John O. Ifediora.
The current state of affairs in Nigeria would perplex and disturb any observer with the mildest of interest in the country. But for the millions of inhabitants who live the daily experiences of the havoc wrecked on the economy, the seemingly intransigent problems take on existential dimensions. Begin with the obvious….a worsening adult unemployment rate, a free-falling purchasing power of the currency, made more burdensome by rising prices for almost all consumer goods and services, declining quality of healthcare services, and continuous depreciation in quality and kind of available social services. The paucity of electricity is a hardship the average citizen and businesses have already factored into their misery index …they have desensitized their expectations to its unavailability.
But what seems so overwhelming is really not, if only the leadership and elected policy makers know what to do, and are willing to take concrete steps in that direction. They already know the problems facing the nation, but do they have the political will to reach across the cumbersome social, cultural, and religious divides that have perennially vitiated such effort? Time, and growing impatience by the polity have eroded the luxury of political ‘nonchalancy. ‘
What should be done — the case of fighting bureaucratic corruption:
President Buhari means well in his desire to minimize the unimaginable level of bureaucratic corruption that reached dizzying heights in President Jonathan’s administration. But his chosen method is faulty. For anyone not intimately aware of the procedural mechanism in place to recover stolen funds (which covers almost everyone), it would seem that the effort so far is informed by politics, revenge-driven, and insincere. The effort leaves no room to think otherwise if the major participants in the unsavory act of kleptomania are still out and about, untouched and in many instances still have influence on the national scene. Viewed from this prism the prosecutorial effort to curb corruption looks suspiciously selective.
A good approach, and one that has proven effective in democratic nations with reasonably established social institutions, is for the president to work in concert with federal legislative bodies to create a “Special Prosecutor Act” that allows for an independent prosecutor, aided by a cadre of seasoned prosecutors, and law enforcement personnel. Such special prosecutor act, once implemented, would require the appointment of an independent prosecutor with powers to initiate investigations, issue subpoenas, and arrest warrants, and charge to court accused offenders of the law that prohibits corrupt practices by public officials. The act would necessarily endow the prosecutor with unencumbered freedom, subject to established and extant rules of criminal and civil procedures, to recover stolen funds from policy makers and their accomplices. Details on jurisdiction, subject-matter competence, power to grant immunity, and expansion of the original scope of investigation if information uncovers unrelated crimes would be defined by the “Special Prosecutor Act.”
If properly executed, the process is invariably productive, efficient, and fair; but more importantly it obviates the appearance of selective prosecution and the existence of “untouchables” amongst the social elites. Above all the litany of benefits adumbrated, it frees the president to focus on other pressing issues that face the nation. The process of selective prosecution so far exercised by the administration has distracted immensely from the goal of re-energizing the economy. It is equally of economic import to note that even if the current administration is able to recover all the looted funds, their collective impact on the economy now in full recession would be minimal.
The case of a weak currency and Nigeria’s current state of recession:
Only one not informed in the complex world of international trade and the mechanisms of inter-currency exchange rates would wonder why the Naira has fallen so dramatically, and may continue its downward spiral in the short-run. And to such person this question must be put……was there a good reason for the Naira to have traded at one Naira for two US dollars in the early to mid 1970s? What could have justified such “strong” showing by the Naira? Well, it could not be that the Nigerian economy was producing more marketable goods and services than the US or that the international demand for the Naira far surpassed the US dollar. Far from it.
The reason is what economists call pegging…this is a process where Nigerian policy makers elected to use the country’s foreign reserves to prop up the Naira against major international currencies. What this means is that in the 1970s and onwards, the federal government utilized the vast revenue derived from the oil boom to defend and prop up the Naira…this meant needless dissipation of the country’s foreign reserve, but done to afford the country’s dictators and their civilian facilitators the means to acquire foreign assets at subsidized rates. Put differently, the artificially strong Naira, propped up with the country’s foreign reserve, enabled the purchase of dollar-denominated assets with minimal expenditure in Naira, thus benefiting those who controlled the country’s purse strings. Such policy of defending the Naira continued into the 1980s until the country went begging the IMF and the World Bank for loans; one of the conditions demanded by these institutions was devaluation of the Naira (stop using the country’s reserve to defend the Naira); and ever since the naira has continued to fall against all major currencies. The latest decline is more draconian, but reflects the fact that the administration is no longer willing to borrow to defend the Naira; it is now a monetary policy regime that recognizes the economic exigency the country faces, and the expediency of combined free exchange (free float), and mild intervention (managed float).
The Buhari administration had no real good choice in this matter. With a seriously declining revenue portfolio, an economy in recession, and the sovereign wealth fund almost vacant, the options left to the administration were not good…..continue to borrow, and have the funds dissipated through bureaucratic corruption, and artificially propping up the Naira, which in turn deepens the country’s debt level, since the borrowed funds are not benefiting the economy…..or refuse to borrow and have the country live within its means. The administration opted for the latter. Borrowing from the IMF, the World Bank, and the Paris Club would have starved off the current recession if the administration was amenable to such undertaking, and if these institutions can be persuaded to lend more funds to Nigeria. They would have been willing to if Nigerians were willing to abide by the almost certain stringent demands that would be attached to the loans. For now, President Buhari, by temperament, is not showing the willingness to extend his hands to these institutions, and for this, the recession would deepen.
There is nothing the matter with public debt; so long as it is put to uses that conduce to both direct benefits and beneficial externalities. If borrowed funds are used to strengthen Nigeria’s decrepit power sector, road infrastructure, and the appalling educational system, then the returns would be positively impactful. This would be the case in terms of both short-run and long-run benefits ..the current recession would moderate, rising costs would be contained, and adult unemployment reduced to a reasonable level. But for these benefits to be realized a combination of underlying social vectors must be in place — a severely marginalized insurgent groups, a good accounting of the uses of borrowed funds, and a steady-state supply of electricity. It is really not that complicated!
