Nigeria, IMF and other matters

on   /   in My Layman's View 12:54 am   /   Comments

By Adisa Adeleye
THE representative of IMF in Nigeria was reported to have advised Nigeria “to take advantage of the current growth to strengthen her fiscal decision by saving for the future, as there is no assurance of early global economic recovery”.

According to him, the global economic outlook remains uncertain.  The global context has continued to witness slowing growth mostly masked in the advanced economics.

The message of Mr. Scott Rogers (IMF representative in Nigeria) is that frugality should be the watchword and this should be supported by suitable fiscal measures. This view is not different from the Central Bank’s sermon on increasing rate in government expenditure.

Scott Rogers

Dr Okonjo-Iweala the Coordinating Minister for the economy made an indirect allusion recently when she said that “the problem is that when times are reasonably good, people tend to forget the efforts made in the past and start talking of let’s spend everything, let’s do this, yes, let’s spend for infrastructure but let us also put little aside, there were some of the achievements that we began to have in the economy”.

Realizing the great dependence of Nigeria on oil revenue and the uncertainty of stability oil price in world market, it is reasonable for the IMF representative to urge the federal government to adopt policies which would avoid undue increase in government spending and save as much as possible for the raining day.  Thus there should be no question of a budget deficit policy at this time.

To him, the nation should generate fiscal surplus while oil prices are high and use it to build the nation’s reserves.  “Stop spending what is meant to be saved, make the oil price rule effective”.

The question of relevance of oil money to the country’s economic development has been subject to debate in the past.  Some analysts have criticized the Nigerian Governments (Federal, State and Local) of ineffective and inefficient management of the oil resources.

The oil resources, being over 80% of recurrent expenditure of various state budgets are meant for consumption and 20% of capital expenditure (if released). Thus, it is reasonable for caution to be exercised on extended government’s expenditures.

The other factors touched by Mr. Scott Rogers, like porous borders for traffic at petrol stations are familiar problems with us.

All associated problems related to petroleum products are attributed to rampant corruption, and the pity is that those saddled with the eradication processes are themselves parts of the problems.  That Corruption is endemic in Nigeria is axiomatic and its resolution is left to the gods of our forefathers.

However, my problem is with the gospel of savings in the midst of wants and desperation.  Some advocates of budget surplus (leaving more money in the coffers of the government) do not always take into consideration of the state of infrastructural decays and depth of poverty arising from mass unemployment.  The problem with Nigerian leadership has been a comical misunderstanding of modern economic growth principle in a weak economy.

The “classical” economists who have dominated the policy making cadre in the country have created the impression that increase in government expenditure would always result in general inflation.  However, since Keynes it has been recognized that the modern economy could be subject to the deficiency in effective demand and that direct government action would be necessary to offset it.

The new thinking has been recognized throughout the western world.  The recent re-election of President Obama of the USA has stamped this economic orthodoxy.  President Obama has used government funds to bail out ailing motor industries and also to stimulate effective demand in time of recession to create new employment.

It is my belief that a dormant economy (with weak demand and mass unemployment) would not respond positively to a policy of budget surplus with high savings and high foreign exchange reserves, being presently canvassed by many, and followed by government.  An economy pushed up to a fairly level of full capacity would ensure a satisfactory rate of growth.

It is not possible to have the required economic growth and prosperity under a condition of high employment (as we have in Nigeria today) with capable hands kept idle when they should be producing economic goods.  The idle hands are now showing their capabilities in armed robberies, kidnappings and hurling bombs.

Political uncertainties

While commending the activities of the national legislators for organizing rallies for the review of the present Constitution, my believe is what the country needs is a general Discourse on reconstructing of the country.  The craze now is for the creation of more states in respective of economic viability.

Realists believe that the present 36 State structure is unwieldy, unviable and deficient in structure.  Others believe that the six zone structure with some amendments on South – South and North Central could be a workable, viable and political stable option.

Some have even suggested that apart from the South West (Yoruba), South East (Igbo), and Bayelsa (Ijaw), other linguistic groups could be considered.  This would ensure the avoidance of volcanoes in some states which abhor restless minorities who could be subversive.

The advantage of a linguistic group is that common culture would be elevated and unity preserved in a mutual co-existence in a group.  It is an attempt to reduce ethnic antagonisms as observed in some states in Nigeria today.  This brings me to the question of the South-Western zone (Yoruba) and South-Eastern zone (Igbo) of the six zone structure.

On the present diatribes on the personal reminiscences of the octogenarian literary genius, what modern Nigerians would expect is a high level of technological development and economic transformation in the two states to show modernity.

What efforts are the giants in these two states making to achieve good education, good health and good governance to make life easy for every citizen? What seems to be required are good understanding and profitable investments among themselves and other people of Nigeria to prevent another senseless war and its tragic consequences.

 

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