By Dele Sobowale
“As for the exchange rate, I think we need to move our rates to be as reflective of the market as possible. This, in my own view, is the only way to improve supply.” – Vice President, Yemi Osinbajo
That pronouncement, as well as others we shall mention shortly came as a thunderbolt. And, its impact, deliberately or inadvertently, was as electrifying as the natural phenomenon.
Expectedly, the “experts” were divided in response to it. Great and unexpected departures from team position by a Vice Captain of a team on a long losing streak always provokes that sort of reaction.
But, before we go into interpretation of the VP’s very clear statement we need to ask a very important question which will help us to understand the motives behind the statements credited to the VP.
Will the real Osinbajo please stand up
“In whatever situation you find yourself, determine first your objective.” – Field Marshall Foch, 1851-1929, Vanguard Book of Quotations, P.174.
He might not realise it, when VP Osinbajo uttered those explosive words, three individuals, Nigeria’s secular trinity, were addressing us – the current Vice President of Nigeria, a presumed Presidential candidate and a private citizen. Each of these individuals can legitimately offer opinions on public economic policy; but with varying degrees of relevance. I will start in reverse order.
If Osinbajo had made that statement in 2013, probably no newspaper would have published it on its front page. In 2013 Osinbajo was relatively irrelevant. Few people would care. Osinbajo, the Presidential candidate, is a little bit more relevant. He might eventually become President.
Whether Osinbajo realises it or not, he had served notice, premeditated or not, of the direction of economic policy in a future Osinbajo administration – if he is elected to office. It will be market and private sector-led. Those uncomfortable with that approach to managing the economy will need to find another candidate for their votes. It is Osinbajo, the current VP and the Chairman of the Economic Management Team, which includes the Governor of Central Bank of Nigeria, CBN, whose motives are obscure.
There is an unmistakable disagreement with the management of foreign exchange policy; as a result of which the country is not receiving the supply of foreign exchange it should. In other words, somebody has fouled up. Nobody needs to be told who is under attack here – the CBN.
Other charges piled on top
The VP was like a damn breaking on that day. He was not only critical of CBN handling of exchange rate; he condemned the CBN’s intrusion into fiscal policy in unmistakable terms. Let me give Osinbajo the floor once again.
“There must be synergy between the fiscal and monetary authorities. We must be able to deal with the synergy; we must handle the synergy between the monetary authority, the CBN, and the fiscal side.
Sometimes, it appears that there is competition, especially on the fiscal side. If you look at some of the interventions, you will find that those interventions are interventions that should be managed by the ministries.
“The Ministry of Industry, Trade and Investments should handle MSMEs (micro, small and medium enterprises) and we should know what CBN is doing. In other words, if the CBN is intervening in the MSME sector, it should be with the full cooperation of the Ministry of Industry….”.
Again, these thinly-veiled accusations against the CBN acting unilaterally can be subjected to the same interrogations regarding which Osinbajo is speaking – the private citizen, the candidate staking a position or the incumbent VP? However, one thing can be said about the observation about synergy. The VP is only stating the obvious. No economist will dispute the need for synergy between fiscal and monetary policy. The Executive branch, which includes the VP, is responsible for that. The CBN is charged with formulating monetary policy to complement the fiscal policy in the attempt to grow the economy, control interest and exchange rates and curb inflation while aiming to provide jobs.
The VP obviously strongly believes that there is no synergy; that the CBN is acting without taking the Ministries along. That is a serious charge. And, despite the fact that the CBN has issued no response, objective observers can still ask questions.
Primarily, was the VP being fair to CBN? Is the portrayal of Mr Godwin Emefiele, a true reflection of what went on the last almost six and a half years? Again an objective observer must note that everything revolved around the formulation and execution of a fiscal policy. Was there one? When was it announced? And when did implementation start?
Absence of fiscal policy invites CBN intervention
“Nature abhors a vacuum.” That is true of any aspect of life – including economic policy management. In that respect, the civilian governments since 1999 have uniformly failed to set out clear fiscal policies in their annual budgets. All they do is to announce how much would be spent and the sector allocations. This is amateurish. No single budget address has included the fiscal policies that would underlie the attempt to achieve the objectives stated in the budget – particularly, the GDP growth target. That explains why Nigeria has missed the growth target for six years in a row.
Under former military governments, I was privileged to attend for several years Budget Briefings by the Minister of Finance which occurred about a week after the Head of State has delivered the budget to the nation.
This was not the only difference in budgeting under military regimes. Each budget revolves round thirteen to eighteen targets which the country was endeavouring to achieve each year. Everybody was aware of the Budget Thrusts or priorities for that year.
The Minister of Finance, addressing top public officials, leaders of the Organised Private Sectors, OPS, Banking, Labour, Academia and the International Community would lay out the regime of taxes, duties, tariffs, fees, surcharges etc expected to yield the revenue projections. Most importantly, the address will announce the alterations to the list of products imported or exported. Three lists generally emerged, in black and white – goods under absolute import prohibition, goods under licence for importation and goods subject to unlimited importation. These decisions were never left to the CBN.
Why then is the CBN now prohibiting imports of goods under Buhari? The answer is simple. Buhari’s government allowed that intrusion into fiscal policy. And, it is amazing that the VP who is the Chairman of the Economic Management Team is just waking up to the fact that something was definitely wrong in the way they were running the economy – some would say to the ground. To me, the VP’s statement amounts to blaming the victim; CBN in this case.
Emefiele knows that a badly mismanaged economy results in exchange rate problems; that sooner or later devaluation of the currency will be the only option left. In the absence of any coherent, comprehensive and comprehensible fiscal policy, he had to act to prevent worse deterioration of our position.
The MSME example cited by the VP is very apt in this regard. When the Minister is not asleep, he is making outlandish projections which cannot form the basis of sound fiscal policy. The VP should thank the CBN for helping out. Without those unorthodox interventions, the Nigerian economy would have been wrecked beyond repairs.