The Surefire Truth about Our Sliding Economy

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Ring True

with Yemi Adebowale; yemi.adebowale@thisdaylive.com; 07013940521 (text only)

Minister of Information and Culture, Lai Mohammed continued with his usual embarrassing rhetoric about our slithering economy on December 20, remarking that the current hardship and economic crisis “are not the making” of the present administration.  The minister, who spoke at a special town hall meeting for youth held at the Presidential Villa, stressed that the hardship was brought about by years of lack of planning, profligacy, mismanagement of funds, massive corruption and lack of investment in social programmes by the previous administration. The low price of crude oil is also persistently chanted by Mohammed and his cohorts as being responsible for our economic woes.

The truth that must be told is that the current economic recession and hardship in this great country is a product of the slipshod economic policies of the Buhari administration. All these factors listed by Mohammed are just propaganda. For example, the current forex policy is unfriendly and stifling. Banning deposit into domiciliary accounts (which was reversed after a big damage had been done), restricting international transfers, limiting USD to certain sectors, while hindering several sectors, are the most preposterous of these policies. Worse still, our President has been going all about de-marketing our nation, telling the international community that virtually everybody in Nigeria is corrupt. So, which foreign investor will bring money into such a system?

We are in this dire economic situation because foreign investors have lost confidence in our economy and in the Buhari administration. In the last 18 months, many have liquidated their investments and have been massively withdrawing their funds from Nigeria. The investors, desperate to get out of Nigeria, are paying any amount to exchange their Naira for USD. Billions of USD was moved out in this process, which led to the crash of the Naira and massive job loss.
Let me give pragmatic examples here, using foreign airlines. United States-based United Airlines shut its Lagos- Houston route in June this year, ending the carrier’s only route to Africa because of difficulties in remitting revenue from tickets sold in Nigeria. “Repatriation has been a significant issue, as has been the downturn in the energy sector,” said United Airlines’ spokesman, Jonathan Guerin. The Boeing 787 serving Lagos-Houston route was diverted to the San Francisco-Tel Aviv route by United and was expanded to daily in October from three times weekly. So, United has simply moved the investment to Israel from Nigeria.

Spanish carrier, Iberia Airline pulled out of Nigeria in May, also citing difficulties in remitting its tickets’ revenue. Another international carrier, Emirates reduced it frequencies from a massive 21 weekly flights to Nigeria, to just 7. In fact, Emirates shut its Dubai-Abuja route, all due to this same crooked forex policy.
According to the International Air Transport Association, as at May 2016, foreign airlines had about $575 million trapped in Nigeria. You can see why these airlines are fleeing Nigeria and reducing frequencies.
South African giant, Truworths announced its exit from Nigeria back in February, due to the same unfriendly economic policies listed above. South Africa’s Tiger Brands also sold off its stake in Dangote Flour, following challenging economic environment in Nigeria. Sun International, with 49 per cent stake in Federal Palace Hotel (Lagos) is leaving Nigeria, also due to challenging economic conditions and regulatory dispute.
In the last 18 months, 20 foreign shipping companies have departed Nigeria, sacking over 3000 Nigerians. According to the President of the Dockworkers Union of Nigeria, Anthony Emmanuel, federal government’s importation policy is largely responsible for the closure of some of the shipping businesses.

The truth is that Nigeria has suddenly lost its status as destination of choice for foreign investors because of the slipshod economic policies of the Buhari administration. This is why we are facing this economic mess; and this is why massive unemployment has persisted. Even the National Bureau of Statistics (NBS) acknowledged this much in its current capital importation report. An analysis of the NBS figures showed that the level of investment inflow into the country recorded a huge decline of $4.51 billion, from $8.08 billion in the first nine months of 2015 to $3.57 billion in the same period of 2016. This amounted to a decline of 55.2 per cent. The report states further: “Investors may be concerned about whether or not they will be able to repatriate the earnings from their investments, given the current controls on the exchange rate. In addition, as growth has slowed in recent quarters, there may be concerns about the profitability of such investments.” Clearly, foreign investors are running away from Nigeria.

Local manufacturers are also going through hell due to these same stuffy economic policies. According to the Manufacturers Association of Nigeria, hundreds of their members have shut down in the last 18 months, while thousands of workers are being sacked on a daily basis. Average industrial capacity utilisation also nosedived to about 30 per cent from a high of about 49% during the Jonathan administration. Nigerian Manufacturers have never had it so bad in the 55-year history of this nation. Even our own Erisco tomato processing company was shut few weeks back, throwing over 3000 Nigerians into the labour market
Early this year, PZ Cussons Plc confirmed that it was paying as much as 70 per cent more than the official rate for Dollars in order to remain in business. It added: “Whilst the official Naira exchange rate continues to be stable, a lack of availability at that rate is resulting in the majority of Dollars being purchased at a premium of 50 per cent to 70 per cent. The resultant cost impact is being managed through changes to relative pricing in an environment where trading conditions remain challenging. The situation in Nigeria remains extremely fluid.”

According to the NBS, the harsh economic situation in the country has thrown 1.7 million Nigerians into the job market in the last nine months of 2016. The NBS report, covering January to September this year, showed that the number of unemployed Nigerians rose from 9.48 million at the beginning of the year to 11.19 million by September ending. The NBS raised the alarm that the country’s unemployment rate had increased to 13.9 per cent in the third quarter of 2016 from 13.3 per cent in the second quarter. The report states that the number of unemployed in the labour force increased by 555,311 persons, while the underemployment rate rose from 19.3 per cent in second quarter to 19.7 per cent in the third quarter.

The foundation of this crippling economic crisis was laid by the Buhari administration during its first few months in power, due to its numerous actions and inactions. The major school boy errors were the failure to devalue the Naira and refusal to remove subsidy on petroleum products on time, amid dwindling forex inflow. When Buhari assumed office, it was obvious that the dubious subsidy regime was no longer sustainable due to the dwindling price of crude oil and falling forex inflow. But because Buhari and his cohorts in the then opposition party had teamed up with labour unions to frustrate attempts by the Jonathan administration to remove fuel subsidy, it became difficult for him to implement subsidy removal. So, Buhari settled for the populist path and for over a year, spent billions of USD, subsidizing the warped fuel subsidy regime. Billions of USD was also wasted, sustaining a dubious exchange rate of N197/$. Our reserves were depleted, trying to sustain this N197/$ exchange rate.

For over a year, the consequences of the fixed forex rate manifested in the wide gap between the official and parallel market rates, acute forex scarcity, mounting trade debts, increasing factory closures, unavailability of investors to meet offshore obligations, mounting inflationary pressures and sharp drop in capital inflows. By the time the Buhari administration eventually removed subsidy and devalued the Naira in the middle of 2016, huge irreparable damage had been done to the Nigerian economy. This is the mess, clearly caused by this administration.
The Buhari administration must learn to take responsibility, instead of trying to shift the blame of our economic mess to the Jonathan administration. It must come up with and implement policies that will help restore investors’ confidence in this economy, instead of unnecessary propaganda. It must come up with bold policies and programmes that will see portfolio investors returning to this country. This administration must sit down with manufacturers and agree on policies and programmes that will lead to increase in industrial capacity utilisation. Lai Mohammed and his cohorts must spend quality time thinking about right policies to fix Nigeria’s current economic woes instead of this persistent trickery.

This morning, I urge Buhari and his economic team (if there is any) to reflect on this note from the International Monetary Fund: “Eliminating existing macroeconomic imbalances and achieving sustained private sector-led growth require a renewed focus on ensuring the competitiveness of the economy. As part of a credible package of policies, the exchange rate should be allowed to reflect market forces more and restrictions on access to foreign exchange removed, while improving the functioning of the Interbank Foreign Exchange Market (IFEM). It will be important for the regulatory and supervisory frameworks to ensure a strong and resilient financial sector that can support private sector investment across production segments (including SMEs) at reasonable financing costs.”
I hope the President will read this and act appropriately.

Ambode Must Stop Wasting Money on Gigs
In the last 19 months, Governor Akinwunmi Ambode of Lagos State has been spending a lot of tax payers’ money on sponsorship of gigs. This has to stop, considering the huge infrastructural challenges across this state. An eight-day music festival tagged “One Lagos Fiesta” that has gulped millions of Naira, is about now being rounded off across the state. Just few weeks back was the “Lagos Street Party.” There was the “Evening with Ambode” that featured legends like Ebenezer Obey, Lagbaja, Shina Peters and Salawa Abeni. The state was also a leading sponsor of AFRIMA, a pan African music award held in Lagos this year. These gigs should be private sector-driven. That is the standard in developed societies. Those around Ambode won’t tell him this because of what they are benefiting from the gigs. I sincerely hope that 2017 will be different. Funds going into these shows should be redirected, to tackle infrastructural challenges, particularly in blighted communities across the state. It is very sad to note that many public schools in this state lack functional toilets, water and basic infrastructure. In this same Lagos, pupils still sit on bare floor in some public schools. Inner roads are in a real mess in most LCDAs. I can say with all authority that 99 per cent of inner roads in Ikorodu West and Ikorodu North LCDAs are in tatters. The few public schools in these areas are in shreds. This governor should visit these areas unaccompanied, to experience what I am saying.
Ambode needs to pick a copy of The Economist Intelligence Unit (EIU) 2016 “Global Liveability Ranking” and spend quality time reading it. In this document, Lagos was ranked amongst the worst cities to live globally. Nigeria’s most populous city was considered the 3rd least (138) liveable city in the world on the list of 140. The survey took account of cities’ healthcare, education, safety, culture, environment and infrastructure. Damascus, the war-ravaged Syrian capital city, languishes at the bottom of the table, followed by Tripoli in Libya and our beloved Lagos.
A government, whose 2017 budget comes with a huge N170 billion deficit and working on loan to fund it, has no business carousing. There is a lot of work to be done in Lagos. Sponsorships of gigs must stop.