Wednesday, 28 October 2015

PROPER MANAGEMENT, NOT FOREIGN ASSISTANCE

Muhammadu Buhari, President, Federal Republic of Nigeria
Nigeria has just obtained alms of US$2.3 billion to be spread over five years from the United States following the visit there by President Muhammadu Buhari last July. The alms will be provided in the form of assistance by USAID. The available press reports indicate that the National Planning Commission has mapped out activities aimed at reducing extreme poverty across the country in partnership with USAID.

It is proposed to tackle issues of out-of-school children and drop in enrolment figures in parts of the country including the Northeast as well as to stimulate inclusive economic growth and strengthen good governance.

Surprisingly, leaving untouched the known root cause of the country’s rising numbers of people living in extreme poverty and the long-drawn-out stunting of the economy like its predecessors, the Buhari administration would have the public pin hopes for the reversal of the economic situation on the relatively minuscule alms of $460 million per year. That expectation of economic miracle is false; it will plunge the people deeper into hardship.

Experience shows that such assistance is tied and hardly comes in a financial form. The intended sum, which is partly a grant and partly a loan, will end up in, firstly, procuring American goods (which will not be the cheapest available to Nigeria); secondly, deploying American economic hit men disguised as experts with the sole mission of goading the National Planning Commission to adopt policies that compromise the national interest; and thirdly, paying out dollar stipends (this is a veritable bait) to NPC personnel who will be made to undergo training programme in order to be groomed as local or accomplice economic hit men.

It should be noted that the Vice President, Prof. Yemi Osinbajo, who signed the assistance agreement the other day did not specify any field of expertise that Nigeria lacks and which the USAID assistance will bridge.

And Prof. Osinbajo should quickly disabuse himself on the impression that “the assistance is a demonstration that the US wants our country to be a much better place”. History is a factual teacher. The US was part of the Paris/London Clubs of creditor nations from whose real and contrived debt Nigeria exited in 2006.

In addition to collecting $12 billion as final debt extinguishment, both clubs extracted a policy support instrument from Nigeria, by which they commissioned the IMF to institute formally dissipation of the improperly withheld Federation Account oil proceeds by means of the wholesale Dutch auction system and bureau de change thereby ensuring the systemic weakening of the national currency and economy.

Despite the humongous oil earnings since then, the CBN 2013 Annual Report indicates that in 2012, (in that year the price of the benchmark Brent crude oil averaged $112/barrel), the proportion of the population living in extreme poverty or living on $1.25 or less a day rose to 72 per cent.

With the latest classification of those living on $1.90 or less a day as living in extreme poverty, the poverty incidence will be significantly higher. Furthermore, on the verge of softening oil prices, the U.S., which was the largest importer of Nigeria’s crude oil, completely halted imports of Nigerian oil in July 2014 thereby compounding the country’s budgetary woes.

It should be mentioned that the U.S. not only predicted Nigeria’s dismemberment in 2015 but also nudged its occurrence by refusing to sell us arms to help fight insurgency in the Northeast. Do the above instance signify “the U.S. wants our country to be a much better place”?

As for the genuine import requirement for any listed activities in the assistance agreement, these could be better procured from the cheapest sources anywhere in the world because Nigeria does not suffer any foreign exchange constraint. Remittances from Nigerians in the diaspora alone currently stand at some $20 billion annually, more than 43 times the annual tranche of the planned less than altruistic USAID assistance. And contrary to the rules governing international agreements, neither the Federal Executive Council (which had not been constituted at the time the agreement was signed) nor the National Assembly is party to the USAID Assistance agreement even by way of consultation. Therefore, the apparently rushed assistance agreement should be abandoned as stillborn.

On the other hand, the Buhari administration should take to heart the telling position of the European Union that Nigeria is a rich country that does not require foreign aid or assistance for development. Proper management of the country’s ample resources will dissolve the seemingly unyielding problems.

Why does Buhari prefer foreign alms with strings attached to signaling the take-off of proper management of the Nigerian economy?
Quite candidly, the bane of the economy is unintended excessive fiscal deficits incurred across the tiers of government as a result of the CBN’s withholding of Federation Account dollar allocations and substitution in their place of freshly printed purported naira equivalent (which is not the case).

Intuitively, merely ending the harmful effects of the excessive fiscal deficits (which the CBN agreed in August 2007 to implement) by properly converting the Federation Account dollar proceeds to non-inflationary naira revenue for government expenditure will produce a spurt of economic growth like growing farm crops rid of a suffocating blanket of weeds.

Besides, inflation and lending rates will drop to internationally comparable levels while the naira will assume a stable and realistic value. The tight monetary policy stance will be no more. The era of accumulating costly but non-investable national domestic debt will end. Banks would no longer survive solely like leeches on the public sector.

The existing more than N70 trillion (it will expand with time) idle bank lending capacity will begin to be deployed into investment in the various sectors of the economy. That is the road to sustainable and inclusive growth and accelerated reduction in the ranks of those living in extreme poverty.
And the country will earn more foreign exchange (sans inflows from foreign portfolio investors) than it needs for development at a rapid pace. Therefore, Buhari should free himself from the vested interests feeding corruptly on the existing nationally injurious fiscal and monetary policy framework and let Nigerians in their vast numbers begin the journey to economic prosperity now. (guardian)