Last week two former governors of the Central Bank of Nigeria (CBN) reviewed some of the policies of the government of the day scoring it low in currency management, creation of employment opportunities as well as expanding the production capacity of the economy. SULAIMON OLANREWAJU and SANYA ADEJOKUN spoke with some experts on the assessment of the erstwhile apex bank helmsmen.
In what looked like a convocation of former Central Bank of Nigeria (CBN) governors for the assessment of the nation’s economy, two immediate past heads of the apex bank gave their views on the performance of the economy last week returning damning verdicts.
First, it was the immediate past governor of the CBN and the current Emir of Kano, Alhaji Muhammadu Sanusi II, who on Wednesday in Kano, said the economy was headed for the doldrums unless the government retraced its steps. Sanusi, who spoke at the 15th meeting of the Joint Planning Board and National Council on Development Planning in Kano State, where he was chairman, opined that the failure of the government to provide employment opportunities for the over 80 million youths in the country had made them to be favourably disposed to supporting terrorism.
In a speech entitled Nigeria in search of new growth model, the former CBN boss denounced some of the policies of the government as working against the interest of the generality of the people. He added that some of the policies, especially the foreign exchange policy, had made some people billionaires without investing anything. He said the foreign exchange policy of the current administration was not different from the oil subsidy policy of the immediate past administration of Dr Goodluck Jonathan in that the two policies encouraged rent-seeking.
He said, “You don’t have to be an economist to know that any system that allows you to sit in your garden, and with a telephone call, make one billion naira without investing a kobo, that system is wrong. It is unsustainable.
Lampooning the system operational in the country, which he described as discouraging manufacturing, Emir Sanusi said, “We are in a situation where we cannot process tomato. Tomato paste is being imported from China. It is sad.”
The erstwhile CBN governor said the way out of the present situation in the country was expanding the economy. According to him, “If we do not expand the economy through wise investment, we can end up in classical Malthusian situation.”
Also speaking on the need to expand the economy, Professor Chukwuma Soludo, Sanusi’s immediate predecessor as CBN governor, said “Nigerian economy has been massively compressed by 50 per cent. GDP is being compressed to 50 per cent from $578 billion to $290 billion while per capita income has also dropped from $3,100 to $1,500.”
Soludo, who on Thursday was the guest speaker at the 4th Progressive Governance Lecture Series organized by the Progressive Governors Forum with the theme Building the Economy of States: Challenges of Developing Inclusively-Sustainable Growth, said “The transition to a Nigerian economy without oil cannot be sustainable by merely pumping money into the system. If the aggregate demand is on one side, we have other things on the other side to consider in order to be able to sustain our economy.”
The former CBN governor added that the foreign exchange crisis had resulted in the shrinking of the nation’s economy by as much as 50 per cent.
Just like Sanusi pointed out that the present situation was not without its inherent opportunities in spite of the obvious challenges, Soludo also said, “Nigeria is facing unprecedented and tremendous political and economical challenges with global and local dynamics. Regardless of these challenges, opportunities and possibilities abound if we address some fundamental issues. The key to achieving this is to have a development plan that is anchored on realizing inclusive and sustainable growth.”
Soludo thus recommended that the economy should be steered towards being production-based rather than being consumption-driven.
While commenting on the submissions of the two former CBN chiefs, a Professor of Economics at Austin University, Texas, Sulayman Marshal, said the two ex-CBN governors were right in their views that the economy could be better managed.
According to him, there are so many inconsistencies in the system. “For instance, the government claims that it wants to encourage local manufacturing but the policies we have are at variance with that assertion because the CBN seems to be working towards the reduction of import dependence especially if you consider the restriction of access to forex forced on the 41 items. While some of the items should be banned, there are many of them that should be given time before being eased out of access to forex. If that had been done the impact on the manufacturing sector would have been minimal and there would not have been a spike in unemployment rate. But because not much reflection went into the decision-making process, we have found ourselves at a point where in our bid to solve a problem we have created several others.”
The Professor also spoke about the gap in the official and parallel market rates of the foreign exchange. “For as long as there is a gap between the official and unofficial rates of the foreign exchange and some people, for whatever reason can have a cheaper rate, there would be corruption in the system for the simple reason that you cannot stop anyone who gets dollar at the official rate from selling at the parallel market rate. That needs to be corrected.”
In the view of Dr. Austin Nweze, a lecturer at the Lagos Business School, the major issue with the government is its inability to take required actions on time.
“In economic management, timing is very important. If you delay in taking action, you pay dearly for it. This government has not been taking required action at the appropriate time and we have been facing the consequences of this,” Nweze said.
He added, “The government constituted its cabinet a bit late and that meant that governance did not start until six months after the inauguration of the government. Then the budget came quite late. The decision to liberalise the fuel price market was late. So was the decision to free the currency. These four contributed in no mean way in putting the nation where it is currently. Going forward, the government should understand the importance of speed in governance. Delay is always dangerous.”
Nweze agreed with the former CBN helmsmen that the government needs to increase manufacturing capacity in the country as a way or energizing the economy. “Until we take manufacturing seriously and accord it its rightful position, the army of our unemployed youths is not likely to reduce.”
An economist and the CEO of Emerald Associates, Ibadan, Mr Sanjo Aribatise, said Emir Sanusi was right about the danger posed by the nation’s unemployment situation. He said, “The government has to be creative about solving the problem, trying what we did in the past will only give us the result we had in the past. I am tempted to think that this government would be assessed by its ability to solve the unemployment crisis.”
He also spoke about the foreign exchange management, saying any system that allowed such a wide gap between the official and the parallel market exchange rates was not sustainable.
“The government itself knows that the system is wrong but it does not have the will to do what is right. The need to correct the defective foreign exchange policy is strong and it should be done now. The promise at the outset of the policy was that it would result in a unified foreign exchange system but it has not. The Emir is right, the policy pauperizes the majority and offers a platform for a negligible few to get stupendously rich at the expense of the majority,” Aribatise said.
Mr. Tope Fasua, an economist and Chief Executive Officer of Global Analytics Consulting Limited, said “We actually thought the era of dual exchange rates was over. What the recent policy promised was that everyone with a need for foreign exchange – legitimately – would approach a single market (the interbank market). The Central Bank is meant to intervene occasionally and unpredictably in that interbank market. What the former CBN and Emir of Kano has ‘revealed’ is that it is still very possible to game the system of large amounts of money, which is really an illegal arbitrage. It is saddening and it is a sign of worse things to come. As a former CBN Governor and a powerful monarch, I believe he knows what he is talking about.”
He added, “Dual exchange rate is certainly bad for the economy. However, what we are seeing here is a triple exchange rate regime. There is the N197 which we thought was dead (even though it recently resurrected in pilgrim funding and now being confirmed as alive and well by Emir Sanusi), there is the interbank, which has been fluctuating recently between N340 and N370 to the Dollar, and then there is the black market which is solidly around N412 to the Dollar.”