The Presidency — By Prince Emeka Obasi
Business Hallmark Newspaper, September 14–21, 2009

Last August I wrote a frontpage editorial in National Mirror Newspaper, which I used to publish, calling on the Federal Government to declare an Economic State of Emergency. Perhaps unsurprisingly, the editorial didn’t excite any reaction from government. If I recall well, it was only Mr. Shola Oni of the NSE who took offence and repudiated our conclusion.

As far as he was concerned, the economy could not have been healthier, what with the booming stock market. Apparently, that was equally the position of government as well. Even by January this year, it still painted the picture of a rosy economy. Amidst concern by many analysts, it issued a statement which was duly published by ThisDay Newspaper in January titled “Economy Buoyant or Federal Government.” Of course that statement was a lie, just as many other things about the so-called sterling performance of the economy in recent years have been lies, all lies!

I have often wondered, why do they tell so many lies and why do so many people believe them? But then, to paraphrase a Bible verse, “a lie may endure through the night, but truth cometh in the morning!” The official lie is that the Nigerian economy has been doing very well in the last five years and is only stalling now as a result of the global economic recession.

On the surface that may be true. But look deeper. The truth is that Nigeria has not changed significantly since the early 70s when oil became the dominant foreign exchange earner. The slump in oil prices which began in the wake of the Shehu Shagari administration in 1979 sentenced Nigeria to economic wilderness. It led to the collapse of the Shagari government which then Major Gen. Mohammed Buhari described as “inept,” for “turning Nigeria to a debtor and beggar nation.” Even the revered Awo blamed Shagari for the economic downturn. But unknown to the duo, it was not entirely Shagari’s fault. Rather it was the fault of the collapse in oil prices.

From a peak of $45 per barrel, oil slid to single digits. Other commodities like cocoa, coffee, groundnut etc. lost their lustre and in doing so laid country after country in Africa prostrate. Nigeria, like many other African countries, is a primary producer of commodities. They export these commodities in their primary form and re-import them, often at a premium. So their fate is intrinsically tied to the vagaries of international demand factors of the products. The collapse in the market for primary goods in the 80s shattered African economies, led to the introduction of structural adjustment programmes in many countries and resulted in a spiral of political instability, civil strife and even wars across Africa.

What the Nigerian government under the successive leadership of Olusegun Obasanjo and Umaru Yar’Adua, with their band of economic managers — Okonjo-Iweala, Oby Ezekwesili, Chukwuma Soludo, Ndi Okereke Onyiuke et al — trumpeted as economic success was nothing other than the upward swing in the price of crude oil. Propitiously, the upswing began right at the dawn of the Obasanjo administration in 1999. Oil, which prior to that time had sold for single digits, began a steady climb.

The price of oil soared and Nigeria was rich once again. It had a déjà vu ring. In the 70s, the country was so “rich” that then Head of State General Yakubu Gowon reportedly said that “Nigeria’s problem was not money, rather it was what to do with money!” In the latest cycle of boom, Obasanjo was spared that agony. He had no doubts of what to do with the money. First he paid off a large chunk of the national debt, a move that is still raising controversy in economic circles, then he settled down to the worst spree of profligacy in recorded history.

Nigeria ought to have used the oil windfall to rebuild her decaying infrastructure, expand her revenue base, reform its educational institutions and lay the foundation for a modern economy. But it did not do that. Rather, it employed a plethora of economic monetarists who talked glibly of market reforms and went ahead to institute the most far-reaching consumer regime in Nigeria’s economic history.

RED FLAG FLYING
The banking consolidation policy of the CBN was the lynchpin of the new era of consumerism. The policy which in theory had noble intentions ended up in practice as the Achilles heel of the economy. Of course that is not the conventional wisdom. The way Mr. Soludo et al see it, the policy saved the industry. Not true. But I concede that the jury is still out.

With the consolidation policy, Soludo sought to use monetary policy to solve systemic and structural economic problems. That was obviously a no-brainer. Nigeria’s economy is structurally dysfunctional. It does not produce. It is mono-product based. It has poor, largely unskilled and largely untrained manpower. Its infrastructure is in abject shambles, indeed among the worst in the world. Its people, with a pre-oil price boom of $300 per capita income, rank among the poorest in the world. Its educational system has become so hopeless that renowned universities abroad routinely refuse to recognise degrees obtained from Nigeria and major corporations now resort offshore for recruitments. Capital flight remains very endemic as well.

A more honest response to these litany of problems would have entailed a fiscal and monetary policy that would comprehensively restructure the economy. But Obasanjo, Iweala and Soludo did not do that. What they did was to create a bubble economy with banks deploying idle funds to finance a consumerism binge that fed billions into the conveyor belt of the economy. In the event, a stock market and real estate bubble developed and utterly distorted market fundamentals.

ROAD NOT TAKEN
At the inception of this government, I had urged Yar’Adua to sack all the Obasanjo-era economic managers. Their mindset and falsehood portended doom for the economy and the nation at large. It still does. Nigeria is in dire straits. But that is not the worst. That is still to come. The denial of the government compounds the problem. The full extent of the economic crisis is being covered up.

Crucial questions that beg for answers are: what is the true financial health of the banks? What is their net exposure to margin facilities? What are the full dimensions of the problems and critically how does the government intend to respond?

I have great sympathy for President Yar’Adua. He is a good man, whose lack of greed commends him to many people I know. Unfortunately I do not have confidence in the approach he has to solve the problems. It lacks seriousness and betrays a superficial appreciation of the problem. What is worse, the membership of Vision 2020 is laughable. What it shows is that government is not thinking outside the box. It is the same worn-out methods using quota system and political balancing. Indeed, there is an urgent need for President Yar’Adua to wake up from his slumber and confront the economic crisis before it becomes catastrophic.

(This article was first published on March 2, 2009)