As we eagerly await the final results of the presidential and National Assembly elections, the tendency is for people to start thinking that the trauma of the scarcity of the naira will soon be over and new currencies will be uploaded into the banks for distribution to the public immediately after the elections. In fact, we can think that happiness will start flowing through the land as soon as the full results are out. It is better to be on the pessimist chair in this case to avoid disappointment.
I believe the redesigned currency of any denomination is not available presently in the desired quantum to go round. If there were enough N200 notes, the CBN would have asked the banks to use that for payment instead of reverting to the old N200 notes in the last few days. The policy was not well thought of in the first instant but introduced as an ad hoc measure to achieve the Governor of the Central Bank of Nigeria’s Godwin Emefiele’s hidden objectives.
The CBN governor said the introduction of the redesigned currencies would prevent vote buying but we found that those caught with money during the presidential and NASS elections were caught with the redesigned money. He said it would prevent illicit flow of funds. Is it over- or under-invoicing activities that normally involve e-transact or foreign money to be repatriated to Nigeria but kept in Nigerian banks abroad? Or money to be laundered abroad from Nigeria which would normally be in foreign currencies as naira is not accepted in foreign banks or markets? The true objectives are known only to the bank or the governor.
The starting point for the incoming government is to quickly review the implementation of the policy. The policy has not only disrupted consumption but also production, particularly in the informal sector. The disruption has to be addressed quickly to halt the economic decline and hardship on the citizens.
Prior to the currency redesign, the economy has been performing poorly due to the beggar-thy-neighbour nature of the fiscal policy. We were running a rent seeking economy on the one hand and debt dependent economy on the other. Such economic policies have dragged the country down into both debt trap and poverty entrapment. This economic situation in itself requires not just tinkering but massive reengineering. The economic managers have to recalibrate their thinking from rent seeking to production and productivity as well as shifting from deficit budgeting towards cutting our coats according to the size of our cloth. Fortunately, we expect a new government with better ideas and new modus operandi.
Actually, there is ample time for the outgoing government to resolve the currency redesign problems. If it becomes clear that the CBN has not printed enough of the redesigned currencies for distribution as I suspect, the government should just accept the decision to allow the old denominations and new currencies to circulate together for another eight weeks while sorting things out the lapses. There is greater danger in covering up economic misapplication than accepting and correcting the glitch in time. Further delays in reversing the current actions that have negatively affected production, distribution of goods, including the movement of factors of production, and resulting demand for goods and services can be catastrophic. If the current situation is allowed to persist, it can result in the onset of recession which will require greater time and efforts to reverse.
Solving the foregoing problem by the outgoing government will save the incoming government lots of time to fashion out the best way out of the huge problems of debts and poverty. Of course, an economy that is weighed down by debt requires some debt relief and creditors are usually willing to give such latitude as a way of promoting democracy. It is important to seek a moratorium rather than debt forgiveness. In moratorium, we request some period of grace to resume payment of the debt and debt servicing. Debt forgiveness is demeaning, particularly if the country is turned down. There are various ways of managing debts that the country had applied successfully in the past. All these may not be relevant now but some are still useful and applicable for immediate intervention.
More appropriately however, the country should not turn away from foreign loans and revert to domestic credits which have also been misused by the current government. In economics, we do argue that domestic borrowing is mere transfer of funds from surplus to deficit areas within the economy and it is a tolerable situation. But, we also recognise the concept of crowding out. The public and private sectors are competing for funds from the same domestic market. The public sector has the wherewithal to muscle or crowd out, through economic policies, the private sector in the contest.
In most cases, a large share of the funds that goes to the public sector is used to finance consumption and sometimes finance corruption as in the case of funding the shady fuel subsidy and foreign travels. Such expenditures are unproductive compared to credits to the private sector that would go for production and employment cum income generation. The incoming government has to ‘redesign’ its expenditure through scale of preference, scarcity and choice. Scarcity of funds simply means that some items in the budget have to be shelved.
The second contentious issue has to do with rent seeking mentality. This means that the government just sits back and awaits collection of rents from oil, other natural assets and taxes from the private sector as and when due. Even to provide a conducive environment for the productive sector became so difficult for government functionaries as the rental mentality in the form of bribery and corruption has infused every facet of the civil service.
It was when the economy’s revenue was badly affected and the borrowing sources narrowed that the economy’s manager realised that there was oil theft. The oil theft has always been there but ignored because the rents were not seriously affected. Nigeria was one of the countries that corrupted the ‘ease-of-doing-business’ factor in the World Bank measure of development.
The incoming government has a task to change the narrative from rent seeking to a productive economy. Government businesses will have to be redirected towards productivity. Even government ministries, departments and agencies that are supposed to generate funds must be made productive and accountable. The government audit department must not just be allowed to do its work but its queries must be answered. Heads of the MDAs must be accountable.
For instance, the Joint Admissions and Matriculation Board under the leadership of Dibu Ojerinde was getting allocations from the federal budget without returns. The same JAMB under Ishaq Oloyede is getting allocations from the federal budget and making returns in billion naira. The change is not because the government carried out an investigation but because of Oloyede’s character of transparency and accountability which is uncommon in the civil service. Under the leadership of Ojerinde, the followers were so corrupt that snake, a carnivorous animal, became a herbivore, swallowing grass instead of meat. That is the nature of influence of leadership on followership. Other examples are the suspended Accountant General of the Federation, Idris Ahmed, for embezzling billions of naira and the pension fund fraud convict, Abdulrasheed Maina.
There are many Ojerindes and Ahmeds in the MDAs that need to be identified and flushed out with ignominy. It should be part of the first task of the new government to send a message to the civil and public service that rent seeking and other forms of corruption will not be tolerated. Heads of MDAs that have proven themselves as embodiment of transparency and accountability can be transferred to new areas requiring their services and if in the process some others are exposed to have compromised their positions, the rules should be applied without delay. Cleaning up the civil and public services need to be taken as priority if the country is to become productive.
The private sector presently requires interventions from the government not in terms of tax relief but provision of conducive environment such as availability of bank credit at cheap rate when the public sector is not competing with them in the credit market; when the CBN monetary policy rate is not punitive, when electricity and other power sources are relatively cheap and when ease-of-doing-business is properly streamlined. It is hoped that the incoming government will reopen the need for a long-term development plan which had been on the drawing board for almost four years.
