Nigeria’s Present Political System Constrains Economic Development, National Prosperity
consensus on what needs to be done for Nigeria to achieve the kind of destiny that we have the resources to achieve at least if not for our own generation but for future generations. We have a ticking time bomb in our hands, which is the growing population of educated and active young people that seek expression for their skills and academic qualifications but are roundly frustrated by lack of job opportunities and a near total absence of support structures for enterprise incubation and business operations in the country. The logical expectation from this situation if urgent remedial actions are not taken, is increased criminality, widespread hopelessness, drug abuse, banditry, kidnappings, increase in frauds and scams and other vices, all of which misrepresent the Nigerian spirit. Our young people need jobs. They need a Nigeria that works. They need a Nigeria where there is equality of opportunities and equality of access to justice and the resources of the country.
How do you think the country can extricate itself from the economic development quagmire it faces?
The present political system we operate in Nigeria is a constraint to economic development of Nigeria and will continue to prevent the attainment of any meaningful progress towards national transformation and socio-economic prosperity. Let me explain this. We have political appointees and elected officials at the local, state and federal levels whoessentiallyremuneratethemselvesandapportion to themselves in the annual budgets monies from the commonwealth that are in disproportion to their usefulness or job content and in clear disregard to critical national development priorities. If you add up the resources associated with these political office holders across the 774 local governments, the 36 states and FCT and the Federal level and add the cost of servicing accumulated debts at all of these levels, it is nearly impossible to be able to fund infrastructural development, or fund it at the level and rate required to achieve our SDG objectives or even attain the basic standard of a 21st century economy in the areas of education, health, security, agriculture, water and sanitation, housing, defense and security etc. Actually some states are even borrowing to finance the upkeep of these political office holders. One does not need to be an economist to understand that this situation is unsustainable. There is an urgent need to resolve this political system problem quickly, amicably and for the benefit of the growing army of young people in the east, north, west and south of Nigeria who are increasingly giving up on the hope of a better country. My proposal is to float a “Nigeria Force for Good (NFG)” which will negotiate a reconfigured Nigeria political system with President Bola Tinubu and the leadership of the All Progressives Congress and the other two main parties that constitute the Nigeria political class. The NFG should comprise about 100 Nigerians from the six zones of Nigeria, who will commit between N100 million and N1 billion of their own funds to the project, and forswear interests in any government contracts, appointments or elective positions. I believe that such a group to which I volunteer membership upfront, can engage with the political class of the present political dispensation to persuade them to accept a modified political system through a constitutional amendment to make all legislative positions part time and for the salaries and expenses related to office holders in every local government, states and the federal government not to exceed 5-10 per cent of the IGR of each local government, state government, and federal government. Furthermore, the structure at the federal level should incorporate six vice presidents (VPs) who should represent each geo-political zone and should be nominated by the assemblies of the respective zones and ratified by the part-time National Assembly. Such VPs should hold office for life and the Presidency of Nigeria should rotate among them in cycles of four or five years. Furthermore, monthly FAAC allocations should be abolished. In its place, every one of the six zones should receive a one off take off grant of between $500 million and $1 billion and after this all states shall retain 100 per cent of the revenues from their states and remit taxes to the federal government as shall be agreed. Most of the current federal bureaucracy should be devolved to the six geopolitical zones with the centre retaining only external affairs, defence, national security, finance/ economy and any other functions to be agreed upon. In return for agreeing to legislate and enact these changes, the NFG shall commit to support President Tinubu and other current office holders who have not completed two terms to roll over their first terms unopposed, so that the proposed structure will kick in at the end of their respective current tenures. In fact, the NFG may work towards having no general elections in 2027, once it is agreed that the present office holders with second term aspirations and qualified for that should be re-elected unopposed. That will save the country over N300 billion that INEC spends to conduct elections every four years. I believe there is an urgent need for Nigerians to think our way out of the current crisis of arrested socio economic progress because if we don’t do so intentionally, uncontrollable and even hostile forces of change may compel us to transform into a country or political structure that is imposed on us for the benefit of outside interests.
You operate in the cash processing sub-sector. Since last year we have been seeing a new trend in Nigeria where cash is now scarce. What do you think is responsible for that and how can it be addressed?
There are two reasons I will suggest. The first is regulator induced through a poorly implemented regulatory intervention, and I am referring to the currency redesign exercise of the last CBN administration.Centralbanksimplementsuchpolicies but there are proper ways to implement them and ideally such an exercise ought to be preceded by a detailed need assessment to determine if the exercise is justified, and then the exact scope and typeofinterventionintermsofvolumerequirements, denomination demands data across cities, across seasons across institutions etc. In the end the data sets gathered and accurately analysed feeds into the implementation of the exercise following due consultations with the industry stakeholders. In the case of the exercise in reference, none or most of the above steps were implemented and I can tell you that it was so bad that even some staff of the CBN were completely unaware of the redesign exercise and certainly ourselves as operators in the sub sector were not consulted at all and were specifically and intentionally excluded from playing our roles as entities licensed and regulated by the CBN during the implementation of the exercise. So, even if we assume without conceding that the motive for the redesign exercise was altruistic, the implementation was very poorly executed. That is partly why it created such a negative effect in the economy and in our everyday life and why those effects have endured to this time. The second reason is purely a case of strategic misfit, and I will explain this. At a point in time when it was in the interest of the government to expand productivity and increase the velocity of cash in the system, it was unwise for the then CBN administration as the monetary policy anchor of that government to decide to implement an exercise whose objective was the exact opposite of the advertised growth and expansionary targets of that administration. The timing at year’s end and in the middle of general electionscouldn’thavebeenanyworsefortheNigeria economy for clearly obvious reasons. I mean, Nigeria is basically a cash dominant economy to an extent that it can be said that in Nigeria, cash is king. I would suggest that in conceiving and in implementing the policy, the CBN misadvised itself about the entire currency operations value chain because a country’s currency serves two purposes. One of them is a means of exchange, and this purpose theoretically lends itself to regulatory manipulations through monetary policy tools, and sundry intervention mechanisms according to our laws and market practices. But the second purpose of a country’s currency is a store of value, and this characteristic does not lend itself to the same level of regulatory control or manipulation. Put differently, the CBN as regulator has little or no direct control over how citizens elect to store wealth in the type of liberal capitalist economy that we practice in Nigeria. For the most part, whether people choose cash, property, or other asset classes as store of value is the outcome of rational personal decisions and cannot be decreed by regulation without harmful consequencestoeconomicdevelopmentandnational peace and tranquility. If I have to be blunt, what the then CBN administration did was essentially to confiscate peoples’ savings and investments in cash and then deny them the opportunity to retrieve these from the banks by rationing the amount of cash that people were allowed to withdraw from banks and ATMs. Note that the CBN implemented this scheme at a time it was launching financial inclusion campaigns aimed at encouraging the unbanked but bankable segment of the population to embrace banking services. With latest CBN data showing an unprecedented volume of currency circulating outside the banking system the currency redesign exercise succeeded in reducing confidence in the banking system, thus pushing a growing number of people to embrace cash as a preferred store of value. Another way to look at the situation is that people have a diminished trust in the central bank and commercial banks, and this should worry our economic management team. According to one research sponsored by one of the European Central Banks, there is a well-established correlation between perception of instability and uncertainty (as evidenced by wars, changes in government, political instability, economic unpredictability, etc and an increased desire to hold cash. This is a statistically validated hypothesis that should explain the growth in cash outside the banking system.
Even today cash is still scarce as the ATMs hardly dispense.
Again, I can suggest some reasons for this unfortunate development. The first reason is a carryover from the Naira redesign policy which I just explained to you while answering the previous question. In the aftermath of the Naira redesign exercise, the general elections and the instability generatedbythecontroversiesandlegaldisputations following the general elections you can clearly find justificationforthescarcityofcurrencynotesbecause of increased cash holdings by households outside the banking system. Ordinarily the CBN would have responded by releasing more currency notes into the system but the challenges of controlling inflation as well as interest and exchange rates must weigh heavily as a constraint to the CBN in this direction. So, this trend is likely to continue for as long as the citizens perceive that there is a general sense of uncertainty in the system. The other reason for the scarcity is that the natural circulation process that culminates in the feeding of ATMs with cash was interrupted as an unintended side effect of the referenced action. The circulation of cash in the economy operates within the context of what is called the cash value chain. This chain begins with the CBN as the overall manager of monetary policy and includes the Mint (NSP&M Plc), commercial banks, cash processing companies, cash distribution companies, ATM operators and other ancillary entities like security providers and vehicle providers etc. Under normal circumstances each of these entities plays a vital role in the chain starting from design and approval of currency notes, printing of the notes, release of the notes, circulation of the notes and finally return of the notes to the CBN for destruction. I do not wish to bother you with the fine details of the process but the point to note is that the efficient operation of this chain in any modern economy demands a high degree of professionalism, inter agency coordination, technological inputs and appropriate security and safety systems and above all, such a system demands the proactive and well-informed supportive oversight of the CBN. I regret to say that the last CBN administration did not live up to the above requirements, which is why some of the problems you have identified still linger. The CBN has tended to place too much reliance on the commercial banks as the main drivers of currency circulation and in this respect, there are guidelines and policies developed by the CBN to regulate the activities of the commercial banks in relation to currency circulation and interaction with the other stakeholders in the cash value chain. But because commercial banks do not consider it prudent to make the capital intensive investments in the cash value chain infrastructure, many Nigerian banks have resorted to operating in continuous breach of the operating policies and paying the stipulated penalties which are insignificant. Meanwhile the companies licensed by the CBN to process cash and distribute cash for the industry have not been supported by the CBN to any meaningful extent or at least to the extent demanded by the fact that the Nigeria economy is cash dominant and therefore requires an efficient and robust currency operations stakeholder ecosystem to power the economy. So the result is that the cumulative actions of the CBN have combined to disintermediate the critical stakeholders in the cash value chain and the result of this disintermediation is on full display in the form of scarcity of currency notes at banks and at ATMs and the scarcity has in turn created a thriving black market for newly minted currency notes which desperate Nigerians snap up for spraying at parties and other public events. This is a sad and truly pathetic situation I must admit.
So, what is the way out?
The way out is regulatory rethink. My humble opinion is that the CBN needs to take more seriously its currency operation management function. I say this with a sense of responsibility as somebody who has worked in the banking industry before venturing into currency operations and I can tell you that there is need for greater awareness about the critical importance of cash as the lubricant of such an economy as we have in Nigeria, with our stated ambition to dominate Africa and position to attract resources from all over the world. Until we properly position cash in terms of efficient management of its release, circulation, integrity and availability across all channels and geographies of market exchange and capacitate the relevant offices and officers of the CBN to provide expert oversight of the entire value chain like other countries that share the same ambition as we do, then we are nonstarters. An average central banker or commercial banker in Nigeria will tell you that we are pursuing a cashless policy and very soon cash will disappear, but such a conclusion is not supported by available statistics and projections on cash demand across the country. There is nothing like a cashless system in today’s world and certainly not in Nigeria of today or in our lifetime. There are individuals that have vested interest in the digital and electronic payment spaces that managed to sell to key figures in past CBN and federal government administrations the bogus scheme of so-called cashless Nigeria campaign which the regulator and many ordinary Nigerians embraced with enthusiasm and at huge costs from public resources.