The worst kept secret before the 2015 elections was that Nigeria’s economy was heading for a rough weather. Following a sharp drop in oil price, the 2015 budget was based on a benchmark of $65 per barrel, compared to $77.50 for 2014. Oil was selling for $115 in June 2014, but was down to $58 on December 17, 2014 when Dr. Ngozi Okonjo-Iweala, then finance minister, presented President Goodluck Jonathan’s last budget to the National Assembly.
Despite the prevailing price of $58, we still fixed the benchmark at $65 — on the expectation that oil would rise to between $65 and $70 in 2015. In medical language, that budget was brought in dead (BID).
Indeed, late 2014 when the exchange rate was still N155/$1, it was predicted that the naira would exchange for over N200/$1 in 2015. Domestic and external debts were over $40 billion. The bills for on-going and uncompleted projects were over $50 billion.
With lower oil prices, reserves had gone down from a little over $34 billion in December 2014 to $28.6 billion in May 2015 when Jonathan handed over to President Muhammadu Buhari. In fact, Okonjo-Iweala revealed that the federal government had to take loans to pay workers for April and May 2015. There was no better indication of deep trouble ahead. That’s what happens when your life depends on oil rents.
The real catastrophe of the 2015 electioneering was that we never really debated issues. There was plenty to discuss on economic policy, falling oil prices, pressure on FX reserves, the fate of the naira, fuel subsidy, power sector and unemployment.
Instead of discussing ideas, PDP and APC were busy swapping insults. PDP was severely disadvantaged anyway, having been in power for 16 years and produced a mismatch of resources and results. What promises could it make again? Who would listen? Meanwhile, APC, mouthing “change”, seized the stage and promised Nigerians heaven on earth: free this, free that. The only thing they didn’t promise was free jollof rice.
In an article I wrote on December 21, 2014, titled “May We Now Discuss the Issues, Please?” I expressed worries about the vagueness of the campaigns. I wrote: “I am one of those Nigerians who cannot be easily moved by political slogans.
I love the music of ‘change’ as rendered by the APC, but talk is cheap. What we need to know now is the content of this ‘change’. Jonathan has said we should move ‘forward’ not ‘backward’. Whatever! Let Buhari and Jonathan come out and tell us to our face what they want to do about the Nigerian condition.” For some reason, Nigerians seemed to be more excited by gutter fight. And they got it in abundance.
In his widely circulated article, “Buhari vs. Jonathan: Beyond the Election”, published on January 27, 2015, Prof. Charles Soludo, former CBN governor, did warn that whoever won the presidential election would face a mountain of economic problems, caused partly by declining oil prices.
He wrote: “The tragedy of the current electioneering campaigns is that both parties are missing the golden opportunity to sensitise the citizenry about the enormous challenges ahead and hence mobilize them for the inevitable sacrifices they would be called upon to make soon.” Soludo got a fair dose of abuse for his effort. But after the assault, his prediction is here with us.
With the economy suffocating Nigerians, what now? In my last article, “Where do we go from here?” I traced our current economic challenges to the state of affairs inherited by President Buhari, compounded by his own ideological hangover. I said recovery would be slow and painful and there would be no easy answers.
I also posed three questions: One, how do we first stabilise the economy and stop this bleeding? Two, where is the recovery roadmap so that the average Nigerian can hope for light at the end of the tunnel? Three, how do we ensure that if there is another oil boom, we will utilise it intelligently and escape from the “petropathetic” syndrome?
CBN Governor, Mr. Godwin Emefiele, has been carrying the can for the economic wreckage since Buhari came to power. We all know that monetary policy, which he oversees, cannot on its own address the historical structural defects in the economy. Monetary policy can be more urgently implemented and immediately visible in exchange and interest rates, but can it lead to economic growth on its own? Can it improve trade on its own? Can it industrialise Nigeria on its own? Can it create jobs on its own? In the absence of a cabinet and important policy instruments to complement monetary policy, local and foreign investors despaired.
With the naira sleepwalking to the gulag, Emefiele started throwing everything but the kitchen sink at the forex market. But it would appear the more he did, the more the naira was determined to slide into the bottomless pit. Although the capital controls, the restriction of forex sale to 41 items, the restriction on the use of naira cards abroad and the dollar swap deals with the banks have combined to keep our reserves within reasonable range to maintain our access to international trade, we remain desperately in the woods. It’s like a vehicle on a long journey without enough fuel. It will stop breathing at some point. The naira started devaluing itself without waiting for anybody.
Debate went on for long over whether or not the CBN should officially devalue the naira. For 16 months, Emefiele — with the full backing of Buhari — resisted the pressure. Apparently, there was this hope that oil would miraculously recover to ease the forex crisis. It did recover at some point, but the Niger Delta Avengers made sure we did not reap the benefit. Forex inflow, which averaged $3.4 billion per month in previous years, kept nose-diving. In 2016, it has been undulating between $500 million and $400 million per month! There is no way the massive shortfall will not destroy the naira in an import-dependent country.
Boxed into a corner, the CBN finally introduced a “flexible” exchange rate to attract foreign capital. Now we cannot even recognise the naira anymore. From the official rate of N197/$1, it is going for N311 at the interbank market. Everything has gone haywire. The foreign investors we tried to attract by “floating” the naira are yet to board the plane, and we’re beginning to wonder if they are aware we still exist. Many economists say we are paying the price of delayed adjustment — which I agree with to a large extent — but, let’s be honest, monthly forex inflow cannot drop from $3.4 billion to $400 million without crippling consequences on the naira.
What next? We need to renew confidence in the economy. Last week, I proposed that Buhari should draw up a roadmap with timelines and milestones on his recovery plan. This will create a sense of urgency and direction. I have listened to Vice-President Yemi Osinbajo, Mr. Udoma Udo Udoma, minister of budget and national planning, and Kemi Adeosun, finance minister, articulate plans to broaden the economy, eliminate inefficiencies, reduce waste and block leakages. These, to me, are good but not suited for the problems at hand. The economy is in A&E. What we need urgently is an emergency recovery plan. It doesn’t stop long-term planning, in any case.
That is why I am now thinking Buhari actually needs an economic war room, made up of experts from outside the government who would regularly advise him and his economic team on the way out of this crisis. It shouldn’t be party-based. Buhari needs the best talents he can get from anywhere, and he shouldn’t go for the usual suspects. The “group think” in Aso Rock needs to be subjected to some modulation from the outside. He should get competent advisers and pull them into the war room. This bleeding must stop. We are in a war situation, economically, and the president must look outside his immediate circle for ideas.
During the global economic crisis in 2008-2009, Mr. Barack Obama, on winning the US presidential election, appointed an economic recovery advisory board in spite of the White House structures. The board reported regularly to him and his economic team. It was chaired by former Federal Reserve chairman, Paul Volcker, with members drawn from business, labour and academia. Obama said he wanted to “pierce the insularity” of Washington decision-making processes. The American economy did not start recovering until his third year in office, but at least Americans knew he had a clear-cut recovery plan. Buhari should consider a similar support system.
“Buhari needs the best talents he can get from anywhere, and he shouldn’t go for the usual suspects. The group think in Aso Rock needs to be subjected to some modulation from the outside”
HOUSE OF WAR
Pardon my gloating, but I am always excited when members of the Nigerian political elite enclave take on each other and let us into their dirty secrets. I am enjoying every second of the on-going public drama between Hon. Abdulmumin Jibrin, the former chairman of the house appropriations committee, and Speaker Yakubu Dogara. I’m inclined to believe everything I’m hearing about the budget padding and the pillaging. Unfortunately, because it is an “in-house” matter (pardon the pun), we are never going to get to the bottom of this. Nevertheless, I want to keep hearing the salacious details of what our leaders do with our money. More!
I wept after reading Malam Jafar Jafar’s take on the scrapping of the proposed N3 billion Kano Films Village because of protests by clerics. The 20-hectare village, modelled after Indian and Chinese film centres, was to have a cinematography centre, a 400-capacity auditorium for training, a three-star hotel and a shopping mall, among others. In the view of the clerics, this is an invitation to sin, and an attempt to fast-track the end of the world. In the view of President Muhammadu Buhari, the clerics are right. So he has cancelled the project. I hereby advise the Plateau state government to lobby Buhari to relocate the “sin city” to Jos. Hell!
TRAIN OF THOUGHT
As President Muhammadu Buhari launched the Kaduna-Abuja rail on Tuesday, my heart glowed. The project was conceived by President Olusegun Obasanjo. President Goodluck Jonathan did the bulk of the work. Buhari completed it. Thank God it was not discarded. APC, characteristically, does not want to give any credit to Jonathan because of the narrative that he achieved nothing in five years. Does it matter — as long as the rail will make life better for millions of Nigerians, irrespective of tongue, religion and party affiliation? The Yoruba would say a woman spotted a snake and a man killed it, and so what? Progress!