Thoughts on current developments -By Sheriffdeen A. Tella

Prof. Sheriffdeen Tella

There are insinuations that the Nigerian economy has gone through this kind of current economic challenges before and came out better. Every economy and even the global economy, goes through a kind of business cycle from time to time.

That is, a period of boom normally followed by a season of depression. How long each period subsists depends largely on economic policy adopted and implemented by the government. When depression comes knocking, and more often than not it sneaks in like a thief in the night, panic is the only word to describe the reactions of government and the civil society.

Nigeria is now in depression, occasioned largely by corruption, idle funds in homes and warehouses and more importantly, loss of revenue from crude oil export, the major source of fund for executing recurrent and capital budgets by the three tiers of government in the country. The situation is not likely going to be short term and the earlier the managers of the economy realise this, the better.

The fact is that the United States is not going to abandon the production of shale oil which was responsible for the decision not to buy our oil anymore, and, oil is being discovered in commercial quantities in more counties, apart from expected oil production and exports from Iran, if the economic embargo is finally lifted.

So it becomes apparent that the current short term management and economic measures being introduced the Federal Government and the Central Bank are in order but must be improved upon to cover medium and long term anticipated economic problems.

The Central Bank of Nigeria will have to start working on medium term measures that will bring down interest rates to encourage borrowing for investments at cheap rates with consequent business expansion in output, lowered unit cost, employment generation and falling domestic prices.

The major complementary arm of the policy is still absent as the economy is waiting for a minister of finance to provide leadership in the fiscal policy formulation and implementation. What this implies is that the President needs to move faster from now on the issue of ministerial appointments.

Before moving into the real sector, however, I wish to align myself with the directive that harmonises the federal accounts or the Single Treasury Account policy, which will not only make the Central Bank play its role as the ‘Banker to the government’ but also assists in solving the riddles on huge liquidly in the banking system which over time had promoted some illicit transactions in the foreign exchange market, even by the banks themselves.

Should the CBN decide to change the face of naira within a short term of three months or less, lots of the illegal funds presently causing undesirable liquidity in the economy will either be mopped up or become problems for their owners. All hidden naira in surface and underground vaults at different homes will be unveiled. May I equally suggest that the Central Bank should be cautious on the issue of bail out for some industrial sub-sectors. For instance, there was a bail out for the aviation industry and the textile industry among others, under the last government without positive results to show for it.

Two major sectors that are germane to putting Nigeria on the path of growth and development are the oil and gas sector and the electricity sector. They are important for the fact that the former not only provide funds for budget implementation but also provides energy for home and industrial uses while the latter, through backward linkages, provide the energy that powers the industries. Thankfully, the oil and gas sector is being re-engineered by the by the President’s immediate and desirable actions of changing the management and re-directing the orientation of the outfit. While the ongoing actions in the sector are yet to produce landmark results, the improved production from all the refineries are indications that the sector is waking up.

I was against the removal of oil subsidy during the heat of 2012 and I have no regret for the taking such stand. In the present circumstance however, I can no longer support keeping the subsidy, if it exists. The whole thing has been turned into a huge scam. It has become a source of illicit transfer of foreign currency abroad and mismanagement of the existing refineries. I overheard a discussion where ships loaded with fuel in Warri appeared in Apapa waters as imported refined petroleum products! So the refineries have been working before now but the whole processes lacked transparency.

My suggestion is that, given the age of the refineries, the Federal Government, if it wants to own refineries, should keep only two with largest outputs and possibly run them on joint venture with local or foreign partners for some level of efficiency. The price of fuel should be deregulated gradually at the initial stage until more private refineries are established. Private investors should be encouraged to build modern refineries which will boost production and improve distribution.

There have been improvements in electricity supply in many parts of the country since the Buhari-led government came into office in May and this is acknowledge as improved productivity of factors of production rather than increased investments. In fact, I asked a friend who works with one of the electricity company what investment went into the sector to improve the power generation and the simple answer he gave was that no new investment took place but the wind of change has just blown into the sector like some other sectors that have started functioning without additional efforts.

In order to maintain the momentum of change, the government needs to move on to consolidate on the gains of the power and oil sectors and move fast into other areas requiring attention. The agricultural sector needs attention. There is the need to study the policy of the immediate past Minister, Dr. Akinwunmi Adesina, adopt some good aspects of it and adopt some other best practices around the world. This should include the immediate review of the existing land reform for better land allocation and improved performance in the sector.

Regional specialisation in financing agricultural production should be encouraged and this is where the CBN bailout becomes relevant. The bailout for agricultural sector, particularly production of cash crops is very important for the survival of domestic industries and food security. Small and medium scale private enterprises using the agricultural outputs and inputs should be financed through lending policy of the Bank of Industry such that the focus should be production for domestic consumption and exports of value added agricultural outputs. Both modern agricultural production and promotion of SMEs in the manufacturing sub-sector have the inherent characteristics of generating multiple employments.

Within the last three weeks, there were unsavoury reports concerning education and health. According to the United States Agency for international Development, 40,000 maternal deaths occur yearly in Nigeria and from United Nations Children Education Fund, Nigeria has the highest number of children out of school. This clearly shows that in spite of huge revenue in the last 15 years, Nigeria could not make the Millennium Development Goals in these areas of development. There are enough documents on why and how to improve the education and health sectors which have been ignored all the while and it is time to go back to them.

The country needs to set a new target date for achieving education and health for all with emphasis on science and technology for education as well as promotion of primary healthcare for the health sector. A country that does not invest and manage its education and health sectors properly can never develop economically.

Many state governments have lots of uncompleted projects from roads to schools, hospitals, et cetera. Completion of these project should be the priority rather than embarking on new projects given the present financial predicament. All attempts must be made to reduce uncompleted projects as they benefit nobody.

As probes and prosecution of offenders progress on one side, fulfillment of development agenda must of necessity take centre stage on the other side. For now, grandiose projects, while desirable in times of boom, are not required in the present circumstances. Rather, meeting the old MDGs and the new United Nations’ 16-point agenda for sustainable development should be the concern going forward.

Tella, a professor of economics, Department of Economics, Olabisi Onabanjo University, wrote in from Ogun State