Truth of Recession Explained: 10 Steps To Fix Nigeria’s Economic Crisis
Nigeria needs to rapidly apply solid solutions to rescue the nation from its current recession. Millions have lost their jobs – 4.6 million according to the national statistics bureau – and millions more are suffering severe hardship and dying and at risk of death. The further down Nigeria sinks, the steeper will be the climb out of the hole.
Sadly, most of what we read from so-called economic experts is advice for the Nigerian government to consult them or others to address the economic recession. None of them has opened up in the public space, if they have the ideas, and proffered the solutions to the current economic quagmire. They keep talking like it’s some sort of riddle and as though Nigeria is not their country and they are not part of those who got the nation where it is today. Indeed we are all responsible, but most especially those who have been in governments in the past; however blaming is disingenuous and counterproductive. What Nigeria needs now is solutions.
The solutions for an economic recession, if it can be solved, are not private or secrets of any kind. This is why anyone who keeps it a mystery does not have anything good to offer. The U.S. recession was solved with simple open processes including for a big part, the “2009 Stimulus” [the American Recovery and Reinvestment Act of 2009 (ARRA)].
A few “solution” comments I have read which include, flooding the economy and diversifying, are palliative and long-term and not to address the fundamental, acute and chronic issues that are not peculiar to Nigeria. While I am not an economist by training, as an educated Nigerian with preservation of my nation at heart, it is my duty to contribute my researched analysis on the solutions for the current problem(s).
How Did Nigeria Get Here?
While the Obasanjo and Jonathan governments definitely played a major role in getting us here by selling (Obasanjo privatization frenzy) all of Nigeria to cabal and looting all its earnings, it is counterintuitive to keep blaming them. The truth is that there is more to this recession than the tens of billions of dollars they and their private cabal partners looted and the infrastructure they failed to build. We must recognize that the recession is not limited to Nigeria. Venezuela is feeling it too; even Saudi Arabia is laying off workers in the thousands.
Two global factors played the biggest role in bringing on this economic famine.
The first was the Saudi oil war-games. By pumping oil at above quota, Saudi Arabia single-handedly determined to crash oil prices and punish all oil producers. Saudi pumps oil at under $10 a barrel which makes low prices still profitable for them, unlike Nigeria where the Obasanjos, Babangidas and other semi-intelligent, money worshipping lowly organisms exploited the country permanently with deals that produce our oil at as much as $33/barrel. Low oil prices, with oil being Nigeria’s mono-economic singular export, naturally crashed the Naira. Unfortunately when teased during an Al-Jazeera interview, President Buhari said he will never challenge Saudi Arabia on the kingdom’s crippling decisions and will not even dare threaten to pull out of Saudi-run OPEC in order to push for Nigeria’s survival. So we are stuck here as far as oil prices go.
The second factor that really triggered this recession, most specifically, the tissued Naira was a U.S. decision made public – and thus, operative– as early as March 2014, to increase interest rates. Floating this decision alone caused investors to buy-up the dollar and through 2014 before the rate was even increased, the Benjamin appreciated the most it ever had in a decade, rising as much as 12% in value that year alone. Naira crashed as did Cedis and other currencies. By December of 2015, the U.S. Fed finally increased interest rates to between 0.25 and 0.5% and the fortunes were sealed. The Dollar continued to appreciate, investors in the U.S. would get more money on their bank deposits and mortgages would rise. The rates are on course to further increase to about 0.875% in 2016. It’s summer for the dollar and winter for the Naira.
It is important to always compare what is happening in Nigeria to peer nations. Our analysts compared the changes to the Naira to the Cedis. Like the 2012 fuel subsidy removal which was not a puppet Jonathan thing per se but a mandate from the IMF as we noticed that the same subsidy was removed across West African nations at the same time on the instance of Lagarde, so also the Forex crash has been virtually identical in Nigeria and Ghana. While the Cedis dropped over the past three years under highlight, gradually, reaching a 1:4 value from the initial 1:1.7 it was in early 2014 post revaluation, the Naira was artificially retained at an inflated value and crashed in one swoop, also downgrading from about 1:160 to 1:425. Both have crashed the same proportion.
Bearing this in mind, next are frank solutions to Nigeria’s recession:
1. Actual Devaluation of the Naira
Why is there a black market, BDC in Nigeria? Why does the country have two dollar rates? This is supervised corruption and main reason why the Naira remains in free and turbulent fall.
Central Bank, CBN’s Godwin Emefiele continues to play games with Nigeria, refusing to fully devalue the Naria. A rate duplicity is maintained with the current interbank dollar rate at N305 while the parallel market sells this at N425. This dual rate is corruption and set up to favor the cabal who have been dashed billions of dollars via CBN subsidized dollar sales. Godwin and his friends are able to make N115 on every dollar. The dual rate also maintains a competition for dollars which hikes the price at the parallel market with rebound effects on the interbank rate. A recent Reuters article highlighted how corrupt governments-made billionaire Aliko Dangote was literally dashed $100 million in just over two months of Buhari’s tenure in review. Extrapolate that to a year and you get a total gift of as much as $500 million dollars.
Nigeria can only come out of the recession if the Naira is truly devalued, and there is no longer pressure on the BDC (Bureau de Change). While the federal government of Nigeria is seeking a $1 billion Eurobond, it has within the same period dashed Dangote half a billion dollars in the span of a year and the cabal as a whole some several billion dollars in subsidized forex for their personal ventures while small businesses were shut out to die. This cannot continue. As Senator Ben Murray-Bruce said, the central bank is for all Nigerians and not only the cabal.
2. Recover Nigeria’s USD Billions And Do Not Borrow
The Federal government of Nigeria should not borrow money. It has no need to do so as this has no long term benefit. Rather the Buhari government should employ the services of Nigeria’s best lawyers including Attorney Femi Falana to exigently go after the more than 100 billion recoverable dollars Nigeria has abroad and with bailed-out local banks.
Falana explained in February of this year, “From the information at our disposal, the federal government is owed not less than $66.5 billion (about N13.3 trillion) which ought to be recovered without any further delay…In addition, following the crisis of global capitalism… in 2008, the Central Bank of Nigeria gave a bailout of $4 billion (N600 billion) to the commercial banks in the country… The CBN has not deemed it fit to ask for the refund of the total sum of $11 billion injected into the banking system…”
With the right legal maneuvers, Nigeria can immediately secure several billions of dollars in hard cash air lifts, just like Iran recently is reported to have. Nigeria must face its challenges from a position of power and not one of defeat. He who goes out with a begging bowl lives to tell a sorry tale. There are ways to twist arms and repatriate moneys rapidly. Every tool must be used.
Delete security vote: It must be mentioned that waste must be cut in the government. The security vote must be cut both at the federal level and at state levels. This runs into trillions of Naira mostly wasted or used to finance political, hate and terror campaigns including to pay for media attacks of individuals and groups which continue to promote deadly strife in Nigeria.
3. Take Advantage of the Devalued Naira
If it can’t be a win, win, it doesn’t have to be a lose, lose. Foreign investors are leaving Nigeria not solely because of the devalued Naira, but because of the government posture. Whereas, the crash of the Naira as all economic predicaments, should be exploited to Nigeria’s advantage with aggressive marketing of the opportunities for investors but most importantly with a strong government posture; the shaky and uncertain body-language of Buhari and his cabinet are making a double loss where there should be gain. This is the time for foreigners to invest dollars in Nigeria, most especially in its vast natural resource opportunities. A dollar goes 250% further than it used to.
Now is the time to set up quarries, to invest in mining, farming, fishing and other available opportunities in Nigeria. Now is the time to build and own estate. But why are foreign investors not coming? It is time Nigeria hones in on the opportunities of the low Naira by assuring of security of investment for foreign entities and governments. It is time Nigeria showed confident and eager leadership. We should at least turn it around into a lose, win, situation.
4. Scrap Import Ban List, Open The Market
The CBN’s import ban list has been described as a sham that has always been prompted by the cabal, the likes of Obasanjo and Dangote who typically institute these bans on products Dangote and other cabal manufacture. The import ban lists have always been set up in Nigeria’s history to promote the oligopolies of the cabal. Late Umaru Yar’adua opened the markets and prices fell. He dared to “disentangle” Obasanjo and Dangote till he was killed.
It is poor economics to force dependence on a monopoly. This is why the rich get richer in Nigeria and the poor get poorer till there is chaos. Former CBN governor Charles Soludo has lambasted this policy. It is highly fraudulent and reeks of corruption.
You cannot invite investors and expect trade cooperation while you lock out goods to promote a certain exploitative cabal. In spite of successive government promoting the same cabal, Nigeria buys cement at the highest global prices, at least double the world average. Nigeria’s “.ng” domain name sells at $100/year by these same Obasanjo-related cabal, the highest cost in the world. Virtually every product the Nigerian cabal are assisted to have monopolies on end up exploiting the masses and put money in one pocket only – the cabal’s. Markets can grow on open competition. The cabal must be encouraged to be competitive and not “it’s so much it’s like voodoo money” exploitative.
5. Lower Interest Rates And Promote Small Businesses
Small businesses employ as much as 80% of labor. As small businesses are being killed, there will continue to be mass unemployment, no purchase power and economic recession. The current CBN policies are tailored to corruptly give undue advantage to the cabal and to exterminate small businesses. While cabal buy forex at CBN subsidized rates, small businesses get none. Small business entrepreneurs have limited access to loans and when they do, they get them at unreasonable interest rates.
The federal government must immediately create alternative sources of capital for small businesses. The cabal utilize stashed loot and launder money for former administrators to run their businesses while small businesses are forced out of existence. It is better the Buhari government supports 1000 micro industries than it supports one cabal company. Cabal must be properly taxed and the taxes used to build small industry. Rather the Nigerian government currently taxes the small people to give to the cabal who further exploit the small people with highest prices in the world for goods and utilities.
The cabal have been bailed out numerous times and given waivers and dashed subsidized forex while all governments including the current fail to bailout small businesses. Interest rates must be lowered and government cash must be pumped in an organized and supervised fashion at SMEs (small and medium enterprises). Local fruit juice companies, local chemical factories, metal works, parts plants, recycling plants, solar panel assemblies, mushroom refineries and the like must be encouraged by the government aggressively and immediately.
6. Promote And Standardize “Made In Nigeria”
It is past time for a #MadeinNigeria culture. But this must be more than just a slogan. There are reasons why Nigerians do not patronize made in Nigeria goods. These include reliability. The Federal government must update the standardization boards. All manufactured goods must have warranties that are enforced, with customers being 100% protected by the government. Nigerians should be able to see the warranty label and know that it is backed and protected by law. Failure of companies to fulfill the warranty must be treated seriously as a crime with the companies being immediately shut down and the customers compensated.
Furthermore the ministry of industry must certify products. Product certification in China has boosted the country’s manufacturing sector as its goods are better regarded in global as well as local markets. Nigerians need this assurance as do potential foreign markets where Made in Nigeria goods can be sold. A portal with licensed manufacturer names and information must be available online through which goods and parts can be sourced and Nigerians companies’ accreditation by the government can be reviewed.
Only the federal government has the capacity to develop piecemeal manufacturing where parts of products are made by various small manufacturers and then later combined by other small enterprises, i.e. “division of labor.” The government must do this. The importance of the government recognizing and promoting small entrepreneurs as it currently only does the cabal can not be overstated. The government must set-up to be the link between small piecemeal manufacturers and the market.
It is time for the federal government to actively promote, support and protect a Made in Nigeria culture.
7. Naira: Think Strength Of The People, Poor Economics
Forget strength of the Naira. Think strength of the people. When the people are strong the Naira will get strong; when the people are weak, the Naira will be weak. Nigeria must forget about its Moody rating. Countries have endured tough sanctions and come out superpowers. This is not even sanctions. The Federal government of Nigeria should put the cap on people suffering and dying and not the Naira devaluing. Pull reserves if needed to strengthen the people.
The Naira will continue to drop when the government gives a single cabal $500 million dollars in 12 months then seeks to borrow $1 billion for the entire nation. This corruption makes the people weak and the Naira weak. The Naira cannot appreciate when the Presidency hugs 10 wasteful presidential jets. The people will not be convinced. The people will not have strength, sacrifice and patronize when Lai Mohammed walks in, clad in a loud diamond-sharp starched agbada, to advertise “Change” a slogan copied from Obama, and the President reads more words copied from Obama. And the Naira will not be strong. The Naira will be as weak as the weakening people when they see the circle of power sporting $40,000 watches and $100,000 bags. This government must be serious about change, or/and must immediately partition the country into pieces that will have the chance to as serious as is demanded, and to compete which each other in this.
Contrary to what capitalist economists say, the strength of the economy and currency is determined by the strength of the people and not the other way around. We must study economics for the poor and not always the predominant hegemonists’ brand of economics. Economics of the wealthy has not worked anywhere. Europe is in a perpetual recession even after deriving and the continued derivation of billions from the exploitation of Africa. America today is trillions of dollars in debt in spite of the slave trade and colonisation largesse and continued military economic escapades around the world. The late Thomas Sankara believed in and built the capacity his people. The results were shocking and immediate. We have already wasted the first year and a half of this administration building only the corrupt cabal, it is time to build the people. The Naira will follow.
8. Never Again Use a Banker As CBN Governor
Remove Godwin Emefiele and never again use a banker as CBN governor. Each of the times Nigeria appointed bankers as CBN governors, they built the banks and cabal and extinguished the masses. It is a clear conflict of interest to put a banker with vested interests and friends in the banks, as head of the Apex bank. That is like putting a wolf to protect your chickens.
With the two famous recent banker governors, crippling bank charges and fees were added upon each other to fund the banks and drain the masses in a continuous and progressing ponzi scheme. Some policies were more directly exploiting than others, but all gave the banks many free passes to make earnings off of the poor masses with no value added to the Nigerian economy. And these were done while the cabal were given humongous loans on hand shakes and billions of dollars gifts in subsidized forex. As I wrote July this year, “Recession: Nigeria’s Economy Cannot Improve So Long As Godwin Emefiele Remains In Charge.”
9. Strengthen And Decentralize The Police
Insecurity has cost Nigeria billions in economic loses from the northeast, now a humanitarian catastrophe and a drain to the economy, and continues to do so in the Niger Delta. The fastest and best solution to the continuous breakdown of law and order is stronger and local police. The Nigerian army has no role in domestic maintenance of law and order and as it continues to unconstitutionally police the state, it gets involved in more violations and provokes more deadly crises as it has done in the past. The army is not trained in investigating and arresting. It has no training in disbursing riots and protests and presenting cases to the court. The Nigerian constitution reserves its use as a back up to the police and ONLY when and if approved by the national assembly.
There is no economy without security and there is no security without a police command that has capacity and understanding of the region. Nigeria will not be serious about economic recovery till it returns the army to the barracks and builds police capacity.
10. Find A Vision For Nigeria
I do not know the vision of Nigeria so far and if the current government has one. What does Nigeria want to be? We know the vision of Dubai and Dubai took itself there. Does Nigeria want to become a tourist center? Does Nigeria want to become the West and Central Africa central manufacturing capital? Does Nigeria wish to become the food basket of Africa? Does Nigeria wish to become the information technology capital in the world? Or does Nigeria wish to become a combination of these or some of them and others?
It is important a central vision or visions for Nigeria is developed and Nigerians are made cognisant of this vision for the future of the nation. Let’s know where we are going so every one can pick an oar and row in consonance. Today we just hear that the new administration wants to build a country, but what country will that be? It is OK to just build a country, but it is better to build a country with a particular primary vision. The world is moving away from careers as we know them. Soon all jobs will be taken over by machines, even medical jobs are at risk. Nigeria can choose a vision that places it at an advantage in the future that has already begun.
Nigeria will survive by God’s grace.
Dr. Peregrino Brimah; @EveryNigerian