By Arize Nwobu Acs
MON, APRIL 3 2017-Beyond the economic recession, the Nigerian economy is characteristically obstinate and resistant to guidance or discipline. It is a paradox, an economy brimming over with both natural and human resources, but marked by a vicious cycle of poverty.
Presently, all macroeconomic indices have turned hostile to the welfare of citizens. In January, 2017, inflation rate spiked to 19 per cent before it dropped to 17. 78 per cent in February, unemployment rate (which measures the number of people actively looking for a job as a percentage of the labour force) rose for the seventh straight quarter to 13.9 per cent in the third quarter of 2016, reported to be the highest level since 2009.
Poverty rate stands at 62.6 per cent with almost 100million people living on less than a US$1 a day, reinforcing a vicious cycle of poverty, while the Misery Index, measured by the sum of inflation, unemployment and lending rates, minus year-on-year(y-o-y) per capita GDP was at 49.5 per cent( before the drop in inflation rate to 17.78 per cent), from 47.7 per cent in 2016, and ranked Nigeria as the fourth on the global index, according to the National Bureau of Statistics.
The Nigerian economy can also qualify as one of the most sabotaged in the world and the sabotage is virtually on all fronts, perpetuated largely by Nigerians, but sometimes in collusion with foreigners. Sabotage is a deliberate action aimed at weakening the economy, polity or corporation, through subversion, obstruction, disruption or destruction. To sabotage is to undermine, countermine, counteract and weaken, destroy or hinder normal operations and the perpetrators are known as saboteurs.
Some of the economic saboteurs include unscrupulous and unpatriotic law enforcement agents at the borders and other gateways who collude with contrabandists for selfish gains, greedy and covetous political class who appropriate a lion share of scarce state resources to themselves to feed the need of their egos and perfidious propensity for conspicuous consumption rather than channel same into the economy to stimulate growth, and treacherous government officials at Ministries and Agencies who betray trust and outfox, circumvent and countermine State policies for filthy lucre.
Others include opportunistic thieves, criminal syndicates and militants who attack and destroy state infrastructure, the elite and powerful businessmen and women who get around to genuflect at Presidential courts and corridors of power to obtain questionable waivers and concessions to rake in stupendous profits, but would hardly pay commensurate taxes into State coffers.
In a recent press report, Minister of Finance, Kemi Adeosun, noted, ‘’ It is a pity that Nigeria has one of the lowest tax regime ratio globally at six per cent. The only country that is lower than us is Oman. We have so many wealthy entrepreneurs who have managed to develop habit of not paying tax, we need to correct that’’.
Next, are banks that mobilize enormous government funds at virtually no cost but would not lend to the real sector to catalyze production and generate growth and employment, instead, would rather go round-tripping at the foreign exchange market.
There are also a majority of Nigerians who have the uncanny penchant to consume foreign goods and services, and importers who hide under the cloak of freedom of choice, to fritter away the nation’s foreign reserves by importing even the most basic items that can easily and readily be sourced or manufactured locally to generate employment and expand the economy.
As noted by a former Deputy Governor, Central Bank of Nigeria (CBN), Mr Obadiah Malaifia, ‘’Nigeria became the largest importer of rice and all sorts of worthless Chinese goods, from pirated mobile phones to substandard steel products and dangerous baby foods. We became in effect, a country that consumes what it does not produce and produce what it does not consume-the junk yard of the world’’.
Between January to July, 2015, CBN spent about US$5billion defending the Naira, with an average of N1.3trillion spent on imports annually and about N100billion expended on the importation of toothpicks, milk and furniture in the first quarter of 2015. To curtail the trend, CBN had to exclude 41 of such items from the Interbank foreign exchange market in 2015 in order to preserve the reserve and encourage local production.
In defence of the policy, CBN Governor, Godwin Emefiele remarked, ‘’before we decided to place them on the exclusive list, we thought about them and we felt these are items that can be produced in this country and that as long as we continue to import them, it would be difficult for our people to look inward,’’ adding, ‘’there is need to change the economy’s structure, resuscitate local manufacturing and expand job creation’’.
In the past twelve years since 2004, three successive Governors of the apex bank, namely Professor Chukwuma Soludo (2004-2009) Sanusi Lamido Sanusi (2009-2013,now the Emir of Kano), and the incumbent, Godwin Emefiele (2013 to date), have evolved ‘’tough’’ policy measures which created significant impact on the financial landscape, economy and polity.
Amid stiff opposition by vested interests, Professor Soludo, successfully implemented the Banking consolidation exercise within the set timeline, a development which transformed the banking industry for better. The exercise was necessitated by persistent illiquidity, poor asset quality, weak corporate governance, insider abuses, unprofitable operations, over-dependency on public sector funds and weak capital base of banks, among others.
In a treatise, Ezeoha (2007), and Adekoya and Oyatoye (2007), noted that ‘‘most banks operated with a capital base of less than US$10million before 2004. The largest bank as at 2004 had a capital base of US$240million, compared to the US$526million for the smallest bank in developed countries which its capital base is larger than all of the Nigerian commercial banks put together’’.
In his address on July 6, 2004, Soludo noted among other things, that ‘’the Nigerian banking system today is fragile and marginal, our vision is a banking system that is part of the global change, and which is strong, competitive and reliable. It is a banking system which depositors can trust, and investors can rely upon’’.
The succeeding CBN Governor, Sanusi Lamido Sanusi, assumed office in 2009 in the middle of the global financial crisis and anchored his reform blue print on four cardinal objectives, namely, establishing financial stability, enhancing the quality of banks, ensuring that the financial system contribute to the real economy and enabling solution evolution.
From a vantage position as a risk expert, he saw the underbelly of some banks post Soludo’s consolidation exercise and acted. In an interview with Financial Times of London, Sanusi said, ‘’there was no choice but to attack the many powerful and interrelated interests who were exploiting the financial system’’.
Thereafter, the banking industry has remained strong, resilient and with minimal corporate rascality in the system, and for effect, CBN launched a corporate governance project to eliminate ambiguities and help stakeholders be up to par with global best practices.
But, among the three CBN Governors, the incumbent, Godwin Emefiele, seem to be the most challenged and arguably, the hardest working, in view of the present state of the economy. Some analysts believe that Emefiele, like President Buhari, assumed office at the ‘’wrong time’’.
But, also, like President Buhari, Emefiele has remained focused and resolute in the face of adverse economic developments which have kept him and his team under high pressure. From around N190/ US$1 in May 2015, the Naira plunged to as low as N560/US$1 in mid February 2107, a development which elicited public uproar, with some calling for Emefiele’s resignation, but the apex bank Governor seemed to know what many did not know- the artificiality of the underlying causes of the development; namely, acts of sabotage by speculators, those hiding illegal monies and people desperate to transfer illicit gains out of the country at any cost.
A pragmatist, Emefiele is inclined to solving problems in a practical way rather than by having fixed ideas, theories and ideologies. Between mid February and early March, CBN made six critical foreign exchange interventions which jolted speculators and strengthened the Naira. The first intervention was with US$417million (Tuesday, February 21, 2017), next was with US$231million (Thursday, February 23, 2017), and US$180million (Monday, February 27, 2017). Others are, US$380million (Friday March 3, 2017), US$367million (Monday March 6, 2017) and US$100million (Tuesday March 7, 2017). And the rate crashed to N380/US$1 in the ‘’Parallel market’’ so called.
According to the Acting Director, Corporation Communication, CBN, Isaac Okorafor, the interventions are to fund the commercial banks with enough foreign exchange to cater for the request of customers to meet Personal Travel Allowances (PTA), Business Travel Allowances (BTA), Medical and Tuition bills.
The CBN Governor is averse to ‘’freeing’’ the Naira and has continued to retain the MPC at 14 per cent as a strategy to checkmate inflation, citing Egypt which freed her currency and inflation rate spiked to 30 per cent.
As an advocate of CBN’s involvement in development banking, Emefiele has continued to complement the efforts of the fiscal authorities by pushing in the areas of creating mass employment, conserving scarce foreign exchange, and has met with several stakeholders in the ailing production sector in a determined move to turn around the decline experienced over the past decades in areas such as textile, palm oil, wheat and rice, among others.
Under his watch, CBN’s Anchor Borrowers Programme(ABP) is making impact especially in local rice production. The apex bank set aside N40billion, out of the N220billion earmarked for Micro, Medium and Small Enterprises(MSME) for farmers, at a single digit interest rate of 9 per cent, and small holder rice farmers will get between N150,000.00 to N250,000.00 to enable them procure seedlings, fertilizers and pesticides.
Out of the N40billion, N4.9billion, reportedly, was disbursed to 78,581 farmers in Kebbi State which has an abundance of rice paddy, and each farmer got N218,000 to enable them cultivate a hectare of land to plant three times a year, two dry season cropping and one rainy season cropping, a development which is said to have generated a total of 570,000 direct jobs and a harvest of 1 million tons of rice.
With a projection that local rice production would reach 2.730million tons, CBN has set a target for the exportation of rice before the end of 2017.
Arize Nwobu , Assistant Director/ Head, Research and Technical, Chartered Institute of Stockbrokers wrote via email@example.com. Tel; 08033021230.