We saw it coming…if only we were listened to!
In times like this, where are the erudite economists? This piece, I must confess, was motivated by an earlier piece by Franklin N. Ngwu, an Assistant Professor of Finance in a UK university, titled “The Untapped Solution to our Economic Crisis” in The Guardian of April 13, 2016. Commenting on the on-going debate over whether or not naira exchange rate should be devalued, he stated that “the most surprising is the demand for further devaluation of the naira, especially by our so-called erudite economists, obviously neo-liberal textbook economists.” He went further to advise President Muhammadu Buhari to set up a Council of Economic Advisers, headed by a thorough-bred economist “with an unconvincing (sic) inclination for home-grown solutions.”
If by erudite economists we mean academic/research economists with deep knowledge of the subject who constitute the Nigerian Economic Society (NES), I am not aware of any who has advocated for devaluation in recent months. For the record, NES has consistently prescribed and advocated evidence-based policies for growing and diversifying the production base of the economy.
On the issue of naira exchange rate, NES’s position was articulated at a meeting with the Managing Director of the International Monetary Fund (IMF), Madam Christine Lagarde, during her visit to Nigeria on January 5, 2016. In her interview with The Guardian on the eve of her visit, the MD, among other issues discussed, had advised that “where possible (the Naira) be allowed to depreciate.” At the meeting, I, as NES President, submitted that in determining whether and when it would be possible or advisable to devalue the exchange rate or allow it to depreciate, there would be the need to take into account prevailing import and export fundamentals of the country. Non-oil exports accounted for 7.4% of total exports, manufacturing exports accounted for 3.4% and agricultural exports for 3.00% in 2013 and 2014. Meanwhile, import elasticity is -2.00, with weighted average of -1.32 and standard deviation of 11.40, compared to say, Ghana’s -1.52, -1.09 and 4.32 respectively.
With fundamentals such as these, the Nigerian economy does not stand to benefit in any significant way from cheaper export price that may be occasioned by naira devaluation, and rather would be hurt by expensive import prices. The MD then asked me what should be the exchange rate policy and whether available reserves should continue to be exhausted on defending the Naira. In my reply, I suggested a managed float exchange rate policy with bands on either side. When the MD suggested the band should be wide, NES’s position was that a wide band was as good as devaluation, and as such, it should be a narrow band, say ±0.5 – ±1.00. It is assuring that this has more or less been the position taken by President Muhammadu Buhari and the CBN.
Beyond the exchange rate issue, NES has consistently used its annual conference, seminar, public lecture and presidential address platforms to prescribe workable policies borne out of detailed empirical evidence. Take the annual conferences, after which a communiqué and policy briefs are issued, the need to diversify the economy away from oil was the subject of the 1983 conference, with the theme “Diversification Strategies for Economic Development.” NES had foreseen the dangers lying ahead if Nigeria did not move away from its mono-cultural path. The call was re-echoed in its 1985 conference which was on “Fifth National Development Plan and the Restructuring of the Nigerian Economy.” There was sufficient evidence to call for urgent economic restructuring away from oil and into agriculture and manufacturing.
Concerned that little was done to heed its earlier submissions, NES returned to the issue of diversification via industrialisation in its 2004 annual conference on the theme “Challenges of Nigerian Industrialisation: A Pathway to Nigeria Becoming a Highly Industrialised Country in the year 2015”, and its 2011 theme on “Planning and Transformation of the Nigerian Economy.” These issues have gained new currency now that the economy is seemingly at a crossroads as to which way it should go. Professor Akpan Hogan Ekpo in his Presidential Address to NES in 2008 anticipated this when he asked: “The Nigerian Economy: Is it at the crossroads?” Perhaps if Nigeria’s past governments had not squandered the opportunities offered by oil wealth, Akpan Ekpo’s prognosis may not have been necessary.
In a similar vein, perhaps the crisis in the Nigerian oil industry which was long foreseen by Chief Phillip Asiodu in his Presidential Address in 1979 may have been averted if his “Nigeria and the Oil Question” had been taken seriously. The cross-roads over the petroleum industry bill would have long been prevented.
After naira exchange rate, an issue most debated in Nigeria today is the problem of unemployment, particularly youth unemployment. In its characteristic pro-activeness, NES tackled the issue in its 1986 annual conference, themed “Unemployment and Underemployment in Nigeria”, and “Employment Generation in Nigeria” in its 2006 Conference. Professor Joe Umoh still dwelt on this issue in his 2007 Presidential Address to the Society titled “Moving Nigeria into The New Economy: A Human Capital Perspective”. It is assuring that government intends to adopt Keynesian reflationary policy by injecting N350 billion into the economy as payments to contractors. More interesting is the intension to tie it to job creation. According to the Minister of Finance, contractors would be evaluated on how many jobs are to be created through the allocation. A policy of tying fiscal incentives to job creation was among the submissions in the aforementioned conference themes. Inspiration for the submission was drawn from James McLure Jr. (1974) who had advocated the policy as a way to tackle emerging unemployment problem in USA and Europe in the early 1970s.
Frequently, one hears people say Nigeria does not lack policies but lacks implementation of such policies. NES in a reflective perspective addressed the issue in its 1997 annual seminar with the topic “Why Economic Policies Failed in Nigeria.” Central to the prognosis was the issue of governance. Today, it is globally recognised that corruption has virtually destroyed the potentials for Nigeria to migrate into first world, despite all the promises which led Peter Kilby (1969) to have predicted that Nigeria would become one of Africa’s three most industrialised economies in less than two decades. The harm Nigeria would suffer by poor governance had been diagnosed and advised against more consistently by NES since the early 1990s. It was the subject of its seminar in 1994 which was on “Governance in Nigeria”, an issue in Professor Mike Obadan’s Presidential Address in 1998 on “The State, Leadership, Governance and Economic Development”, its Public Lecture in 1999 on “Public Accountability and National Development” by Professor Sam Aluko, and its 2004 Public Lecture “Towards a Re-Birth of Nigeria’s Economic Development” by Professor M. O. Kayode.
Undaunted by all these, NES will further address this state of the nation in its 2016 Conference theme, decided in October 2015: “Developmental State and Diversification in Nigeria.” Countries that have successfully migrated from third to first world were able to achieve the feat through adoption of developmental state development trajectory. South Korea, Indonesia and Singapore are notable examples.
Nigeria must rise to move to the first world through inclusive development and not merely by rebased gross domestic product.
• Aigbokhan is President, Nigerian Economic Society and Vice-Chancellor, Samuel Adegboyega University, Ogwa, Edo State. e-mail: firstname.lastname@example.org
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