Recession: It’s Not Time For Talks, Just Diversify the Economy
The Minister of Finance, Ms Kemi Adeosun, and the Nigerian Bureau of Statistics (NBS), last Wednesday provided empirical evidence to the hypothesis that the country was plunging into the gully of recession. Two depressing sentences - “It’s the worst possible time for us” and “I think we have a long way to go” - from the Finance Minister’s remarks to journalists capture the length and breadth of the current economic predicament. The NBS, on its part, said its own research had confirmed the shrinking of the Gross Domestic Product (GDP) of Nigeria by 2.06 per cent in the second quarter of 2016.
The health of any economy is measured by its GDP growth, among other monetary and fiscal indicators. The country’s annual inflation has hit 17.1 per cent, more than 10-year high; the value of the Naira has continued to weaken against other international currencies. It is at N423 to a dollar in the black market. Oil export has shrunk by 21 per cent; non-oil export is not significant; and oil and gas infrastructure are being criminally destroyed by Niger Delta militants.
The Emir of Kano and former governor of the Central Bank of Nigeria, Alhaji Muhammadu Sanusi II, puts the current predicament succinctly on the game of ostrich played by those who have governed Nigeria over the years. At the 15th meeting of the Joint Planning Board and National Council on Development in Kano on August 24, 2016, he said, “The problem is that there is nothing we are facing today that we did not know would happen. That is the truth. We made mistakes. Many of them deliberate. We ignored every single word that pointed otherwise. Economics is a science. It is not a perfect science. But over decades and centuries, people have seen that there are certain things that, when you do, will lead to certain consequences. If you take a brand new car and give a driver who doesn’t have a license to drive and you have an accident, you really can’t say you were surprised, unless you are some kind of idiot. We knew that this was going to happen. You can’t just keep borrowing money and paying salaries, not building roads, not improving power and think that this would not happen.”
Though another former CBN governor, Professor Charles Soludo, has rebuffed the current administration for blaming the previous administration for the current economic crisis, we would state unequivocally that the political class whose self-serving tendency for corruption energised the collapse of the economy should cover its face in shame. Nigeria’s political leaders, over the last four decades, have failed the ordinary Nigerian by planting the seed of division among the population, while carting away our commonwealth, storing them in other economies for their unborn children. From this perspective, we would encourage the Buhari administration to vigorously pursue the recovery of funds looted by the political class, irrespective of the dispensation in which they held positions in government.
As it were, there are hardly any fix-quick measures. However, we believe there are decisions government must take urgently to increase the flow of cash in the economy. First is the need to reach a political settlement over the Niger Delta militancy and beef up security around oil and gas facilities. If done, this would guarantee an improvement in oil and gas export, which has been cut from 2.3 million barrels per day to 1.7 million barrels per day by the violence dealt to facilities by militants.
Also, as recommended by well-meaning economists, government should urgently reflate the economy by injecting funds that are tied down in the Central Bank of Nigeria into the economy. The Federal Government can start this by providing all the necessary support to states and local governments to ensure the payment of salaries to civil servants. In many states, these government workers have continued to languish in hunger and penury as governors throw up their arms in defeat. If salaries are paid, Nigerians would have funds to purchase foodstuffs to deal with the alarming hunger and starvation ravaging the people. Also, we suggest that funds should be used to provide credit facilities for Small and Medium Scale Enterprises (SMEs) and agriculture. There is no gainsaying the fact that today, many youths have taken their destiny into their hands by embarking on entrepreneurial projects, but their efforts are being hampered by the lack of access to credit facilities. It is imperative for government to remove the hurdles that banks have created between SMEs and funds in commercial and development banks.
Furthermore, we call for more stringent import restrictions, primarily to protect local industries and beef up our GDP. Local production is hampered by the importation of items which are cheaper than made-in-Nigeria goods. Apart from inhibiting local growth, the importation of finished goods puts pressure on the country’s foreign reserve. Over the years, many developing and developed countries that faced recession had to embark on a similar measure in order to deliver their economies from the danger of depression. To encourage local farmers, government should quickly revive produce marketing boards which would mop up produce from farms at prices that will encourage them to return to the field in the next farming season. As bumper harvest is being experienced in several states, if government does not embark on a quick purchase of the crops, farmers will be compelled to sell them off at give-away prices that may not even cover the cost of labour on their farms.
Last Tuesday, the Minister of Finance spoke eloquently about government’s desire to diversify the economy. Critics would say diversification has become a sing-song of the Buhari administration. Nigerians are yearning to see the economic diversification policy being implemented, because previous governments had mouthed the same rhetoric without engaging in meaningful efforts to achieve it. In government’s attempt to revamp the economy, the private sector must be carried along because it is the major player in the economic sphere. No country achieves economic prosperity without involving the private sector at all stages of the implementation of its economic plan. The Buhari government cannot sideline the active players in the economy and expect to achieve any enduring success. Also, the National Assembly should be brought into the efforts to diversify the economy because the constitution provides that the lawmakers are part of the drivers of the economy.
While embarking on measures to pull out the economy from recession, it is vital to task actors with targets and timeline. Without the discipline to meet targets at given timelines, the country could linger in the adverse economic situation far longer than our prophets of doom can predict.