Economy: Undo Buhari’s sealed failure (2)
WE have just seen the extent to which CBN’s ‘long-throat’ for public sector oil proceeds (which have been replaced with freshly printed naira funds since 1971) has severely stunted the economy.
Secondly, the claim by the fiscal and monetary authorities that freshly printed naira funds furnished by the apex bank were/are the equivalent of the withheld FA dollar allocations stands debunked.
By the same token and in truth, the debunked legacy rule makes the three tiers of government to run a CBN-financed combined annual fiscal deficit level that is proportional to the withheld FA dollar allocations over and above any additional fiscal deficit incurred by other means.
Thirdly, it is erroneous to describe the Nigerian economy over the past 40 years as oil revenue-driven because the more than 50 per cent contribution of oil proceeds on paper to the annual budgets was actually proportionally replaced by CBN deficit financing (excluding any additional deficit incurred).
The Nigerian economy, therefore, has over the years been made over-dependent on fiscal deficits substituted for oil receipts and deficits otherwise incurred. Year after year, actual fiscal deficits exceed 3.0 per cent of GDP and consequently were excessive.
The unyielding hostile economic production environment is enough proof of the economy’s over-reliance on excessive fiscal deficits.
Fourthly and by way of further elucidation, the unwillingness of the fiscal and monetary authorities to correctly infuse the oil export proceeds into the economy persistently created problems that are associated with a revenue-deficient economy such as excess liquidity, high inflation, uncompetitively high lending rates and unrealistically valued weak and sliding domestic currency.
The immediately preceding feature, for example, has provided the perfect excuse for the Presidency acting through the CBN to corruptly dissipate the withheld FA oil earnings in the name of defending the value of the naira and to pander to anti-economic activities.
But how come it is lost on economically shortchanged and cheated Nigerians that it is antithetical that their economy which, in the first place, is awash with oil export proceeds to the tune of over 50 per cent of the annual budgets on paper (not to mention supplementary healthy inflows of autonomous forex) should become forever preoccupied with defending the domestic currency from constant loss in value?
Is it not axiomatic that inordinate printing of a country’s currency or excessive fiscal deficits precipitate currency free fall? Therefore, is it not self-explaining that growth if and when it occurred at all, has been non-inclusive?
To end the self-inflicted contradictions, the Presidency should discontinue the substitution of deficit financing by the apex bank in favour of the appropriate conversion of FA dollar allocations by means of the managed float system to non-inflationary naira revenue for the budgetary spending by the tiers of government.
According to a CBN letter of 29/11/2002, out of suspicion by an apparently super patriotic national leadership that the tiers of government would abuse FA allocations in raw forex, the CBN has been withholding FA dollar allocations. But from this discourse, the end product is illegally substituted excessive deficit financing for oil receipts with its adverse paraphernalia.
Yet, gathering dust on government shelves since 2001 is the solution that has been in the public domain: it meatily canvasses superiorly as follows: Leave FA dollar allocations in the apex bank vaults in order to forestall their abuse and corruption but credit forex notionally to FA beneficiaries’ domiciliary dollar accounts.
The notional domiciliary dollar account balance statement should serve as a dollar certificate for forex transactions in any deposit money bank of their choice.
Further reinforced by requiring strict documentation of any forex allocation converted to naira revenue or expended on government business, the managed float system will prune the actual fiscal deficits (which are self-servingly not officially fully acknowledged) by about 10 per cent of GDP annually and thereby restore the officially intended limits.
Only then will the contribution of oil receipts to the budgets on paper cease to be mismanaged and to stunt progress in reality and begin to impact commensurately on the economy.
Fifthly, it is incontrovertible that Nigeria’s contribution to economic history is to hoist signally the futility of sidetracking tested economic practices and principles through apes-obey or improper handling of export receipts.
Nigeria’s 40-year economic record presents a case study in how substituted excessive fiscal deficits in place of genuine revenue from export proceeds not only waste a country’s ample human and natural resources but also make impossible the actualization of its economic potential.
During the past 16 years under the democratic dispensation (more than half the time that Singapore took to move “From Third World To First”, oil export receipts rose to the highest point ever but the inverted economy (no thanks to excessive fiscal deficits) did not experience commensurate, talk less a multiplier, improvement.
The economy is in the throes of death. In an economy that is already steeped in unacknowledged cumulative government debt topping 100 per cent of GDP while lapping additional public debts of 20 per cent of GDP, the plan in the APC Manifesto to raise yearly public spending to 30 per cent of GDP over and above what the Buhari administration met (with extra fiscal deficits forming the bulk) over the next four years is likely to exacerbate rather than reverse the prevailing adverse economic conditions.
To practically seek to induce in post-2015 Nigeria the calamitous 1930s German-type or ruinous 2000s Zimbabwean-type domestic currency meltdown will be reckless indeed.
The earlier cited prescriptions Nos. 1-4 for the country’s chronic economic illness, which were openly addressed to the Jonathan administration and the country, still remain the essentials that will save Buhari from sinking deeper into the economic quagmire.
The reality will immediately dawn that “Nigeria is rich and does not require foreign aid” to finance rapid economic growth and development as the Nigerian authorities are often reminded by Western countries. • Concluded • Mr. Ojomaikre is a Visiting member of The Guardian Editorial Board. Email: firstname.lastname@example.org
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