PAST BUT PRESENT

Victor C. Ariole argues that the central bank is taking Nigerians through another difficult route

Dollarisation reinforces the need for offsetting structural policies… internalizing social risk, strengthening the infrastructure supporting the importation of loanable funds. The practicality of such policies must understand the erosion of national frontiers by trade, tourism, migration, pension issues, being viewed from the point of view of capital account liberalization.

– Excerpt from Globalization and National Financial System

Dr. Kalu Idika Kalu, a former minister during the Military era that introduced Structural Adjustment Programme (SAP) that landed Nigeria’s naira from $1 to N0.90, to $1 to almost N10, over 1000% depreciation, was on Sunrise Daily Channel TV, lamenting that Nigerians are still lacking true understanding of SAP after 40 years of that event. He sees it as going to be repeated if Central Bank of Nigeria (CBN) fails to adjust its own understanding of global economy.

According to him, SAP has different names at different times and it was the name that suited at the time the Korean economy needed to re-position its economy in the face of excessive raw material importation to keep its manufacturing industries going, and needed to reduce its emphasis on petroleum products then for effective marginal contribution in cost behaviour of manufactured goods so as to remain relevant in its manufacturing activities.

So, he wonders what CBN is doing with inventing high interest rate that has no weight of marginal contribution in promoting positively the transportation sector, agriculture sector, manufacturing sector, mining sector and even the Creative Arts sector; that is, helping to channel resources into areas of priority instead of having what people like Bismarck Rewane call glut capital as cash reserve ratio and interest rate are raised as if Nigeria has no need for funds, and unemployment rate goes berserk.

SAP, according to Idika, is a continuous adjustment programme needed in any given time to align national resources with priority areas so as to maintain an economy and to allow it to run at an optimum capacity as against keeping over 50% of its production capacity dormant or damped (Common sense illustration is like coming to work twice in a week).

Take for example the recent off-budget CFA 3 trillion, about $5 billion, accessed by Côte d’Ivoire from the World Bank that is tied to 24 projects and at the rate of over 20% disbursement par tranche as the projects’ execution shows great progress and ends well in making returns; combined with its enablement of employment and marginal impute to the well being of the Ivoiriens. No fewer than 100,000 Ivoiriens could be involved.

Such approach is adopted wrongly by Nigeria as it relies on NNPC’s capacity to mortgage Nigeria’s crude for credit advance, the way we heard of Buhari’s government and crude oil for cash swap. Somehow it is termed ways and means.

For example, Côte d’Ivoire, like Morocco and Kenya, export products ranging from fruits, Cocoa, coffee, cassava, notwithstanding its available petroleum resources, to Europe and other destinations on daily basis as its seaports and air freight processes are seamless in operation. That, certainly, cannot be said of Nigeria in order to earn credibility in the World Trade Circle.

The Korean government at the time they experienced  their own brand of SAP, did well in plugging the waste avenues and channelled effectively their resources to

invent production lines that align with their economic structure and strength for unrelenting

functional manufacturing items that are needed to make them competitive against their immediate competitors like Malaysia , Taiwan, China then.

It was also a time some Nigerians went investing in Korean economy as Koreans welcomed investors with as small as $5000. Even the administration of a given university in Nigeria plugged into it and made a lot of money at its later peak moment in the 90s, thought it was seen as a scandal without correct understanding of what it was; like Dr. Idika attributes to weak understanding of the global economy by Nigerians.

The above quotation that serves as peg to this article is also pregnant with meanings that CBN seems not to be taking note of.

The Governor of CBN came on board as Impact Investment Expert and it seems the knowledge is not well applied like the Ivoirien experience suggests and like Korean awakening proved. Subsidy is embedded in most economy of many countries as emphasized by Dr. Idika. However, experts look at it from the perspective of monitoring how its removal whenever deemed necessary is contributing to the marginal well beings of people, not the negatively discriminating one of Nigeria.

The key word here is marginal. I am neither an accountant nor an economist but the knowledge of integration of disciplines I gathered in an MBA class, and a study of why France’s economy is weak tells me that aspiration of experts to get average cost to match marginal cost is greatly genial and, possibly, where artificial intelligence operation could mark its unique selling proposal. In deed, this is where I feel Nigerian professionals are not intervening enough.

The average cost of producing Nigeria’s crude oil after over 60 years of production ought to have moved to a marginal rate towards reaching very weak cost that Nigerians ought to see in it some benefit of economy of scale that make profit accruable enormous. Just like any intent of SAP, or whichever name you give it, like CBN interest in impact investment policy intends to do, should be pointing at projects of impacts which must start yielding fruits in quite near future, otherwise CBN is taking Nigeria to a blind alléy.

Yes, CBN is on the lane of SAP, like the quotes relate, as dollarization of the economy; ordering Banks to re-capitalize as if Nigeria has not been there before. Supposedly, such re-capitalization could attract importation of loanable funds available in the world open finance market at a very low one-digit interest rate whether in London, Paris or New York. However, CBN is assuming that weak Nigerians are not of interest to its policies; that is, Nigerians who are not japaing, not involved in informal transborder trades, not capable of getting foreign jobs.

In effect Nigerians who are in the majority, living from hand to mouth are to be left on their own. Nigerians need to question such policies as such policies fail in observing BETA Social Risks. The risk is very high and it is already “cannibalizing” both poor Nigerians and valuable Nigerian assets.

Ariole is Professor of French and Francophone Studies at University of Lagos