Buhari and the economy
PRESIDENT Muhammadu Buhari would want Nigerians believe that his attention to the economy is total as he said the other day that he “cannot be distracted” from his “efforts to salvage and revamp the national economy.” Hence his various trips this year to London, Washington D.C., Paris and New Delhi. Relatedly, the administration has signed an assistance agreement with the United States Agency for International Development (USAID) while several foreign delegations have visited in prompt response to what appears to be the President’s alms bowl economic revival strategy.
The recent statement by President Muhammadu Buhari’s media adviser in response to the opposition party’s expressed displeasure over the handling of the economy thus far, however, portrays the President as the haughty know-it-all. It is the very mindset of the political leaderships before him that over the years “cannot be distracted” and was not “prepared to listen” to the supposedly not “serious matters” deemed to emanate from other Nigerians.
In the past 14 years, that self-deluding mindset led successive federal administrations not to listen to the painless solution to the national economic pain, which the President’s approach so far will make worse. Buhari should, therefore, stop lamenting the past and desist from doing so in foreign countries. And importantly, the Nigerian people deserve to know firsthand the President’s economic vision for the country before it is implemented.
Meanwhile, it is necessary to put the main issue raised in the statement in proper perspective. The plundering of the national treasury for personal gain by the entire political leadership dates back to at least the 1980s. The rape and mismanagement of the economy were advanced as the major reasons for the coup on December 31, 1983, which made Buhari Military Head of State. It is a blessing in disguise that sharp drop in crude oil prices and oil proceeds has exposed the stark economic reality. And the gospel truth: all economic problems besetting the country including heinous corruption were made possible by the decades-long flawed fiscal and monetary policy framework, the destructive factor which received no mention in the exchanged statements between the opposition PDP and the President.
When the verbiage and tasteless post-election mudslinging are sheared from the substance of “salvaging and revamping the national economy”, Buhari and his opponents are in agreement as both sides look up to foreign investment to drive national economic recovery. Sadly, they have merely refused to listen to history as well. Nigerians should not allow 45 years of self-inflicted economic under-performance to be repeated. Available data credited to the IMF/World Bank show that over the 43 years up to 2013, the value of foreign direct investment (FDI) net inflow in Nigeria as a proportion of (not contribution to) GDP ranged from minus 1.15 per cent in 1980 to 10.83 per cent in 1994.
Under Buhari in 1984, the indicator was 0.66 per cent (current US$189.2 million). From 1999 to 2013, despite the purported seductive packaging and marketing of the economy by the PDP administrations, the indicator ranged from 1.07 per cent (current US$5.6 billion) in 2013 to 5.5 per cent (current US$8.6 billion) in 2009. Compare and contrast the value of FDI and its other aspects with the yearly remittances to the country (it has steadily risen to $20 billion annually) by Nigerians in the Diaspora and it is obvious that the importance of FDI has been overrated. On the other hand, will Buhari’s pledge to remain true to plain-speaking by parading the stunted and kwashiorkor-like distortions of the economy before foreign investors in their home countries bring in the expected huge finances for development? FDI is not charity: foreign investors are hardnosed businessmen that are wont to create banana republics for wholesale exploitation.
Therefore, before he jets out to the capital of another successful economy for alms, Buhari should savour the meat of the TICAD Asia-Africa Trade and Investment Conference in Tokyo in November 2004, which is hopefully preserved in the Aso Villa Library. In his opening address to the conference, then Japanese Prime Minister Junichiro Koizunmi said, “In the last half century, Asia achieved unprecedented economic growth which was once dubbed the East Asian Miracle. In fact, this was not a miracle but the fruit of tireless efforts by the Asian people. The purpose of Africa-Asia cooperation is to share and make use of the experiences for African development.” He asserted that government’s role is to provide the conditions for the private sector to invest and create employment, trade and grow the economy and in the process remove poverty.
What is the lesson therein for Nigeria, which has been gathering dust for 11 years? In the world’s successful economies, domestic bank credit fuels the various economic sectors. For example, domestic bank credit disbursements to economic agents as a proportion of GDP exceeds 300 per cent and 200 per cent in Japan and USA respectively. For Nigeria, it was only 20 per cent in 2013. Yet the private sector deposit base in Nigerian banks (excluding public sector deposits that have finally and rightly been sequestered in the Treasury Single Account) is enough to raise the indicator to more than 70 per cent of GDP.
And so, the Federal and State Governments have clung to unpatriotic policy measures meant to perpetuate corrupt self-enrichment of the political elite while rendering uninvestable behind prohibitive interest rates domestic bank credit capacity proportionally in excess of 50 per cent of GDP to the disadvantage of the national economy but simultaneously to the benefit of foreign economies where they go to contract foreign loans and beg for FDI. It does not make a rational economic choice for the Buhari administration to pin hope for economic recovery and national prosperity on FDI when the FDI indicator since 1999 has been a negligible 5.5 per cent of GDP or less annually relative to expandable domestic finances currently exceeding 50 per cent of GDP but which deliberate federal policies have rendered inaccessible.
This newspaper has for over one decade pointed out repeatedly that the flawed handling of Federation Account oil proceeds and the attendant response with tight and contractionary monetary policy stance are to blame for not only the above oddities but also the accumulation of humongous non-investable national domestic debt for the unmerited enrichment of banks, preying foreign portfolio investors and few individuals, among other problems. Unless and until President Buhari directs the CBN to implement across the board its proposal on August 14, 2007 to reverse the improper treatment of Federation Account dollar allocations, which was arbitrarily overruled, the economy will remain in the woods. And pending that directive, any presidential orders such as stopping further naira devaluation is inconsistent as it will not stem naira depreciation with associated compounding economic distortions. That order may be likened to attempting to stop black smoke rising from a kitchen where damp faggot is being burnt to cook.
Having already sat out nearly six months of his four-year mandate, President Muhammadu Buhari should now hurry and embrace sound economic policies in full awareness of the normally lagged economic outcomes.