Nume Ekeghe
levels of consumption that the economy of this size is bound to demand from foreign goods. For instance, refined petroleum accounts for about 30 per cent of our imports. Then other items like machinery and other items account for 70 per cent of our imports. Even if we eliminate 30 per cent of our imports, you’ll have to still deal with the 70 per cent of imports. So you must have export earnings that are sufficient to meet that demand.
So in terms of export earnings, we are not getting enough of that because our major source of export is crude. Much of it has been pledged upfront and our production has stagnated around 1.3 million barrels a day. If we look at what the budget said, the budget breakdown noted that by September last year, our average crude production was about 1.3 million barrels a day. So we need to increase production to stabilise exchange rates.
The other option we have will be for the federal government to borrow long-term from either multilateral partners or bilateral partners. So that will require government borrowing without having to pay immediately. Not the type we have from Afrexim bank, we need a loan that would give us five-year moratorium to stabilise our foreign exchange market.
If you borrow and you have to start paying back immediately, it then means that the receipts you would have gotten from the sale of crude will be forgone.
Also, eliminate the panic buying because the panic buying comes from those whose monies are trapped so when they see a further movement in exchange rates, they are compelled to demand for it at any cost. We need to eliminate that so that we know that demand is based on current market demand.
Away from monetary policies, what are your takes on the fiscal policies that have been implemented now and how do you see it playing into 2024?
Firstly, fiscal policies also have their challenges. We have had some level of boldness on the part of the President in making difficult decisions, which for me are commendable. But how those decisions were taken, created challenges that should have been avoided. For instance, if you talk of fiscal policy, the President had proclaimed the elimination of subsidies on petroleum products but we know the subsidy has come back because the exchange rate has devalued materially so the landing costs of fuel are clearly above the pump price. So you have the well-intended policy decision on the fiscal side, but obviously, through the process of implementation and other exigencies, it looks like the benefit is being reversed.
The other aspect is the harmonisation of the exchange rate. which also is ell well-deserved talked-about policy but as we speak, we are seeing the depression of the local currency to the extent those of us who had aggravated for harmonisation were right.
Another aspect of the fiscal policy is when you look at the budget. If you look at the implementation of the budget, and I’m talking about the period that the current government was in power last year. And then you consider that based on the report published by the government, the performance of the 2023 as at September last year the federal government budget deficit was N4 trillion and at that point, if you consider the fact that the government total revenue for the first nine months of last year was N12.7 trillion.
Total revenue was N8.65 trillion, leaving you with a budget deficit of N4 trllion which the government had said was funded locally, mostly by ways and means. But that is not the big story. The big story is that by December, the government went to the National Assembly with a request to securitize N7.3 trillion, which implies that N3.3 trillion was incurred as a budget deficit within a period of three months. So it is difficult for me to see how the government bought the N3.3 trillion in three months and where it was invested in and those questions are not being asked. So if it turns out that the government incurred N3.3 trillion in three months, because we had an increase from 4 trillion according to government publication then it puts a huge question mark on the government’s fiscal responsibility.
Recently, data shared by CBN showed that currency outside banks is 92 per cent of the currency in circulation, which is way above what prompted the naira redesign. How can you relate that to present rise in insecurity which was also key reason for the naira redesign policy?
I have said in previous engagements that the cashless policy of the government has very positive security implications. I’m not going about cashless as to what the immediate CBN governor did towards the end of 2022 and last year, when he denied people having legitimate access to thier cash. I’m talking about the cashless policy that specified N150,000 as a maximum withdrawal limit for personal accounts, and N500,000 for corporate accounts.
Unfortunately, the current CBN has revised that which means it’s an intentional act to allow cash outside the banking system. What we are witnessing now is it designed by the current administration of the central bank by reversing the entire cashless policy and removing all penal charges for cash withdrawal and cash lodgment. So, once you do that, you have unwound years of cultural change, or attitude change that had been implemented from the Sanusi era to the now. So it’s not strange that we’re seeing an increase in the volume of cash outside the banking system.
Also, remember, that there is a transaction charge for every transaction with the bank. So an average businessman who will want to bypass, circumvent or avoid the charge if there is no penalty for keeping cash. And as you rightly said, we’re seeing an increase in kidnapping for ransom because if they know that they can get cash from you they don’t need to lodge the cash into the banking system. Then they are not encouraged.
Remember that during the cashless policy, we almost eliminated incidents where people came to people’s homes to rob them of cash. So we eliminated robbery at homes and highway robbery because the robbers knew that the chances that they would get cash were minimal. But now if you reverse that process, you’re going to have those crimes come back. So you’re not just going to deal with kidnapping for ransom. You may also deal with highway robbery and robbers come into homes because they expect people to keep cash.
So would suggest we go back to limits, or what is a quick win?
I really don’t understand the reason for that. Because in terms of technology, we have seen a huge improvement in technology. So in terms of the payment system, we have one of the most inefficient in Africa. So, I wouldn’t know what prompted the decision to reverse the charges on cash withdrawal and cash lodgment. I don’t think it is a technology issue, because Nigerians are adopting technology at a very fast rate. So unless you have other compelling reasons I think they need to review that decision.