nor the poor civil servants, teachers, doctors, market women or the parents forced by the lack of opportunities locally, to send their wards abroad for higher education. Those shooting down the Naira are to be found among the wealthy class which, unfortunately, has now been infiltrated and polluted by people who acquired wealth not by hard work and intelligence but by primitive looting of public resources, legally or otherwise. And the ammunition they are using is the Naira! Indeed, the huge amounts of funds looted and poured into the economy to fight the 2015 presidential election formed part of the explanation for the manner in which the Naira melted like butter in the weeks past.

To shield the Naira from vicious attacks or at least reduce the intensity of such attacks, the government must move to dispossess the attackers of their ammunitions and the way to do it is not by propping up artificially the value of the Naira which plays into the hands of the attackers and other profiteers within and outside the banking sector but the way to go is to suck out as much cash as possible from the economy. In particular, those who acquired public funds illegally must be made to return them with interest, where appropriate.

To do this, the government must take a number of bold emergency measures which might include:

• Following rather than leading, for a brief period of time, the parallel market exchange rates and not trying to dictate an unsustainable rate to the market. By selling its own dollars at the rate the market is willing to pay, the government will suck in a lot more Naira cash, thereby reducing the stock of ammunitions available to the “attackers” in the subsequent rounds of dollar purchases. As for costs of manufactured goods that may sky-rocket beyond the reach of ordinary Nigerians, the government can moderate such effects by offering generous tax credits over several years to genuine manufacturers of consumer goods to absorb a good portion of the foreign-exchange price shock (advantage: you cannot steal or misappropriate tax credits).

• Abstaining completely, for the exchange-rate stabilization period, from using any ways-and-means facilities available to it at the Central Bank.

• Getting the salaries and emoluments of holders of elective offices and political appointees drastically reduced, perhaps, slashed in half. Former President Obasanjo recently cried out against the obscenely high salaries and allowances that federal legislators have been carting away from the national treasury but the legislators were not impressed; huge portions of such unmerited payments end up chasing dollars at any price in the foreign-exchange market.

• Announcing its intention to drastically reduce the size of government over the coming periods: the Oronsaye Presidential Committee on Reform of Government Agencies report (released in 2012) that recommended the shut-down of more than one hundred of un-necessary and “not-fit-for-purpose” federal agencies is still languishing somewhere.

• Introducing a series innovative taxes aimed at sterilizing a part of the foreign-exchange purchasing power of the wealthy class  while helping to rake in vastly more Naira revenues. Blinded by easy, free-flowing oil revenues, Nigeria has traditionally been negligent and carefree in the matter of non-oil fiscal revenue generation.

With the savings and streams of new cash flowing into government coffers, the government would obtain more resources to redistribute to programs that immediately touch and put spendable cash in the pockets of the mass of low-income (and no-income) earners who form the bulk of the populace and potential consumers. Not only would that redistribution take (some) pressure off the Naira, it would boost demand for local goods and services which in turn would drive the employment of more factory and service hands, reduce un-employment and again reinforce demand for goods and services and so on and so forth. When you put extra cash in the hands of someone who has already met his basic life and leisure needs, the use to which he puts that extra cash is more likely to hurt the value of your national currency than is the case if that extra cash is channeled to a low-income urban or a rural family. Government is there to make this judgement and act in the best interest of the majority.

My belief is that our governments knew this but had always been scared to touch the privileges of the wealthy and powerful class who in any event would continue to be able to meet comfortably their basic and leisure needs.

With its limitless taxing powers, here is a small sample of taxes that the government can immediately roll out to generate cash, redistribute wealth out of the pockets of the wealthy class to fund the development of the productive sectors of the economy and provide succor to the weak while moderating the capacity of the wealthy to attack our national currency:

• Yearly registration tax on electric-power generating sets determined in accordance with the engine capacity just as you register your vehicles (remember that for industrial and commercial users of gen-sets, such taxes are deductible expenses); think of the favorable effect on the economy if funds raised from this source are applied exclusively to house and feed students in public universities plus the thousands of jobs that would be created in administering this tax! 

• Sharp increase in the cost of number-plates (issuance and renewal) for luxury automobiles while waiving or reducing the cost for low-category vehicles; this would entail compulsory renewal, whether the vehicle is used or permanently parked in the garage. 

• Special tax on domestic and international airline tickets sold to Nigerians (less than 5% of Nigerians would be affected; the measure would be Naira-supportive as reduced demand for air travel would mean reduced demand by airlines for foreign exchange).

• Counterpart-tax payable on real-estate property owned abroad by home-resident Nigerians the amount of which shall be equal to the tax levied on the property in the country of location and shall be payable in any freely convertible currency (think of the streams of cash that the government would haul in each year, at least, for a while...)

• Tax on half- or full page non-commercial, non-official, ceremonial advertisements like congratulatory, birthday messages, burial announcements and such like (think of the thousands of ads that are splashed on newspaper pages each year and what the government can smartly hurl in from that source).

As regards oil revenues, perhaps the government would now accept to do what Norway did immediately it became an oil producer, decades after Nigeria acquired that status: you don’t monetize and spend oil revenues on useless recurrent expenditure (when not looted outrightly) or squandered on purchasing and keeping harems of gleamy official jets and automobiles or constructing useless infrastructure like stadiums and airports in remote state capitals while the country is in a dire need of decent well-staffed primary and secondary schools as well as large, well-funded, world-class universities and technological research establishments. Normally, no more than 10% of current oil revenues should fund the central and State governments’ recurrent budgets while the remaining 90% should compulsorily (that is, constitutionally) be earmarked to fund useful, future-generations’ projects in education, health, roads, housing, energy, public security systems (not “security votes,” not defense expenditure!) within a clear and transparent framework. 

​In Chad, it took the determination of the World Bank to impose a similar model in respect of that country’s oil revenues. And I wonder, why do Africans almost always need outsiders to tell them to do the right thing ? Are we forever intellectual minors? 

On the aggregate, the recurrent expenditure should be pegged at a reasonable maximum percentage of the penultimate year’s non-oil revenues with the balance, again, funding nothing but meaningful, real pro-growth infrastructure projects through the length and breadth of the federation. 

If Nigerians, today, have nothing good to say about oil or the oil industry, it is not oil but the successive Nigerian executive and legislative leaders who should be blamed as all these leaders may be accused of having betrayed the sacred duty to manage the country’s resources in the best interest of its people.

Nigeria’s true economic performance should henceforth be measured by the performance of the non-oil sector as the numbers from the upstream oil sector merely distort the records of our real performance. It is regrettable that past governments bandied around “synthetic” or lip-stick” economic growth-rate figures which, just a small “shower” (external shock) was enough to wash completely away in seconds, as we’ve seen over the last 12-18 months. 

For a vibrant and intelligent people that Nigerians have at least been able to show themselves to be, it is an insult and a shame that more than fifty years later, Nigeria would still be sucking from the crude-oil feeding bottle. That must stop.

Dave Lafiaji is an economist and is a former Executive Secretary of the African Petroleum Producers’ Association.