I watched Sanusi Lamido Sanusi, our Central Bank Governor, on Saharareporters TV last week, wading through the many questions on Islamic Banking and my respect for the man soared even further.
I had watched his defence of the same issue in the House of Reps chambers, and at that particular moment when he mentioned that the second highest shareholder in the proposed non-interest (Islamic) bank was Igbo, the whole House was aghast. The jaws of most Representatives dropped! That is what comes from preparing well for a defence, knowing ones onions and being articulate.
Sanusi was one of my inspirations in putting my book, CRUSHED! together. I had approached him at one of those open forums, to write a foreword for the book, but I just let the idea slide because the poor man has too much on his plate already. The book is also a monster of sorts; controversial and bold in many ways. The few people who have read it have been shocked to speechlessness. Some were afraid for me, but therein lies my strategy. I chose to heed Soyinka's advise back in the day, that 'the man (has) died in him, who keeps quiet in the face of tyranny and injustice'. So, I am still physically living (as I type this at least), in spite of the many revelations in the book. I will have to seek him out and present a copy to him though. Some sections in the book are dedicated to his work. Imagine, I read part of the book again last week - and I burst into tears at some point! I was overwhelmed with emotions. Really, I've done Nigeria and the black race a great favour in that book. More than my fair share...
But my concern today is about the precariousness of the Nigerian economy, and by extension, the entire country, in spite of Sanusi's best efforts. I am concerned that the sheer banality of this economy may yet rubbish the legacy of a truly great and hard-working man. Sanusi did hint in the saharareporters interview that he didn't need five whole years to make his impact on the economy. My heart sank, for I knew the man must be really tired of the Nigerian madness. Why drill a CBN governor over every other issue, every other day? Why allege ethnic and religious bias over bank licensing? In the sharareporters interview, the CBN Governor was clear about his focus on inflation and productivity. Still, this economy hangs on a very thin thread.
As we all know, this is a mono-product economy. What we economists know as 'Dutch Disease', whereby a country neglects its other assets because of the presence of extractive resources - like crude oil - is holding Nigeria in a vice-grip. It is amazing that the best analysis of the Nigerian economy today, still centres around the proceeds of crude oil. If we are wise, we should stop analyzing and reporting GDP growth, inflation targets and what have you, that are totally skewed by the sales of crude oil. Today, Nigeria's Bonny Light Sweet Crude sells at around $118 per barrel, and we are lucky to be producing at an all-time-high of 2.6million barrels per day. We should really sterilize the effects of crude oil from our reporting of GDP and Foreign Direct Investments. To make matters worse, bilateral and multilateral trade agreements also deceitfully report progress and achievements based on Crude Oil sales. USA's AGOA (Africa Growth Opportunities Act), lists Nigeria as one of the countries whose exports are being 'encouraged' by the USA. But 98% of the export to the USA from Nigeria is crude oil.
Now the bad news. If the study of statistics is anything to go by, the crude oil prices that Nigeria is enjoying today at $118, is going to crash someday soon. This is not about voodoo. And it has nothing to do with religion. Crude oil is a product of science; it is nothing spiritual. From the 1880's through to 1973, the price of crude oil never exceeded $30 per barrel. The first spike in 1973 as a result of the Yom Kippur war between Israel and the Arab world, sent prices soaring to around $90, followed by a gradual crash in prices, to about $30 in the mid-80s. This was what put Nigeria, as well as other commodity-based African countries in economic depression, thereby exposing us to the bad advice of IMF, World Bank and their cohorts. This crash, which we never provided for or expected, is what turned many African countries - chiefly Nigeria - into beggar nations, laden with huge debts which had to be cancelled circa 2006. Between 1987/8 to 2002, the price of crude oil hovered between $30 and $35.
The current high plateau of crude oil prices on which we are riding, which started with the US invasion of Iraq in 2003, compounded by its spending in Afghanistan, among others, is therefore not sustainable to the future. More importantly, a high crude oil price is not in the interest of the superpowers. China's rise added for the demand for more crude, hence the pressure on price. But China too is working to reduce the cost of purchasing crude oil from countries like Nigeria. It is instructive to note that General Sani Abacha, much vilified and demonized by the Western countries and their local collaborators, ran this Nigerian economy on crude oil prices of between $9 and $11 per barrel! I am not a prophet of doom, but crude oil prices will, someday in the near future, come back to the $10-$30 level. In statistics, this is called the Random Walk phenomenon, and it is a scientific reality, because of the many intervening forces in the market, who exert their interests in different directions. Producing countries are only one of such forces and cannot keep crude oil prices at the peak levels that they are now, for much longer. So, what has gone wrong with Nigeria since Abacha? Yes, you heard me right, since Abacha?
How come Nigeria sells crude oil at $118 today and our foreign reserves are dwindling almost unstoppably? Why is the federal government financing every state and local government with the proceeds of crude oil but there is nothing to show for it on ground. Why do some states collect as much as N20billion from the federal government every month and their people are still crassly poor? What happens if the price of crude oil crashes tomorrow? The debate for minimum wage is on. But even at the present wage structure, ALL governments in Nigeria will start to owe salaries FROM THE FIRST MONTH, WHEN the price of crude oil crashes.
So in spite of Malam Sanusi's best efforts, I daresay this is a bad time in history for one to work for government in Nigeria. Reputations are at stake. Yet the needed unity and strategy, that could save this country from disintegration and even the black man from extinction, are nowhere near in sight. Since Abacha, we have totally lost our innocence in this country. We have become greedier. Our big men have totally confiscated the commonwealth, building mansions and stashing even more money abroad than Abacha could ever dream of. They have elevated deceit to the level of virtue and take pleasure in inflaming deadly rivalry amongst the people they lead, in order to keep the confusion going. It cannot go on for much longer. Certainly.
In the snowy winterland of Davos, Switzerland, eminent personalities and global leaders from diverse walks of life and different countries gathered for the annual economic summit. The August visitors to Davos include Presidents of countries, CEO of major corporations, civic leaders, top academicians and politicians. The purpose of the gathering is to review the state of the global economy.
The organizer of the conference, “The World Economic Forum is an independent, international organization incorporated as a Swiss not-for-profit foundation. The organizer, “believe that economic progress without social development is not sustainable, while social development without economic progress is not feasible.”
African leaders and bureaucrats are never missing in the conference. These leaders especially Nigerian and South African presidents are always present together with their entourage of the central Bank chieftains, finance ministers and top government officials. It is impressive to see them engage in table conferences and discussions, an enlightened exercise that displayed the side of Africa that is rarely seen. African leaders must be pragmatic if not realistic and must separate the wheat from the chaff in order to bring a meaningful and tangible result to their people waiting for them in Africa.
Beyond brainstorming and intellectual exercise the leaders of the world should formulate ideas backed with practical steps to ease the burden of poverty in Africa and developing nations. The reason for poverty in Southern hemisphere has been analyzed enough, the time has come to do something reasonable that will improve the status quo and re-introduce a pragmatic capitalism.
A global fund for small business can be created that will directly lend small loans to small scale industries and medium enterprise in Africa and developing countries that will bye pass interference from governmental bureaucracy of respective African countries. Funding must go directly to small business owners that lack the conventional know-how and collateral security for raising capital from financial institutions.
As for African leaders they must be respectful but shun diplomatic shenanigans in Davos and tell leaders of international banks and corporations that African countries are in the midst of economic depression therefore creditors of African debts have to find effective methods to ease the burden of the debt. Africa needs injection of credits and grants to deter credit crunch in the market. African leaders can justify this by arguing that sound African economy is good for the stability of the world especially in their own hemisphere. The most important is the re-introduction of capitalism and free enterprise in Africa with fairness, efficiency and justice.
The world economic forum at Davos is not the venue for easy talk, tabloid and entertainment news. It was displeasing to hear about the issue of President Jacob Zuma of South Africa and his wives. President Zuma was even compared to Tiger Wooden the fallen golf superstar. Davos is too important for the global community to have such news emanating from it. There is time for everything; President Zuma came to the summit to attract foreign investors to his country not to discuss the issue of polygamy in South Africa.
There have been good things happening in Davos and conference is living up to expectation. In the 2008 forum, Bill Gates spoke about creative capitalism, emphasizing how free market and capitalism can work for average citizen and developing countries. The band front man of U2, Bono also spoke about debt cancellation for poor highly indebted countries that cannot continue to make payment on their foreign debt with burden of poverty, prevalence of AIDS and hyperinflation.
The application of creative capitalism can be a force in tackling instability in some restive regions of the world. Take for instance the case of Niger Delta, the big oil companies do not necessarily have to wait for the native government to act, they can aid in solving problems by acting responsible and providing technology, jobs, schools and amenities to the locals. "We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Gates told an auditorium packed with corporate leaders and politicians at the 2008 meeting of the World Economic Forum.
The vision of transforming Nigeria’s economy by 2020 must be strategically framed, rooted in sound macroeconomics fundamentals and elucidated legal framework to accomplish the targeted goal. Nigeria has come of age, and is now determined to expand her economic frontiers and to invest in the populace. The targeted year 2020 is the year Nigeria proclaims that she will make the list of one of the greatest/best twenty economies in the world.
During the inauguration of the President Yar'Adua, he echoed that Nigeria was ready to emerge from shambles of corruption and hyper-mismanagement to take her rightful place in the comity of nations. Nigeria must move forward to build a prosperous and giant economy. There must be shift in economic paradigm. Nigeria has so far achieved quantitative macroeconomic fundamentals, but a lot needs to be done .
Emeka Chiakwelu, Afripol organization’s Director/Chief policy strategist has offered strategic steps to be taken by Nigeria to realize her vision of making club of the world’s 20 biggest economies by the year 2020. (An abridged version of the paper he delivered on United Nations Day in United States of America).
1. Stabilization and convertibility of Naira: Nigeria must have a stable currency, or her pursuit of a powerhouse in the global economy will be a mirage. Although Naira currency is relatively stable, it is weak and soft when you compare it to other major currencies like dollar and euro. Presently Nigeria is having one of the lowest debts to GDP ratio in the world. This is attributed to her recent payment of foreign debts and the reasonably macro-economic stability she achieved through economic reform measures. Nigeria does not need a volatile economy with unstable exchange rates for that will precipitate low investment. Though high unemployment and low per capita income presently bedevil the economy, her economic indicators look bright.
The postponed Naira re-denomination must be revisited and carefully implemented, for this will make the convertibility of Naira readily. The convertibility of any currency remains basic to foreign exchange transaction.
2. Tax Reforms: Taxes are very important to be left in the hands of politicians. Seasoned bureaucrats and financial experts must be used to setup sensible tax codes that are business friendly which encourages economic development, especially in the attraction of foreign investors. Government must look into lowering tariffs to encourage inter-African business partners.
Tax codes must be made to encourage job creations and businesses. Favourable tax breaks must be given to companies and businesses to stimulate economic development. A modest progressive taxation must be reintroduced and effectively implemented, the idea is to encourage taxpayers to be stakeholders in the affairs of government. By paying taxes, citizens’ empowerment is established. Citizens will then carry out oversight function by monitoring how their taxes are spent.
3. Prudent management of foreign reserve: Nigeria’s foreign reserve is hovering between (50-54) billion dollars and such fund must not be allowed to lay dormant in the foreign holding. A reasonable portion of the reserve can be invested in a foreign market, to yield an appreciating return. Nigeria can learn from Dubai and other Persian Gulf oil countries that have invested in the western economies especially in the American Real estate and fiduciary bonds. Government should assemble a committee of experts to manage the reserve and invest some of the money in stable market overseas.
4. Diversification of the economy: Nigeria has become responsive to the diversification of her economy, not minding she has a long way to go. The country knows what to do, but procrastination has always retarded her progress. Oil cannot continue to be her only high yielding sector, agriculture must be expanded and retooled. Investment must be made in research and development.
5. Nigeria’s Image Management: Nigerian policy and decision makers have not certainly explored the power of image making. The image of a nation both abstract and aesthetic speaks a volume of the nation. Nigeria must be able to tell the world that she is ripe for investment and tourism without obstruction. No foreign institutions or countries can tell the world about Nigeria more than Nigerians could do. Even if Nigeria rent CNN, BBC, and New York Times, the primary and fundamental responsibility of dissemination of news about Nigeria resides in the hands of Nigeria. The country must have her own international mouthpiece to tell her stories to the world, especially to the intended investors and the tourists. Nigeria cannot afford to leave her destiny and future in the hands of foreign media networks that see her as their fellow competitors. Nigeria cannot afford to be NAIVE and NONCHALANT in the era of ruthless, back-stabbing and cut-throat business world.
6. Solid social amenities: Social amenities must be present so that she can make headway in industrialization and information technology. Energy conservation and availability are central to modern development. Basic infrastructures are the key to sustainable development. Constant supply of electricity is the key to development.
7. Reform and Secured Property Rights: Citizens must be able to utilize their properties to create further wealth and this can be possible when rights of ownership are enshrined and guaranteed in the law. Therefore, securing property rights will serve as catalyst for economic prosperity.
8. Commitment to Democratic capitalism: Nobody is saying that democracy and capitalism have no imperfections, but time and experience have shown that they work and boost stability in any given country. The major defects of capitalism - unemployment and inflation can be controlled through sound fiscal and monetary policies. As for democracy, it is the best for Nigeria because of her rich diversity. Independence of Judiciary must be encouraged to the highest order, because it protects and strengthens democracy. Again genuine electoral reforms must be pursued and encouraged to make the electoral body independent, stamp out lawlessness, intimidation and rigging. So that free and fair elections will be guaranteed. A representative government enables every group to participate effectively in the political landscape.
Government must encourage and promote free enterprise. Government must also be alive in performing their responsibilities. These include the protection of lives and properties. They should avoid tinkering with the economy, and should allow the forces of capitalism (demand and supply) to be the dominant economic determinant. While Nigerians must be pragmatic in areas of foreign trade especially the protection of local jobs and infant industries, but they should careful not block free trade which encourages trade specialization and comparative advantage.
9. Securing Peace and security: The most important function of any government is the protection of life and property. A nation devoid of law and order will not be able to perform such a necessary function and therefore her economic growth will be hampered seriously. For Nigeria, the police force must be reformed, and properly trained, equipped and handsomely paid. Courts must be allowed to perform their duties without interference from any quarters.