As Emefiele Has Been Saying

EDIFYING ELUCIDATIONS

0KEY IKECHUKWU

There are three broad scenarios in the economics of survival and avoidable dependency that the Igbo man understands and lives by. The first is that whoever develops a taste for what grows in another man’s farm should procure same legitimately and nurture it for himself, through diligence and patient effort. The second is that the man with a badly managed taste for what grows in the farm of another, but who does not wish to work for it, is in danger of eventually becoming a thief. The third is that if you insist on eating what is produced by others as often as possible, and you are not producing and exchanging things of commensurate value, you will always be in the debt of those who produce what you are crazy about.

The above, in a nutshell, even if couched in characteristic traditional Igbo common sense, is what the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has been saying for a long time now about the relationship between our national productivity, consumption profile and the value of the Naira. As we consume more than we produce, import more than we export, buy more than we sell, harvest less than we plant because of security and other challenges, and run a monocultural economy amidst great possibilities of diversification, our economy grows ever weaker.

Thus shall it remain, no matter the ingenuity and efforts of its central monetary and fiscal regulatory mechanisms, until the right things are done across several frontiers. Yes, the CBN is doing quite a bit on several fronts but, as Emefiele himself said at the maiden bi-annual non-oil export summit, last week: Monetary policy alone cannot solve our FX challenges or, single-handed, reflate the Nigerian economy. Hear him: “These problems call for urgent design and steadfast implementation of other supportive, structural, and complementary policies that are broad based, coordinated and focused on complementing the work of the monetary authority.”

The impact of the COVID-19 pandemic on global logistic value chains and local security challenges are real. So is the urgent need for a more diversified economy; and monetary policy alone simply cannot carry the full weight of what it takes to navigate the current challenges of the Nigerian state, especially against the background of its existing political economy. Only a cocktail of strategies that can help the country earn more stable and sustainable inflows of foreign exchange can make a difference today.

The fact that the nation recorded a significant increase in non-oil export repatriation within a short period of implementing the Non-Oil FX Rebate Scheme is a pointer to what is possible. This does not remove the fact that Emefiele’s call is not new. What is perhaps of desperate concern today is its urgency. The stridency of his calls is driven by the fact that we now have a larger cocktail of economy-impeding factors than at any other time in our national life. Besides the fact that the person who produces less has less to sell, you have the unique situation where farms are raided by marauders; such that there is actually nothing to harvest and, therefore, nothing whatsoever to sell. Thus inflation, joblessness and crime walk the land.

The central narrative of Mahatma Gandhi to his people was that they create jobs in order countries when they patronize only foreign-made goods. It took some time for the message to sink in, but it eventually did. That was how India’s cotton farms and textile mills roared back to life. That was how unemployment declined, local earnings grew, family wealth multiplied, overall national income blossomed and India’s reckoning in international trade rose. The story is the same for all nations that have risen out of dreary economic waters in the last fifty years. It can be Nigeria’s story, also. Tata Motors was a laughing stock when it started. Remember what it was like for that company 60 years ago? Look at it today.

We cannot continue on the path of low productivity, high consumption of what we do not produce and unbelievable internal security problems, retain a monocultural economy and then expect (and even demand) that the national currency should magically gain in value. What did we sell two weeks ago to earn the amount of dollars deployed in the party primaries of our political parties? Has the dollar come down from that new high yet? The national assembly cannot decree that the dollar should drop in value. A presidential fiat will be as useless in that regard as well. Expressions of anger, and even calls for the head of the CBN governor, will not remove or address the structural, institutional and other challenges that are rooted in the political economy of the Nigerian State as it exists today.

Perhaps a new CBN governor will set up his own armed forces to protect farmlands, and farmers from bandits and herders? Oh, no, I get it: he will announce a new value for the Naira and make sure everyone complies with the directive? Let us look at recent measures taken by the bank to: (1) Raise the cost of borrowing so we will borrow a bit less and (2) increase the interest we get from savings. The idea is to make people save more. It is also intended to make people invest more. This means more pressure on the cashflows, as higher debt service obligations will mount. And, wait for this, equity investors will be more demanding because the cost of capital will shoot through the sky. With higher costs of borrowing, and the consequent increased financial risk for companies, everyone will be careful where he puts his money. So, logically speaking, it should all reduce how much money is in circulation. This is expected to impact inflation and lead to an overall brighter economic outlook. That is, logically speaking.

The real issue on the table, however, is that we simply must wake up to the fact that expansion of the earning capacity of the economy, through wider commodity options, must compliment the best monetary, or other, policies anyone can design. Out national road infrastructure must come back to motorable life. The insecurity in the land does not conduce to any form of productivity or developmental initiatives. The power sector must be rescued from its current state of “powerlessness”. We need realistic and sustainable investments in education, health and other social schemes, to save the Nigerian state today. As Emefiele said: “These problems call for urgent design and steadfast implementation of other supportive, structural, and complementary policies that are broad based, coordinated and focused on complementing the work of the monetary authority.”

As was said on this page seven months ago, under the title: “What the CBN Cannot Do”: “When financial outflows into the agricultural sector do not yield the expected returns due to insecurity, the projected gains in terms of food availability, food security and forex earnings from food exports go up in smoke. Thus a “silo” conversation on diversification of the national economy, especially with agriculture in focus, which does not also simultaneously address security and national road and transport infrastructure is an exercise in self-delusion. You do not drive foreign exchange earnings … when farmers cannot go to their farms.” And it is not the business of the CBN to provide national security, or protect local farmers.

While it is true that the CBN’s Anchor Borrowers Programme, among others, has created millions of jobs, taken the youths of many communities, especially rice farming communities, off the crime path and rescued many local economies, it is also true that Nigerians need to better understand what the issues really are. As was said here, back then: “Only economy-reflating and socially impactful efforts, as seen in such initiatives, in addition to consuming what we produce and producing what we consume, will give us the prospect of bringing up the value of the National Currency and keeping it up”.

A nation with a predominantly consumption-driven economy cannot suddenly catapult itself into the Neverland of foreign exchange El Dorado. You make money from what you produce and sell, or from what you can do and be paid for. You also buy with what you have earned from either goods or services you offered. You get paid nothing when you produce nothing. You spend more than you earn when you produce and sell far less than you buy. The person who produces nothing and earns nothing, but buys a lot, must be getting the money for his purchases from somewhere. If in addition to producing nothings the person also has some savings, then he must be depleting his savings. But what if this person also has no saving, in addition to producing nothing, that means he must be borrowing. And to borrow is to get credit for present needs, with payment deferred to a future date, right? Well, that is our lot in Nigeria today. And we are still borrowing!

We shall end on the very conclusions drawn and presented by a Non-Partisan RoundTable on pressing national issues, which was organized by Development Specs Academy, and which held on May 19 in Abuja: “(1) Increased productivity is a critical success factor for any nation that wants a strong and stable national currency, (2) Consumption patterns and product preferences have a direct impact on a nation’s Balance of trade, especially with regards to deficits, (3) The Nigerian State, and the citizenry, must consume mostly what they produce and produce mostly what they consume, or retain some of the economic debilities on the table at the moment, (4) the public is only interested in measuring the value of every economic intervention against the background of impact, (5) The operating environment, in our own case an environment where insecurity threatens national productivity in the area of agriculture and food security, can undermine the best policy initiatives and economic intervention programmes.”

The above conclusions are valid. They reinforce, and reiterate, Emefiele’s repeated calls. Let us pay attention to the things that really matter.