BY ADISA ADELEYE

It does not matter again if Nigeria is categorized as a failing or failed state by economic and political pundits.  To many Nigerians, this country has refused to show the traits of political and economic progress envisaged by the founding fathers and some foreign friends – Europeans and Africans.

To clothe our collective shame in a fashionable colour, it is admirable to state that this country is one of the developing nations of the world.  Perhaps, it could be charitably described as a ‘lymping‘ economy.

In the pre-Jonathan era, President Obasanjo had predicted in 2002 that the economy would grow by about 4 percent in the year 2003 and approach 7 percent in 2007.

In fairness to Obasanjo, the economy became resilient and grew by about 6 percent, buoyed by increase in oil revenue which helped in the repayment of about $32.billion debt owed to the members of Paris Club.  Obasanjo‘s economic policy which jettisoned Abacha‘s Vision 2010 was anchored on ‘free market‘ principle and deregulation of financial systems.

It also witnessed the period of MEGA BANKS – a consolidation of many banks into 25 Banks with huge capital.  The consequences of Obasanjo‘s economic policies were massive devaluation of the nation‘s currency from N90 to $1 in 2003 to N150 to $1 as at present.  Also, the Mega Banks, rather than being a blessing to the real sector of the economy, some of them resorted to shaddy and speculative operations of all sorts.

It took the courage of Mallam Sanusi Lamido Sanusi, CON, Governor of Central Bank (though not without some unpleasant consequences) to stop the swift drift towards financial calamity.

The present economic situation under President Jonathan, though superficially promising, is not too far from jeopardy.  According to the latest Central Bank of Nigeria Communiqué No 71 of the Monetary Policy Committee Meeting of July 5, 2010, the Committee awarded itself pass- marks on some vital aspects of the economy.

On Exchange Rate, the communiqué reads, ‘The Committee observed that the naira exchange rate has remained stable, in all segments of the market during the review period, reflecting increased confidence in the Naira and the efficacy of the current exchange rate policy stance.

It believes that the relative stability in the foreign exchange market is likely to be sustained in the next term‘.  My observation is, DEVALUATION DE LUXE – the price is POVERTY.

On External Reserves, the Communiqué states, ‘The Gross External Reserves stood at $37.63 billion on 23rd June, 2010, represents a decrease of US $1.19 billion or 3.08 percent when compared with the level of US $38.82 billion at 31st May 2010.

The Committee however, noted that ‘current external reserves level is still adequate as it would finance 16 months of import; compared to the internationally recommended bench mark of 3 months import cover for a country‘s external reserves‘.  Good observation, if not self delusion. Could the reserves withstand any serious threat to oil prices in international market?

And now to the catch! The Communiqué remarks, ‘The MPC noted with satisfaction the continued micro economic stability.  It however, stressed the need to grow the real sector on a sustainable basis.  It also reiterated the possible inflation risks, in the light of the anticipated budget deficit and the operation – realization of the proposed Asset Management Corporation‘.

The Asset Management Corporation, (Mallam Sanusi‘s baby) should not induce inflation since it is expected to sink all the banks ‘toxic assets‘ and put the banking system on a sound footing to perform its normal roles.

The great danger lies in the wife getting hooked permanently to the same husband who could not perform, or the government following the same public policy that has failed totally in the past to stimulate the economy or reduce unemployment.  It has been stated many times that the economy could not grow on utter neglect of the real sector or on the total decay of the economic infrastructures.

However, it is significant to note that the President Jonathan‘s government is trying to tackle, howbeit, in a tardy way, some of the problems inhibiting economic growth.  In a recent meeting with the organized Private Sector, government representatives promised to embark on the needs to boost the real sector of the economy, create more jobs and increase industrial production.

Manufacturers have complained bitterly many times on clumsy method and cost of clearing goods at the ports; lack of electricity; high tariffs on products, multiple taxes and dumping of low cost goods by other countries.

The consequences of these problems are higher cost of producing at home, closure of manufacturing plants and movement to other more friendly countries and of course, loss of jobs and increase in unemployment.

Against the justified anger of the manufacturing industry, the government has promised through its representatives, the prompt clearance of raw materials and spare parts within 48 hours at the ports.  On the perpetual problem of power (electricity), the Nigerian Economic Management Team would ‘set a time line of six weeks to work out a new power purchase agreement from ‘independent power supply‘ that would be put on the national grid.

It is sad to note that any extra power put on the national grid (general supply) never works efficiently as required, as industrial power needs are diverted to non-industrial areas on political considerations.

As an answer to those manufacturers who always complain about high cost of borrowing from the banks, the Finance Minister Aganga said, ‘we are exploring our global contact of multilateral and other institutions to source low cost long term funds which will serve our real sector better‘.

There is no doubt that our Finance Minister was confusing what the local manufacturers want from the local banks with what the nation wants from international bodies. The manufacturing concerns require tolerable interest lending rates from the country‘s banks that borrow at six percent from the Central Bank and lend at over 20 percent.

It is also gratifying that the NNPC (which needs restructuring) is ready to supply fuel oil (LPFO) to the manufacturing industry.  This should be done through the local reliable oil marketers who are familiar with their customers‘ (manufacturers) demand and have ways of effective supply to various places.

Of course, cost per litre of this otherwise cheap product would determine the seriousness of NNPC management.

I am not unmindful of the N5000 billion and over N200 billion to be injected by the Central Bank into the real sector of the economy.  This is fine if the funds are quickly and honestly channeled to the desired ends.

Another problem is the cost to the users of the funds, whether public or private.  The lending rate should not be high as to increase cost of production.

In addition to some admirable government policies, it may be necessary to inject some liberal doses into such economic principle to make Capitalism less harsh and more humane.

The monetary policy should be a regime of ‘cheap money (low lending rate) for industrial development; adequate supervision of the banking system and channelizing of excess liquidity into productive labour intensive activities. This is to increase employment.

I have strong faith in a fiscal policy that promotes enhanced minimum wage for workers in order to increase their purchasing power to consume goods from the enhanced domestic manufacturing industry.  Increase in pension pay and continuation of NYSC stipends until they are employed will tend to sustain consumption at a higher level.

Many Nigerians believe that a strong Naira is necessary at this stage of our economic development in order to secure cheaper imports of necessary capital goods.  Adjustment could be made as occasion demands. There should be a subtle way to protect our domestic industry.