CBN’s desperate measures – Nigerians should not face desperate times

The Monetary Policy Committee of the Central Bank of Nigeria rose from its meeting of 25th November, 2014 to announce a string of measures ostensibly to reduce pressure on the Naira and achieve macroeconomic stability. The Committee considered vulnerabilities in the domestic as well as the exposure to changes in the global economies.

In the communiqué issued by the Committee, it claimed that “the domestic economy is strong and resilient in the face of strong global head winds”. The Bank also projected a 7 per cent overall growth of the economy in 2014, a figure better than the 5.5% recorded in 2013. The committee equally noted that “the robust expansion in domestic output in the third quarter of 2014 against tepid growth in the global economy was anchored by the improved performance in services, agriculture, trade and industry”.

These are contradictions that are not consistent with the prevailing realities on ground and neither can this be the true premise for justify the drastic panic measures being taken.

The Committee claimed that a total of 600,000 jobs were created in the second and third quarters of 2014 and that most of these jobs were created in the informal sector. In reality, most of these jobs are mere hand-outs based on fanciful schemes with attractive acronyms. They add very little to the National Productivity Index and have been designed for cosmetic political intentions.

The claim by the CBN that under the 200Million Naira Commercial Agriculture Credit Scheme, 166,790 jobs have been created since 2009 is despicable. This amounts to creating 33,000 thousand jobs per year at the cost of 1.2Million Naira per each creation. This is probably the most expensive way of creating jobs in Agriculture anywhere in the world.

The point that I am trying to make is that the mangers of our economy should be sincere with themselves and be sincere with Nigerians. Hiding under the umbrella of international economic development trend to justify our current predicament is misleading and deceitful.

The economy is not as strong as they make us believe and the “global head winds” cannot fully explain our dilemma. Key vulnerabilities in the economy have been noticed a long time ago.
Months ago, I warned that that the economy was headed for hard times if changes were not made immediately. My position was informed by a number of reasons which I observed at that time namely:

- Uncontrolled spending and lack of discipline in budgetary implementation both of which propelled the nation into foreign and domestic debt portfolios

- Foreign debt ($3.9 billion in 2007 to $9.3 billion now)

- Domestic borrowing (now N8.9 trillion)

- Rapid depletion of our external reserves at a height of $68 billion under Yar’Adua in 2008 to as low as $36.75 billion at the end of October 2014

- Misapplication of the excess crude account which stood at $22 billion in 2008 but now as low as $470m with nothing much to show for it in terms of investment with recoverable revenues

- Sluggish effort at diversifying into other non-oil sectors of the Nigerian economy with the attendant exposure to the vagaries of global economy

- The unacceptable cost of governance in which a disproportionate percentage of the budget is being allocated to recurrent expenditures.

I warned that the trend will leave our economy undiversified and make us sleep-walk into austerity.

Nigeria used to have in 2008, a Foreign Exchange Import Cover of up to 24 months but now have less than 7 months cover despite experiencing nearly six years of oil boom. This administration has been engaged in frivolous spending, careless borrowing and poor savings. This extravagance and inability to put enough away to absorb and cushion potential shocks in global oil price fluctuations shows a high level of negligence and lack of vision.

Excessive government borrowing and higher bond repayment prices with higher interest rates have also significantly contributed to the present problem.

It is also alarming that the committee admitted in the Communiqué that the depletion of the foreign exchange “does not seem to have any bearing on the genuine foreign exchange need of the country”.

This is probably the most sincere admission of the Bank to its incapacity to discharge a critical aspect of its mandate.

The Bank needs to fine-tune its policies such that while targeting currency speculators on the one hand, we can boost investors’ confidence on the other to forestall dreadful capital flight.

Most importantly, we need to deliberately intervene for SMEs whose operations require Foreign Expenditure so as to ensure that people can keep their jobs. We cannot afford to worsen the already bad unemployment rate. There is need to suspend all non-essential business regulations that will hamper the growth and sustenance of small businesses until such time that the ECA reaches a certain threshold.

Unfortunately, there has been poor disclosure of true state of the country’s finances. This has made it difficult for anybody with good intention to diagnose and prescribe corrective measures. This has also led to constant mistrust and constant squabbles between the Federal government and the states at FAAC meetings resulting from haphazard and arbitrary allocation of funds to states.

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Read full text here - http://atiku.org/2015/news_events/cbns-desperate-measures-nigerians-should-not-face-desperate-times/

Nigerians must not be allowed to face desperate times from a wicked government. We need a good leader to save us from the situation come 2015.

Atiku Abubakar is the answer!!