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ECONOMIC CRISIS: WHO SHOULD BE BELIEVED?
Recently, precisely Wednesday, January 21, 2009, millions of Nigerians, including my humble self were glued to television sets watching the live transmission of the appearance of the Governor of the Central Bank of Nigeria, Professor Chukwuma Soludo before a committee of the House of Representatives as he explained the true position of the Nigeria’s economy and steps being taken to wade off any unpalatable drift.
I was amused about the level of emotions and outcry by the honourable members. I had wished they share similar sentiments three years back. May be, the situation could have been better than what is obtainable today.
In my mind, the position of the CBN Governor and the salient reasons which informed his submission about the level of vulnerability of Nigeria’s economy in the face of global melt down remained valid up to this moment. He clearly stated then, I remembered precisely, both at the THISDAY’s Town Hall Meeting in November 2008 and at the Senate plenary session that the economic fundamentals favoured Nigeria even though not completely insulated from the global crisis. That position was quite valid and has not changed. What Nigeria is experiencing now is the ‘second-round effects” resulting from credit crunch, ineffective demand for goods and services, declining output and job cuts in the industrialized economies.
Invariably, that has affected the demand for crude oil negatively thereby resulting into falling price of crude oil at the international market. This calls for “belt tightening” measures on the part of policy makers as there are no signs of recovery in the nearest future. More so, that major consuming nations like China and the United States of America have either stockpiled the product for future consumption or vigorously searching for alternative sources of energy to power their economies.
For God’s sake, we have been hearing about Nigeria being a monoculture economy dominated by crude oil and the need to diversify the mainstay since l970s, and more than three decades later, the entire clamour for diversification amounted to a mere wishful thinking or at best a slogan.
Today, the concern of every one is about the sudden fall in the value of the Naira against other major currencies like the Dollar, British Pound Sterling and the Euro. But what did we do when we had all the opportunities to lay a solid foundation for the defense of the Naira’s value, especially when we savoured the “sweet aroma” of the Dollar rain. What did we do when the exchange rate was stabilized between N118 and N125 to Dollar for almost three years? And if the exchange rate should go back to N100 to one Dollar, what plans do we have for proper utilization of the foreign exchange?
The truth is that the CBN has sustained the stable exchange rate of N118 to One Dollar for a long time without a commensurate local production to shore up Nigeria’s balance of payment position. Instead, we gleefully tied our apron to petrodollar and embark on importation jamboree. That was the same period our leaders were clamouring for the appropriation of the so called excess crude oil account. But if only half of the normal allocations were judiciously used for the provision of vital infrastructure, maybe the story would have been different now. Anyway, the discourse on exchange rate dynamic is reserved for another day.
Today, the price of the crude oil has nose-dived from $147 to about $36 per barrel, far below the 2009 budget estimate of $45 per barrel. This is as result of low demand for oil in the international market due to economic down turn of the major consuming nations. Indeed, austere time is here, at least for now and we need to re-order our priority. But in the case of Nigeria, the demand for foreign exchange soars without any justification other than speculative. What else do you expect other than undue pressure on the Naira. Just recently I came across an advertisement published in the newspapers titled “CBN Forex Sales to End Users” indicating who demanded for how much and for what purpose at the foreign exchange market. The record showed that a total of $672,207,968.87 was demanded between January 19 and 28 alone. That record was for those with $100,000 and above demand. And one can imagine what the total sum would be when those that demanded
below $99,999.00 are added.
Further scrutiny of the items for which foreign exchange was demanded revealed that if only we had laid good foundation and sustained such, by now Nigeria should have been a net exporter of such items like newsprint, package juice, frozen fish, billets and even petroleum jelly to mention just a few of the items being imported. How then, would the foreign reserves not reduce especially when Nigeria had over $60 billion in the reserves and was earning about five per cent interest on investment and all of a sudden we now have about $50 billion with the interest rate inching towards zero.
It is absolutely incorrect and misrepresentation of the position of the CBN as to what extent will Nigeria’s economy be affected by the global economic crisis. The level of pessimism emanating form some quarters was alarming. The whole thing is sounding as if these groups of people are eager to witness Nigeria’s economic doom with the way and manner they are carrying on with their unwholesome campaign. An average mind may be wondering who’s to be believed, whether the managers of the economy or the pundits.
The optimism expressed by the CBN about the Nigerian economy should be seen as patriotic and commended. The Bank has matched words with actions in discharging its statutory mandates.
Be as it may, agitating minds may hold the public sectors are culpable of recklessness and failure to address the issue of economic development of Nigeria sincerely. But my humble submission is that this is not the time for trading blames or calling for the resignation of one public officer or the other.
The “chicken has come home to roost” and our inability as a nation to execute development plans to fruition has again exposed us to the vagaries of global economic meltdown which is fast driving Nigeria into the lower rung development ladder. But all hopes are not lost as attested to by Merril Lynch, one of the World’s leading financial and management consultants ranked Nigeria among the ten least vulnerable economies in the world. We should learn to believe our leaders and play down negativity
For now, it is becoming obvious that 2009 fiscal budget is unrealizable but that does not mean we should dip hand into the reserves or excess crude account in particular, to augment the envisaged budget shortfall. No. Rather, the most auspicious thing to do is to reorder our priorities especially in project implementation while watching cost of running the government. We should focus on infrastructural development for effective take-off of the real sector. Similarly, government at all levels should leverage on the enormous potentials of agriculture.
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