Lately, the Federal Government’s enthusiasm for further national debt accumulation has become more strident, especially after the IMF’s suggestion that Nigeria is currently under-borrowed, and therefore recommended increasing the borrowing threshold of 20% of gross domestic product to about 56% of GDP.
In the light of government’s reticence to our persistent recommendation for the adoption of dollar certificates for the payment of distributable dollar-derived revenue, a regular reader of this column has suggested reasons why certain stakeholders would oppose the proposition to fundamentally alter the payment system and thereby lift the irrepressible perennial burden of surplus cash and its attendant adverse collaterals such as inflation, high cost of funds, rising national debt, weaker exchange rate, rising unemployment, N2000bn annual fuel subsidy and deepening poverty nationwide!
President Goodluck Jonathan, State Governors and members of the Legislature last week celebrated May Day with organized Labour, with the usual spectacle of march-pasts and copious speeches! Labour, on one hand, demanded for positive results in the areas of employment, security and corruption, so that the Nigerian economy can thrive and soar from the impact of such good Governance.
The concept of moral hazard is defined as a situation where there is a tendency to take undue risk, because the costs are not borne by the party taking the risk.
In the second quarter of 2012, the Legislature considered a bill for amending the existing 2007 CBN Act; the bill attracted a lot of media attention in response to the exuberant controversy surrounding it.
The Bankers Committee,which comprises the Central Bank of Nigeria and Chief Executive Officers of the Money Deposit banks resolved at the end of their meeting last week, to remove ATM charges, and investigate alleged excessive charges imposed on customers and also agreed to increase lending, and reduce interest rates to Micro, Small and Medium Scale Enterprises (MSMEs).
The International Monetary Fund (IMF) recently concluded its 2012 ‘Article IV Consultation’ on Nigeria. The IMF, as part of its recommendations, suggested the winding down of the operation of the Assets Management Corporation of Nigeria (AMCON). This recommendation was apparently predicated on the need to curb what it described as ‘moral hazards and fiscal risks’.
At a recent forum in Lagos, on Tuesday, 19/3/2013, President Goodluck Jonathan insisted that “we cannot continue to waste resources meant for a greater number of Nigerians to subsidize the affluent middle class, who are the main beneficiaries (of fuel subsidies)”.
Today’s piece is sequel to Toyin Dawodu’s earlier article “Stable Electricity Still a Decade Away from Nigeria”. Toyin, a Nigerian in the Diaspora, is Managing Partner of Capital Investment Group in California, and also CEO of an outfit currently testing alternative and clean energy generation.
This column has consistently maintained that the root cause of our economic paradox of increasing income, with unbridled unemployment rate, and deepening poverty will be found in the conscious and incorrect adoption of a faulty process for the infusion of our crude export dollar revenue into the economy.
Lately, the Central Bank of Nigeria in a two-page Press Release, laboured to corroborate the Finance Ministry’s earlier clarifications on “the meaning, structure and management of the nation’s foreign reserves”. CBN defines external reserves, appropriately, as external assets held in foreign currencies by a country’s Central Bank for the “primary purpose of safeguarding the international value of the legal tender currency (i.e. the naira)”.
In apparent response to the Action Congress’ admonition that the nation’s economy was “gradually grinding to a halt”, the Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, unexpectedly painted a brighter economic picture, and sought to clarify popular misconceptions on the issues of our external reserves and the alleged discrepancies between reported reserves balances of the Finance Ministry and the Central Bank of Nigeria (CBN). Regrettably, however, the canvassed positive indices of GDP growth and claims of fiscal prudence are not corroborated by the ugly reality on ground.
There are media concerns on the potential adverse impact of delay on budget implementation and the possibility of the Legislature overriding presidential opposition to 2013 budget enactment.
Our governments have spent billions of naira over time to promote a positive image for Nigerians everywhere. Regrettably, the popular perception of the Nigerian character remains that of greed, self-interest and other such ingenious criminal escapades. The promoted brand of “Good People, Great Nation” never really took off, and it has become clear that neither catchy slogans nor sexy packaging can change public perception of what is intrinsically a bad product!
The recognition of the abysmal depth of corruption in public office is probably shared by all discerning citizens of this country; consequently, some well-meaning Nigerians have prescribed the death penalty for anyone convicted of treasury looting! The obvious provocation of the recent slap-on-the-wrist punishment to a civil servant for stealing over N27bn of Police Pension Fund may have prompted the call for more severe penalty!
Public discourse recently focused on the charge by Dr. Obiageli Ezekwesili (Oby), a former Senior Assistant and Minister in Obasanjo’s administration, that the Yar’Adua/Jonathan Presidency had frittered away accumulated reserves of about $67bn since the change of baton in 2007.
The Central Bank Director of Research, Charles Mordi, at the Save Nigeria Group (SNG) forum recently in Lagos, claimed that CBN owns $30bn out of the total reserve of about $43bn.
The first anniversary of the 2012 “Occupy Nigeria” fuel subsidy protest was marked recently in Lagos by Pastor Bakare-led ‘Save Nigeria Group’ with a lecture titled “Nigeria’s Fiscal and Monetary Crisis: the Way Forward”. The occasion afforded Central Bank of Nigeria (CBN) the opportunity to publicly defend its failure to create an enabling environment for industries and businesses to bloom, in consonance with its core mandate for price stability. The major indicators of price stability, of course, relate to conducive low single-digit interest rates for bank loans and an even lower rate of inflation.
Every year, Nigeria’s media traditionally celebrate persons adjudged to have distinguished themselves in their respective fields of endeavour or indeed, in their apparent dedication and commitment to their responsibilities as public servants.
It was a welcome departure from tradition when the national assembly received the 2013 budget proposals in early October 2012! Thankfully, the early submission allowed the legislature to effectively sharpen its oversight functions on a host of government ministries and agencies, and in the process, uncover huge shortfalls between approved budget sums and actual implementation in 2012.
At the conclusion of the 2012 IMF/World Bank Group Annual Meetings in October, the Central Bank Governor, Sanusi Lamido Sanusi, decried the dollarization of the Nigerian economy to some Nigerian journalists, who were sponsored to that event in Japan. According to the Governor, his anxiety was equally shared by President Goodluck Jonathan.
One of the decisions taken by the National Assembly before the Christmas break was the appropriation of an additional sum of N161.6bn to augment the initial N888.1bn voted for subsidy in the budget of the outgoing year. This would bring total fuel subsidy claims for 2012 to over N1.05tn; i.e. the equivalent of over 20% of the 2012 expenditure budget of N4.7tn. The budget allocation of over N500bn for interest and service charges for domestic debt comes a distant second to fuel subsidy.
The other day, a friend narrated a story, which I found stranger than fiction; the story related to the travails of a family who lost a successful and illustrious breadwinner, who, incidentally, died without a Will. The family’s elders were consequently entrusted with the responsibility of efficiently managing the estate of the deceased.
The primary underlying principle in a social contract in a modern democratic dispensation is that of equality of all persons.
Instructively, the higher the degree of social inequity, the greater also will be the level of national instability, and the more restrained will be that nation’s economic growth trajectory. Consequently, it becomes inexplicable that some government policies and initiatives facilitate the prosperity of a favoured sub-group at the expense of the vast majority.
At the Second Annual Capital Market Retreat in Warri, the CBN Governor, Lamido Sanusi, made a strong case against the current dedication of about 70% of national income to purely consumption by civil servants and politicians, who comprise less than 1% out of our population of over 160 million.
The continuation of a tight monetary regime would have the following outcomes: persistence of high interest rate, deepening of the unemployment crisis, financial intermediation role of the banks will continue to be undermined, recovery of the real economy will remain sluggish, capacity of enterprises to create jobs would continue to be inhibited, stock market recovery would continue to be slow and the capacity of banks to support the economy would remain severely constrained.”
Pius Adesanmi, a budding literary icon was the guest speaker at the “Second State of the Nation” lecture organized recently by the Pastor Tunde Bakare-led Save Nigeria Group. Adesanmi, an Assistant Professor at Carlton University, Canada, chose the title “Reparations: What Nigerians Owe the Tortoise” as his theme.
“The bill gives significant powers to the Customs Service and ordinarily this should not be a bad thing, but it does remove powers from the President and the minister that we think are necessary to ensure that the economic agenda of the country are properly carried out as directed by the President and delegated to the minister.”
“We see increase in oil reference price as a threat because the money will be shared by the three tiers of government. It will increase spending and inflationary spending. We think a reference price of $75/barrel is better than $78, and $78 is better than $80/barrel, but that is if the difference is saved.”