By Dr. Ahmed Adamu
Recently, I have written and spoken on many media about the current economic crisis in Nigeria. Some of my recent articles can be accessed via my blog at www.ahmedadamu.blogspot.com.ng. Subsequently, I was invited to New York to speak on the above topic by the Nigerian Young Professional Forum, even though I could not make it to New York, I decided to write the following short piece as the extension (different perspective) of some of my recent articles on the Nigerian economic crisis, which was presented in the event.
Nigerians expect so much from the current administration, and this was as a result of the appealing and ambitious campaign promises during the elections by the ruling party. Coming to power, realities defer significantly from fantasies and expectations, the politicians are now caught in the cross-fire. Things are not going well, but they (politicians) decided to put the blame on the past administration, the easiest exit, though valid. However, things are continuously getting out of hand, but one thing that we all have to keep doing as citizens is to continue hoping and believing in “May Be”. May be if prices of crude oil increases, we might get out of recession. May be Naira will appreciate if we develop the real sector of the economy.
|picture sourced from http://vincentnwani.com|
According to the Sheikh Al-Maktoum (The King of Dubai), “Leaders must always look forward, further than anyone else, in order to anticipate the future, predict the challenges it will bring, and prepare their people to face them”. If the past administrations will have to take the blame for the current economic conditions for not saving to build the real sector and provide the necessary infrastructures, the current administration must also be ready to accept the responsibility of thinking about the future and the challenges it might hold, to avoid been blamed too. Therefore, there is need to develop the country’s economic roadmap for the next 20 years or more, and the plan of actions toward achieving the set targets.
Nigerian economy is cursed for relying heavily for so long on hydrocarbons and depending on the subsidised importation of foreign goods and services. Now due to low oil revenue, currency depreciation and increasing volume of importation, government cannot continue to subsidize foreign currency demand. Subsequently, inflation rose to the highest level of 17%, and foreign reserves declined to the decade’s lowest level of $26 billion. Poverty is becoming endemic as many depend on government, as access to business capital and infrastructure are lacking. This limited the disposable income and wellbeing of the people. Agricultural outputs are not optimised due to the outdated agricultural system. Population is on the increase amidst inadequate infrastructure and income. Which direction are we going? what is up in our front?, the government must give answers to many of these questions.
The challenges are numerous, and they must be identified and strategically chosen to address step by step. Things are moving very fast and problems are compounding quickly. There is need for aggression and proactiveness to address ever evolving economic challenges. Being so protective and too cautious will not auger well in the period of emergency. Action is the best way to solution.
Moving forward, the government must identify the major import demands and set targets and action plan to eliminate them. For example, government might set target of five years to stop importation of refined petroleum. How can we achieve that? we have to allocate substantial amount of resources and policies to encourage construction and development of local petroleum refining capability. This must be rigorous and inclusive, where private sector plays significant role. So, by the end of this five years, the 15% demand for foreign currency must be eliminated. So, the import demand will then reduce to 85%. In addition, the importation of plastics (4%) would have been eliminated as well.
The Importation of vehicles, which constitute 8% of the total imports, can be eliminated too by providing efficient and adequate public transport systems, so that individuals would not need to own private vehicles, and the need to import them will not exist. So, there is need for rigorous development of inter and intra state public transport systems, which include within town and inter towns trains and public busses. This will result to reduction in the demand for transport fuels, and enable saving for other consumption and investment purposes. If can do this, the total imports by then will reduce to 73%.
Electronic equipment, machines, engines and pumps contribute 22% of the Nigerian imports; to reduce or eliminate some of these imports, public and private sector must collaborate to set up industries that produces these specific items. Foreign companies can also be invited to open factories or workshops within Nigeria, through any possible incentive. It is easy to achieve this due to the recent improvement in security and access to energy. Achieving this will reduce the import demand to around 50%. This is a feasible target, only if we plan for it.
If we can achieve above, then achieving local sufficiency for Pharmaceuticals, iron and steel will be easy. And funny enough, the $814 million spent for importation of fish in 2015 can be eliminated by encouraging and establishing fish rearing and processing firms.
Finally, if we can reduce the import demands by 50%, the Naira will appreciate significantly, and our foreign reserves will appreciate too. Unemployment, inflation and poverty will reduce. But, there has to be plan and commitment. This cannot be possible without competent economic team made up of public, private and academic sectors. There has to be genuine reduction in unnecessary expenditure from the government. Private individuals must stop unnecessary foreign trips for holidays, shopping, education, and medicals. Government can enforce this where necessary. The government must listen and be open to criticism and suggestions. It must effectively communicate and engage with public on its activities and plans.
Regarding the recent speculation about the sale of federal assets, I would advise the Federal government not to sell public assets, because these assets remit revenue that will stream for years to come. You don’t kill source of income for immediate need. You can only use the profit/earning for immediate need. Government needs to diversify sources of income not to switch source of income. Efficiency can be optimised even in public sector. Government should raise money through tax enforcement, open market operation, and infrastructure tax for high income earners. These public assets are the sources of income that can be used to fund infrastructural development and social welfare. Instead, government should motivate private sector to construct and operate infrastructures for a period after recovery. Private individuals willing to buy devalued public assets should partner to establish their own capital assets and compete with that of the government.
Dr. Ahmed Adamu,
Petroleum Economist and Development Expert,
Pioneer Global Chairperson of Commonwealth Youth Council,
University Lecturer (Economics), Umaru Musa Yar’adua University Katsina.