By Les Leba
The Dream Economy envisioned in governmentâ€™s â€œâ€˜Vision 20:2020â€™ seeks to position Nigeria as one of the top 20 economies in the world by the year 2020.Â In economic terms, this translates to having a Gross Domestic Product (GDP) of at least US$900 billion by that date compared to about US$212 billion as at 2008â€â€¦. (Source: Nigeria Vision 2020 Economic Transformation Blueprint â€“ pg. 26, work-in-progress as at 5/10/2009.
However, critics may be excused for questioning what is sacrosanct about $900bn GDP and what, indeed, is the guarantee that such achievement would land us in the class of the top 20 economies in 2020!Â Expectedly, the visionaries did not shy away from this question as they rationalized that: â€œNigeriaâ€™s macroeconomic targets for 2020 are based on a dynamic comparative analysis of the countryâ€™s potential growth rate vis-Ã -vis growth rates of other Top 40 economies in the world.
The growth requirement, in terms of GDP, was determined through a process of ascertaining the current GDPs of the bottom five members of the current top 20 economies and using their average growth rates to project what their GDPs would be in 2020.Â The estimates show that by 2020, Poland and Indonesia will have sizes of GDP that are near Nigeriaâ€™s aspiration of at least $900bn.Â For Nigeria to achieve the economic size of Poland (GDP size of US$963 billion), it will have to grow at an annual average of 13.4 per cent.
To achieve the GDP value of Indonesia of $1,000.5 billion, the Nigerian economy must grow at an average of 13.8 per cent during the time horizon to 2020.Â Given the past similarities of the Nigerian and Indonesian economies, Indonesiaâ€™s projected economic size was used as benchmark, in which case, the average annual growth rate to target would be 13.8 percent.â€
So, it would seem that the visionariesâ€™ target was not just guided by a mere rule of the thumb.Â We have seen from the above excerpt that the growth rates of the top 40 economies were analysed, but it is not explicit whether or not Nigeria was among this expanded list of elite economies!Â We can expect that even if Nigeria barely fell outside the club as the 41st nation, it would require monumental national effort to climb at least 20 places up the ladder to achieve the objective of Vision 2020!
Furthermore, the visionaries have assumed that all the other nations in the elite club would not aspire to also exceed their historical average growth rates on which our projection of $900bn was predicated, asÂ such expectation may be self delusion!Â National ambition for growth is not the exclusive preserve of Nigerians!Â We also recognize from a realistic prism that Nigeria has failed to record double digit growth in GDP in the last 30 years or so.Â Indications are that actual growth rates have hovered between 3 â€“ 7% during this period, and not even the majestic commands to ministries and parastatals under the formidable presidency of Olusegun Obasanjo succeeded in bringing about such magic!Â In any case, critics have also been suspicious of officially released flattering growth statistics in a reducing industrial landscape with unyielding rise in unemployment, inflation and deepening poverty in the country!
Thus, an annual target GDP growth rate of 13.8% as envisioned by Vision 2020 is to say the least very ambitious, particularly for a country with an abiding tradition of failure to meet set targets, even for something as simple as the spending of available capital expenditure in each yearâ€™s budget!
Furthermore, critics would wonder if it was appropriate to benchmark our economic objective on Indonesiaâ€™s comparatively â€˜developingâ€™ status in view of its relative adverse economic fundamentals vis-Ã -vis the other members in the top 16 â€“ 20 countries by GDP values;Â i.e. Netherlands, Belgium, Poland and Turkey;.Â For example, Nigeria even has a higher electric power consumption of 116KWh per person compared to Indonesiaâ€™s 37KWh; compare this with 4403KWh, 4912 KWh and 3009 KWh per person for Netherlands, Belgium and Poland respectively!Â So, how does one explain why the visionaries benchmarked our growth rate on the performance of a country where the people suffer more power outage or inadequate capacity than the impoverished and traumatized people of Nigeria?
It is pertinent to note also that the Nigeriaâ€™s per person Gross National Income (GNI) of $920 is already double the GNI per capita of $420 for Indonesia!Â It seems inappropriate that those who claim to be eagles would also benchmark their growth objectives on the performance of ducks!
In the same vein, we must recognize that no serious economic growth can materialize in any country with double digit rate of inflation.Â In this event, it would be a misadventure to benchmark the prospect of achievingÂ Vision 2020 against the realities of countries such as Turkey and Indonesia with inflation rates of 77 and 34% respectively against Nigeriaâ€™s more â€˜beneficentâ€™ rate of a mere 20%!Â It is instructive to note that inflation rates in Netherlands, Belgium and Poland are 4, 5 and 5.3% respectively.
Interestingly also, the cost of borrowing expressed as interest rates range from 3.5% in Netherlands to a high of 7.5% in Belgium, with Poland at 5.5%!Â No wonder the superior industrial competitiveness of those countries; meanwhile, the managers of our own economy have been unable to bring lending rates below 15% in the last 20 years or so; indeed, just over a year ago, Central Bankâ€™s Economics Professor chided manufacturers for clamoring for single digit interest rates, when they should be thankful that they did not have to pay over 30% as was the case in Ghana and some other such weak economies in Africa!
So, in view of the wobbly platform of assumptions on which Vision 20:2020 was predicated, it will be unrealistic to expect consistent annual double digit minimum growth rates of 13.8% as envisioned, as there is no overt restructuring of the current framework that has failed to improve our lot, even when providence smiled on our fortunes with crude oil prices above $150/barrel and reserves of over $60bn, which regrettably stunted our cognitive faculties.
However, anyone expecting innovative approaches to revitalize our economy in the Vision 20:2020 Blueprint will be sorely disappointed.Â The macroeconomic and policy thrusts contained therein are the usual preambles to the serial budget failures of the last three decades!Â Indeed, the Vision Blueprint, notwithstanding the prevalence of the contracting industrial landscape, unabating double digit interest rates, double digit inflation and increasing unemployment, maintains that Nigeria has enjoyed â€˜macroeconomic stability over the past ten yearsâ€.
Regrettably, the Visionariesâ€™ project the illusion that the Nigerian economy only stumbled in the last two years as a result of the global economic meltdown!Â The truth, as even the layman knows, is that life has become increasingly difficult for the critical mass of Nigerians and there was surprisingly no let up to the mass impoverishment when we earned more export dollar revenue in one year than our consolidated export revenue over many years!Â Thus, the global recession is really a ready excuse!
In addition to the usual promises to do things better, such as in the institutionalization of fiscal prudence and the strengthening of government procurement procedures, the visionaries inexplicably extol the virtues of the illegal and unconstitutional consolidation of a so-called Excess Crude Account (ECA).
It is disturbing that both the Executive and the National Assembly have acquiesced in the face of this illegality; so much for adherence to the rule of law propaganda of this administration!Â Meanwhile, the ECA has been drawn down from it level of almost $20 billion to a balance of less than $4bn or so, and yet, no meaningful impact can be discerned in social welfare of the masses, while policy makers continue to admonish that we should count ourselves lucky to have this fund to fall back on!Â The question is, how come the bulk of the ECA inevitably simply supplemented recurrent expenditure rather than the more social welfare enhancement of infrastructure and human capacity building?
However, it is in the area of monetary policy thrust that the thin underbelly of the Vision 20:2020 blueprint becomes apparent.Â The following is an excerpt from the section of the document relating to monetary policy â€œDealing with the excess liquidity challenge requires innovative approaches in view of the source of the problem.Â One potentially enduring solution, which would avoid the creation of new money and boost the naira value in the foreign exchange market, relates to the allocation of foreign exchange earned from oil to the three tiers of government rather than monetizing it.Â But this may be a recipe for capital flight.
Therefore, the Central Bank would need to develop capacity for liquidity forecasting and programming.â€ (Vision 2020 Blueprint â€“ Monetary Policy Thrust)
The above observation of the Visionaries will sound familiar to regular readers of this column; nonetheless, such readers will also observe that in spite of the visionersâ€™ unanimous recognition of the challenge of excess liquidity as the albatross on our economy, there is also consensus with the views consistently advocated in this column that the disbursement of distributable dollar revenue instead of CBNâ€™s unilateral rate determination and substitution with naira as a veritable panacea that will revitalize our economy, but the concluding two sentences in the above excerpt indicates the fear of the visioners that this solution will lead to capital flight!Â This, of course, is an excuse to continue to do the wrong thing with the usual unfulfilled promise to try to do it better next time!!
Of course, if the export revenue was paid as straight dollar cash, it would inevitably lead to capital flight, but such profligacy and recklessness is avoided when the dollars are distributed via the instrument of dollar certificates.Â Such an arrangement would remove the â€˜pressureâ€™ for the Central Bank to consciously auction about $2bn of its dollar cache (after its substitution with billions of freshly created increasingly worthless naira) to Bureau de Change (BDC) every month.
Meanwhile, the smugglers of contraband goods find BDC dollars a ready source for their dollar requirements while looters of public treasures also take advantage of the easy BDC dollar regime!Â While the smugglers facilitate the collapse of Nigerian industries, as well as create unemployment and deprive government taxable revenue, the treasury looters facilitate capital flight with BDC dollars.
However, the adoption of dollar certificates will break CBNâ€™s unholy monopoly of federally distributable dollars and create some sanity and discipline in the foreign exchange market, so that as admitted in Vision 2020 blueprint, the problem of excess liquidity will be arrested, and single digit interest rates will prevail, industries will thrive, employment rate will rise geometrically, inflation will fall to 2-3% and the naira in your pocket will buy more.Â This can only be good news for all Nigerian workers and a boost for industrial regeneration and is possibly the most feasible portal for achieving Vision 20:2020 and GDP growth rate of 13.8%!
Save the Naira, Save Nigerians!
SAVE THE NAIRA, SAVE NIGERIANS