By Dr. MK Hassan
With the global financial crisis of the 2008 driven by the collapse of the US housing market , world leaders and economists were debating policy prescriptions to revive their economies. There were all sorts of economic theories and ideas advanced from different schools of economic thought. There were economists from the Keynesian School that said what was needed is to increase spending in a downturn economy which will stimulate consumption and production. Believers in Miltonian School of Economic Thought said the solution is cutting taxes and reducing government spending to revive the economy. Economists from Austrian School of Economic Thought believe it is too much regulation and government intervention, therefore to get the Western economies back on track, they said less regulation and government interference was needed. In Nigeria, Ngozi Okonjo Nweala, an MIT PhD trained Economists, a former MD of the World Bank has decided to throw away her much-cherished credentials and experiences to transform to a founder of a new school: The Otuokean Economics School of Thought, to deal with our Nigeria’s daunting economic challenges.
The Otuokean Economics School of Thought is an interesting one that embodies the failed economic policies of the PDP government in the last six years promoted by Goodluck Jonathan. This school of thought derives its name from a village called Otuoke, the hometown of President Jonathan, in Bayelsa State. The first and center piece theory of this new school is “The Blame Game Theory”.The concept of blame game theory is similar to a village market woman blaming all her non business prospects on others instead of her failed market strategy.
To Ngozi and the PDP Government, this dramatic fall in oil prices was unforeseen. Ngozi knows that is not the case, but in her current field of expertise of the Otuoke Economics school of thought, it has to be so. All other Economists including Ngozi, knew that the Quantitative Easing (QE) that has been going for the last 5 years by the US Federal Reserve, and currency manipulations in Japan and China would come to this: A fall of commodity prices including oil. This is exactly what is happening. The moment Janet Yellen, announced the end of quantitative easing late October and the plan to raise interests, the global oil market started responding appropriately.
For most of us that do not know what Quantitative Easing is, in simple terms it is just a way of increasing money supply (printing money) by issuing bonds to investors and banks by a central bank. The US Fed reserve kept interest rates low at below 1 percent for almost 5 years to enable the US economy recover, and issued bonds running to trillions of dollars. During this same period because of increase in money supply, the prices of commodities including oil went up due to excess liquidity in banks and stock markets. It was a great period for our dear country except that our economic manager allowed our excess crude and all earnings to be squandered, while showing up on TV with wide smiles stressing how the fundamentals of the Nigerian economy are so strong. This is only possible from an Otuokean perspective. As the exchange rate of Naira continues to slide, her only solution is to ‘blame’ the Governors for insisting that excess crude account revenues be spent. She forgot that she is not only the Minister of Finance, but the Coordinating Minister of the Economy, whatever that means.
It is interesting that Ngozi found it necessary to warn Nigerians of the dire straits the economy is going to be only few months back.. It should be obvious to every layman economist what the consequences of the end of quantitative easing will be on commodity dependent economies like Nigeria. Our situation will have been more manageable if not for the fact that the missing billion dollars from the central bank is what is needed now to defend the Naira. Unfortunately, that the money is unaccounted for, we are now faced with a painful scenario of devaluing our currency which implies indirect taxation on the masses.
It is of course not only the Quantitative Easing that is responsible for the fall in oil prices. There are issues of excess supplies in the market due to shale oil production in the USA, and additional oil coming to the market from Mexico and Canada etc. There is also low oil demand in China and EU due to sluggish economic growth. However, our problem in Nigeria is the mismanagement of our oil revenues and the massive stealing being ‘coordinated’ . The Finance Ministry has failed to do a good job of tracking commodity prices, global oil production, and its impact on our economy over the years. There are no serious policy briefing and research papers on what is likely going to happen after the period of oil boon. The only thing Ngozi kept saying is the ‘fundamentals of the economy are strong’. I heard her say that it is a dangerous job to forecast oil prices, I would have to remind her that it is not dangerous, it is a lucrative job on Wall Street. Gary Cohn, President of GoldMan Sachs Group Inc, is forecasting oil prices may hit $30 per barrel in the coming months:http://www.bloomberg.com/news/2015-01-26/goldman-sachs-s-cohn-sees-oil-falling-to-30-in-extended-slump.html Madam Finance submitted our budget with a benchmark oil price of $65 dollars to the National Assembly. How is the budget going to work this year? Are Nigerians going to vote for this incompetent Government for four more years?
With the falling oil prices and the massive looting that has taken place, Nigeria will have to be loaded with debt again as the only way to finance Nigeria’s budget deficits. There are reports by Bloomberg News of the Government plans to borrow money from the bond markets to even pay Police allowances before this election. http://www.bloomberg.com/news/2015-01-27/nigeria-borrowing-won-t-come-cheap-as-cops-want-salaries.html. This is very serious. I hope the policemen will not allow themselves to be used to rig this election. It is possible that after the elections, the police may not get their salaries for months to come: use and dump tactics. Because of the poor state of the nation finances, the yields on Nigeria’s bond is 7.58 percent, compared with 6.82 percent of Ethiopia today.What that means is that Investors have more confidence in Ethiopian Bonds than our own, and so we have to pay more interest to borrow money. Very sad indeed! Nigerians are waiting for the audit report regarding the missing 20 billion dollars. If the PDP goons will not allow the report to come out, I think the most honorable thing to do for the Finance Minister is to resign and move on. This Government is not interested in solving Nigeria’s economic problems. Jonathan and his cronies want four more years of continuous looting even in the face of dwindling oil revenues and hardship for ordinary Nigerians.
The second theory of the Otuoke school is the “Sharing Theory” which was formulated by our retired Permanent Secretary from Bayelsa, Mrs Patience Jonathan. From sharing of excess crude oil revenues, to sharing of the fuel subsidy to marketers, to sharing of electricity assets to party loyalists, comes the ultimate of all sharing: the “blood they have been sharing who ever they are” as she said. Chai Chai there is God o!. In Otuoke Economics, it is all about “Sharing”, which is a fundamental concept that drives the Government and it has bankrupted Nigeria. The finance minister is presiding over sharing and sharing and sharing…Suddenly then the Government after stealing all the money, came up with a crazy idea of raising taxes on businesses, and import duty on goods. There is no new innovative way to drive the economy and diversify the revenue base despite our agriculture and minerals potentials. In 2008, I experimented on the value of our mineral resources. I was told that there was a mineral stone of value in Nasarawa State, it is called Tourmaline which is used in making really expensive jewellery. I decided to buy a small piece the size of my fingertip, and I was told to pay fifteen thousand naira (about $100 dollars). I thought the gemstone was expensive, but because I wanted to understand the market, I paid the young Geologist to get it and send it to the USA. I made an appointment with a Professor of Mineralogy so that I can learn about the gemstone. He told me to come with my gemstone for him to explain what it is and figure out its value. I went to his office, sat down and brought the gemstone out. The next thing he did really surprised me; He went straight to a hidden safe in his office, opened it and brought out the same kind of gemstone, a little bigger than mine, polished and cut to shine. He told me the gemstone was a donation to the Geology department by an alumnus, and the price written on it was $3500! Not only that, the stone’s origin was Nigeria ! Now that oil price is falling , is the price of gold not going up? Don’t we have Gold in Zamfara and Ilesha, and what have we done with the deposits over the years?
The third theory from the Otuoke School is a shocking display of indifference and open support for impunity : “The Stealing is not Corruption theory”. Who is in a better position to advance this new theory than the Dean of the School? The President strongly believes that corruption should not be punished, and he is on the campaign trail saying it shamelessly. We have massive cases of corruption such as Malabu Oil deals, Stella Oduah’s bullet proof jeeps, fuel subsidy fraud, immigration recruitment scam, etc that have not been logically and seriously dealt with. Why is it so? It is the president’s philosophical disposition to corruption. The consequence of this is GEJ has presided over a period of oil boom never witnessed in the history of this country, but ironically all the economic indicators have deteriorated considerably. The unemployment rate is up, Poverty levels are up, Our growth rate is not commensurate with the revenues we have earned, and our domestic and foreign debt profiles are rising. While the PDP campaign is lying that Nigeria is the third fastest growing economy according to CNN at 7.3 percent, the IMF stated that our economy is going to grow this year at a lame 4.8%, the slowest in 8 years: http://www.imf.org/external/pubs/ft/weo/2015/update/01/pdf/0115.pdf. The presidential campaign is all about lying.
Otuoke School of Economics has turned all well known and tested economic theories upside down. It has stood economics on its head, and it is standing Nigerians on their heads too. Presently, the exchange rate of Naira to Dollar is about 210 Naira at the global oil price of $45. Oil prices are likely going to keep falling to $30 per barrel, the question is how much devaluation of Naira will be enough? Probably 250-300 naira per dollar. Reuters is reporting that the biggest bank in the world, JP Morgan, says it could remove Nigeria from the key bond index it manages because of a lack of liquidity in the African country’s foreign exchange and bond markets in the next 3-6 months http://www.reuters.com/article/2015/01/16/nigeria-bonds-idUSL6N0UV2DH20150116. What this signals is that in the next 3 months our Naira will have less value, and we are going to have less reserves that our own foreign reserves banker wants to drop us from their index, as in we do not matter anymore to them. The Otuoke Economists have destroyed our economy and kidnapped our Naira. Unless one is a beneficiary of the missing billion dollars Sanusi was talking about, I do not see how voting for the continuation of these failed policies will benefit us as a country. To vote for continuity of these, is choosing to walk with your head and not legs for four more years! The pains and awkwardness of such a walk is better imagined. That is why we need CHANGE!
Nigerians cannot continue with this Otuokean Economic theories and their painful prescriptions. Nigerians were suffering even when oil was selling at $118 per barrel and above in the international market. Now that oil is at $45 and may continue to fall to $30 dollars as speculated, what is going to happen if we continue on this path of mismanagement and looting? We need a new Government of APC that will retrieve our stolen billions of dollars which can be used to defend the value of Naira, and restore our economic glory. The great singer Fela, sang about double wahala for the dead body. It is double wahala for Nigerians to be robbed billions of dollars of oil revenues, and then be asked to pay taxes in form of currency devaluation to the robbers. Nigerians will say no to this bitter economic prescription by voting out PDP and its Otuokean economics experts on February 14, 2015. We have a choice to make: Walk with two legs on election day, and vote out an incompetent Government with our PVC or start learning the balancing act of how to walk upside down with our heads for four more years just like the economy is. Prof Soludo, rated this Government F9 in handling the economy, but the issue is beyond a grade, it is about professional malpractice and mismanagement of an economy of a population of 170 million people, and that deserves some jail time too. We are waiting and praying that they bring back our kidnapped girls. It is clear to all that based on the mismanagement of this economy, the value of the Naira has been kidnapped too. The economy kidnappers should bring back the value of the Naira because the consequences of continuous devaluation of the Naira and looting of the treasury, is sentencing more Nigerians to slow dead.
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