Dele Sobowale

“Inflationary pressures remained elevated during the first quarter of 2011 but moderated towards the end of the second quarter.

However, the committee observed that the inflationary pressures which are traceable to the high expenditure levels associated with the April 2011 elections as well as the effects of international energy, commodity and food prices, had moderated by June 2011…The committee welcomed the favourable [GDP] growth projections”.

Guardian, July 27, 2011, in “CBN raises interest rate over minimum wage.”

Mallam Lamido Sanusi

Last week, this column turned to the very serious matter of high level and intractable high unemployment which among youths is now reaching up to 50% in some zones. Readers would also recollect the warning of the former IMF Chief, Dominique Strauss-Kahn, who likened the global and Nigerian unemployment situation to a “life-time sentence, possibly, for a whole lost generation.”

In Nigeria, we might be battling with two lost generations condemned to the life sentence of unemployment. Yet, among the core mandates of monetary policy under the control of the Central Bank of Nigeria is employment generation.

Yet, in that report by the CBN, the bank focused on one of its prime objectives – inflation targeting – at the expense of job creation.

Indeed, the further clarification that the growth, which is currently under 7%, had not been accompanied by new jobs being created points to the bewilderment of all central bankers worldwide.

Even nations, like Nigeria, which are experiencing above average growth still find it difficult to create new jobs in a manner that would have been expected ten or fifteen years ago.

In those halcyon days, a country growing at 7% per annum would be generating new jobs at such a fast rate that employers would be experiencing labour shortages inducing immigrants from other nations in search of employment in its territory.

Nigeria was in such a situation in the 1970s, enjoying full employment and sucking in job seekers from other nations until the depressions starting from 1982 led to the “Ghana-Must-Go” saga.

So, admittedly, the problem is global. But, it is small comfort to those condemned to life of joblessness that their own country cannot provide for them means of livelihood.

Raising interest rates to fight inflation is in order, but it connotes a trade-off with impeding investment and job creation which are heavily influenced by interest rates.

The CBN was probably deliberately silent on this because of the outcry it might provoke. Still, the problem will not go away by being swept under the carpet.

Nigeria needs to create millions of jobs if we are to avert a situation in which the second generation also goes down into hopelessness which idleness breeds all the time. The devil still finds work for idle hands – and there are over 10 million such “devil’s potential employees” in Nigeria at the moment.

To be sure, several measures have been announced. The injection of N1.6 trillion by Asset Management Company of Nigeria, AMCON, into the troubled banks, had, so far, not yielded the desired results.

The banks have become more conservative in their lending policies; all are still smarting from the calamities induced by excessive risk taking up to 2008.

At the moment, the bulk of the lending goes to those enterprises which don’t really need it. As for the real needy, who might, incidentally, have winning start up projects, there is no money; not even advice regarding how to proceed.

The total absence of a clear fiscal policy, driven by the Ministry of Finance, since 2007, as a compliment to CBN’s monetary policy measures, created problems which the Central Bank is called upon to solve – although it is not in its mandate nor is it competent to handle them.

The entire regime of taxes, tariffs and levies which should complement the monetary policies of the CBN, are just now, hopefully, being put in place by the new Federal Minister of Finance, Dr Okonjo-Iweala.

The last occupant of that office, Olusegun Aganga, might be competent in many areas of public finance, but it was very clear that he was not developing complementary fiscal policy packages which would have produced the desired results from the efforts of monetary policy.

Consequently, we have had the funny situation in which the CBN pumps N1.6 trillion into the troubled banks, at the same time that political parties, mainly the People’s Democratic Party, PDP, were also dumping about N1.2 trillion into the economy for the 2011 elections.

President Jonathan alone must have spent close to N400 billion on his campaign alone. Together, the influx of unprecedented campaign money and releases to AMCON created excess liquidity which the CBN now has to mop up with increased interest rates.

One question to which it might be interesting to find answers is: what were the sources of the mind-boggling amounts spent for this year’s campaign – especially when all infrastructural development and bank-lending to the real sector came to a halt? In reality, what has occurred in 2011 is a situation in which a few people collected tremendous income without paying taxes on them.

There were rumours about dollars paid to induce votes and also rumours about unpaid taxes which the Federal Internal Revenue Service, FIRS, an Executive Branch agency, should have investigated.

Had this been done, the beneficiaries of the windfall and the tax defaulters would have been made to pay instead of the whole country. That is one way fiscal policy measures aid monetary policy to succeed.

For more than one generation, defined as thirty years, it has been recognised that Small, Medium, and Micro Enterprises, SMMEs, provided most of the jobs in fast growing economies. We have paid lip service to this idea as a nation without once actually ensuring that banks lend adequately to the sector.

Even now, what percentage of the N1.6 trillion which was pumped into the rescued banks went into the SMMEs? How much was lent to farmers who provide more than half of jobs and contribute more to the growth of GDP than crude oil?

In the past, after the budget had been passed by the National Assembly, and signed by the President, the Federal Minister of Finance would hold a briefing for stakeholders outlining the sources of funds for the budget, the regime of taxes, duties, tariffs and levies designed to support the monetary policies of the CBN.

Even though the policies and programmes were seldom implemented to the letter, the broad aims and objectives of government’s economic policies are placed before the public. I attended several on behalf of Vanguard Newspapers.

Unfortunately, they came to an end when Dr Okonjo-Iweala left office.Those briefings at least gave the impression that policies are well thought out and not arbitrary. One outcome of inadequate briefings is the threat to national security over non-interest or Islamic Banking.