The Governor of Central Bank of Nigeria, Mr Godwin Emefiele, yesterday offered insights into the prevailing economic crisis in the country, explaining that it was caused by the nation’s failure to diversify the base of its economy.
The CBN chief, who spoke in Abuja at the Annual Media Trust Dialogue, with the theme, “Beyond Recession: Towards a Resilient Economy,” also defended the monetary policies of the apex bank, saying they were made in the best interest of majority of Nigerians. Panelists at the dialogue had come down heavily on the central bank’s monetary policies, arguing that they weighed heavily in favour of the few rich in the country. They were particularly critical of its forex policy which allocates 60 percent of the nation’s forex to the manufacturing sector that they said accounts for only 10 per cent of the Gross Domestic Product (GDP).
At the parley were other prominent Nigerians, including the Speaker of House of Representatives, Hon. Yakubu Dogara; Minister of Finance, Mrs. Kemi Adeosun; a former minister of Petroleum Resources, Chief Philip Asiodu; and the Chairman, Standard/IBTC, Mr. Atedo Peterside, who all proffered solutions to the nation’s biting economic hardship.
But Emefiele said the panelists’ perception of the CBN policies was wrong, submitting that the “policies were put in place to help Nigeria pull through the hard time.”
He said the forex policy was meant to stimulate the economy at a time of acute scarcity.
He explained that the country found itself in the present situation due to lack of appropriate commitment to economic diversification, especially when the earnings from oil were as high as $140 per barrel, just as he noted that earnings of the government had risen to as high as $3.2 billion and fell to about $500m per month recently.
According to the governor, there was also a time when the crude oil price stabilised at $105 per barrel over a period of five years.
“What did we do with the huge accretion to the reserves then?” he queried yesterday.
Emefiele therefore, counselled critics of the CBN and government policies that “priority will be given to Nigerian masses by managing the limited resources to provide for industrial raw materials, plants and equipment and agricultural inputs in order to create employment and generate wealth.” One of the panelists, Mr. Atedo Peterside, had raised concern that the foreign exchange policy of the CBN was hurting business interests to which the CBN Governor responded that policy makers don’t make policies in isolation or are designed to hurt the citizenry but with the objectives to improve the life of all concerned and not just for a few powerful and rich individuals.
Many of the speakers at the dialogue, however, suggested radical and bi-partisan measures to build a vibrant economy. They recommended that for the nation to overcome the recession and begin a trajectory of sound economic growth, it must, among others, go back to the era of rolling plans, embark on massive infrastructure development, and align fiscal and monetary policies efficiently.
In his opening remarks, Asiodu who was the chairman of the occasion, embarked on a historical journey, tracing the nation’s present economic stagnation to the abandonment of development planning. He recalled that in the early ’70s, the Yakubu Gowon administration had a comprehensive development plan, which was jettisoned when former President Olusegun Obasanjo emerged as military head of state in 1976.
He recalled that successive administrations also abandoned development plans until the late Gen. Sani Abacha enunciated a broad economic plan, encapsulated under Vision 2010. According to him, by 1998, all the institutions to galvanise efforts towards implementing the 2010 blueprint were already put in place by the Abacha administration. That blueprint, he regretted, was also jettisoned by the civilian administration under former President Obasanjo in 1999.
Asiodu noted that the President Goodluck Jonathan government was to come up with Vision 2020 and the Transformation Agenda, which were not implemented to the letter. He lamented that the lack of political will and commitment to pursue and implement development plans by past administrations set the stage for the deterioration of infrastructure, and brought the nation to the current economic quagmire.
Asiodu observed that in the first republic, Nigeria was at par with the Asian Tigers growth-wise because there were workable development plans. He said it was wrong to look at the economic recession from the standpoint of oil and the precipitous fall in the price of the commodity. Asiodu, who was also a former Chief Economic Adviser to former President Obasanjo, said the fall in the price of oil was not the cause of the nation’s problem, arguing that many African countries without oil were doing well.
He called for a national income policy, and underscored the desirability of such a policy with a flash back to when he was in government.
In her presentation, the Finance Minister, Mrs. Kemi Adeosun, noted that lack of infrastructure had held the country down for too long, regretting that an abysmally low investment on infrastructure had been a trend over the years.
Adeosun lamented that the previous administrations missed the opportunity of investing massively on infrastructure, which she described as the bedrock of economic growth and development, when oil prices were very high.
She also debunked views that Nigeria is an oil economy, describing the notion as erroneous.
According to her, with a daily oil production of 2.2 million barrels of oil per day (mbpd) for a population of about 180 million people, compared to Saudi Arabia’s 10 mbpd for a 30 million population, Nigeria cannot be described as an oil economy.
The minister stated that poor investment on infrastructure, corruption and inability to foresee the future when oil prices were high led to the current economic recession. She noted that the present administration was desirous of navigating the country out of past mistakes and launch it into a sustainable economic growth, anchored on massive infrastructure. Investment in infrastructure, she noted, was the key to the nation’s industrialisation.
In his presentation, the Chairman of Stanbic IBTC Bank, Mr. Atedo Peterside observed that while the present administration was doing some things right, it was equally taking many wrong steps, noting that there was a reluctance on the part of the government to break away from the past.
According to him, the Buhari administration has just this year to make an impact on the economic landscape and the general well-being of the nation as politicking would dominate the scene from 2018.He listed some of the challenges of the administration as the inability to take bold, holistic and audacious approach to harmonise fiscal and monetary policies to attain sound economic outcomes.
Peterside said the government’s monetary and economic policies were at best unclear, citing the existence of multiple forex regimes and half-hearted policy on deregulation, among others.
On what he listed as 11 items he considered as the grey areas that government did not do well, he said not resolving the Niger Delta agitation expeditiously was a major undoing, which had dire economic consequences for the country. That, he said, led to a $6 billion monthly revenue loss, even as he picked hole in the lack of will for the full deregulation of the downstream sector.
He also pooh-poohed the CBN forex policy, particularly its directive to the banks to allocate 60 per cent of their FX resources to the manufacturing sector.
Peterside said it was wrong to allocate 60 per cent FX to a sector that accounts for about 10 per cent of GDP and leave a mere 40 per cent to all the other sectors, adding that it engendered a huge distortionary trend, created panic in the system and led to the disappearance of forex inflows.
He also stated that shying away from the political restructuring of the nation was a serious mistake on the part of the government adding that irrespective of how unpalatable the concept might sound to some people, it was a necessity.
While calling for an open mind on the issue, Peterside, who punctuated every point with “because I love my country,” noted that less than 25 per cent of the nation’s 36 states were economically viable. In his keynote address, the Speaker of the House of Representatives, Hon. Yakubu Dogara, said he was optimistic the economy would come out of the recession soon, adding that the National Assembly was collaborating with the executive to turn the economy around. He regretted that lack of development plans was the nation’s bane, adding that wasting resources to plan and not implementing such plans was wrong. Dogara noted that while the federal government was tackling terrorism, it was disturbing that other security challenges, including armed robbery, kidnapping and other vices were on the prowl.
He regretted that attracting Foreign Direct Investment (FDI) would be difficult in such an atmosphere.