BY: INUNG EJIM (Voice of reason, Nigeria)
Happy new year!!! People screamed. Messages of goodwill broadcast.
The world at this period of the year is usually filled with much enthusiasm, optimism and resolution. Nigeria is no different in this regard. About half the country being Christian and fresh out of crossover services with prophesies of good tidings screamed to them and wished for, and the other half optimistic as is the general default of humans at a new beginning that is a new year, it is fair to say this is not a time most people are rationally engaging with their existential realities.
This article is a downer of sorts in examining serious issues while many are still in a festive mood.
It is no longer news that the nation’s economy has been in macroeconomic recession for several quarters now. The rulership of the nation at various levels (National, state and local government) has been battling with declining revenues due to falling commodity prices and this has been very telling for the public sector employees who have had to receive pay cuts, and in some cases, no pay at all for months as a result. The nation’s economy having a high demand for imported goods and produce which requires much foreign exchange to purchase same. The imbalance of trade caused by our falling revenues therefore has seriously hit our purchasing power, as evidenced by the sharp decline in the value of our currency and by the endemic paucity of foreign exchange which has fanned an ever burgeoning black market. These and rising commodity prices in the local markets are just a few of the signs that make the difficulty of these times palpable.
Nigeria is a country where macroeconomic phenomena seldom has an impact on the populace as a huge amount of our population is rural, unemployed and or unengaged with the formal sectors of the economy. This has been evidenced by the failure of high macroeconomic growth for about 15 years -of recent democracy (from 1999 till 2014) that it has been occurring- from trickling down to impacting the proletariat. The recent downturn in economic fortunes has trickled down most successfully to the poor however.
The above casts a gloomy picture no doubt. However, I believe this period -if exploited- can be great for our nation and could be pivotal in improving the personal fortunes of the sagacious.
So here are my policy suggestions for government and financial management suggestions for the citizenry I believe can bring this about.
For government:
- Spend, spend and spend!
Times of fiscal difficulty stimulate a kneejerk reaction of austerity, however austerity at best only slows the bleeding, it doesn’t mend the wound. What the Nigerian economy requires most is a jolt of productive vitality that is capable of invigorating local production of produce and manufacturing necessities that are now too expensive to import due to our forex paucity.
The government needs to spend massively in ramping up local production of necessities like: fertilizers, refined petroleum products & food staples (e.g. rice, cereals…). It also needs to incentivise the rapid formation of replacement industries for those low-technical know-how requiring products which are heavily consumed but are historically imported. Such as: processed foods and beverages, industrial chemicals and production feedstock. Lastly, it needs to invest in, create incentives for and actively encourage the patronage of companies that are locally owned to prevent the exfiltration of profits and thus depletion of foreign reserves.
It goes without saying that the government must cut down on wasteful spending. So funding celebrations, religious pilgrimages, an outsized retinue of aides and personal assistants as well as a long list of largesse recipients MUST stop. The government must also not allocate this fiscal stimulus in a prebendalist way. Crony capitalism -where licences and special permissions are given to friends and allies- will be most unwise at this time. What is rather required is strict, perfect competition in the market to drive down prices and increase quality of returns on investment.
- Borrow to build tomorrow.
With declining public sector revenues, such a massive stimulus is impossible to fund single-handedly from the government coffers. It is necessary therefore for the government to take loans and financial grants.
I recommend however that these be taken primarily if not entirely from the local economy. Local borrowing will greatly prevent revenue exfiltration which is a major depleter of scarce forex at this time. Such borrowing also has the tendency of stimulating the local economy as banks and other lenders are more likely to transfer their profits to the citizenry who are their shareholders and customers. In the event where such is inadequate -as it most likely will be- I recommend that borrowing be done solely from fellow African states and or the African Development Bank (AfDB). The need for this is to curtail the neo-imperialistic coercion, characteristic of foreign borrowing. At all cost we must stay away from IMF, World bank and Western nations provided aid. The restrictions imposed by these on measures like inflation and recurrent expenditure greatly limit governments ability to pursue the first point of massive spending. Borrowing from foreign nations isn’t free from conditionalities which prevent us from breaking our import dependency as such is likely to be tied to procurement of goods and services from companies native to their countries and that defeats attempts to ramp up local capacity.
For the people:
- Local is better.
For long the government has done its best to sensitise the public to patronise made in Nigeria products. This has had little to no meaningful impact though. With the plethora of cheap Chinese imports accessible to the poor and the availability of affordable Western alternatives for the middle class, we have not been able to wean ourselves. As a result, there has historically been poor patronage of locally made commodities and an attendant disincentive for local manufacturing which further worsens our import dependency. All this is changing now in light of the poorer value of our currency and the risen prices of foreign products. There is an explosion of local production. From rice, fruit juices & other beverages to knockoff Yeezy Sneakers, there is an undoubtable increase in local industry to meet the needs of a cash strapped populace.
There is great value for money in buying local. When a bag of imported rice costs over 20,000 naira, and the equivalent quality, long grain golden rice bought at Abakaliki mills costs just 7,000 a bag, it is foolhardy to forgo the bargain alternative. Knockoff clothing and footwear might be stigmatised, but no one can doubt the fact that N1, 000 Aba made Yeezy Sneakers will do the job of their 500 USD (over N200, 000) original (foreign) alternative.
Local being better, also extends to patronising our open air markets over malls, subsistence farmers & farmer collectives over foreign investor backed mega farms, organic produce over processed (costlier) alternatives. In all purchase decisions one makes this period, it’ll be greatly beneficial to privilege Nigerian over foreign alternatives, because, beyond a patriotic duty is the financial wisdom of such choices.
- Buy more, buy timely.
By this, I mean bulk purchases of non-perishables at the start of harvest is wise. Most staple consumables like palm oil, rice, yam, Garri etc. tend to increase steadily in price the farther from their harvest periods you purchase them. A simple decision to bulk purchase these and preserve them will save one the over 100% price increase that they tack on with time. Bulk purchases of perishables like Tomatoes, onions and vegetables when in season is also advisable if one has the ability to process and preserve them.
- Buy land to store value.
In the case that one has spare resources and wishes to preserve (and grow) its value (safe from inflation), there is no safer bet than land. With Nigeria’s population stated to rise to 200 million by mid-century and expansion of urban areas inevitable due to migratory trends, one will be wise to invest in land -cheap ones available at the outskirts of major cities. Land prices keep pace with and often outstrip the rate of inflation. Thus it is a good store of value.
In summation, the hardship in the land is an opportunity for radically refashioning our nation’s economy. From our import dependency, we can transition finally to self-sufficiency in a plethora of sectors, boost local manufacturing capacity and massively decrease unemployment. All of this dependent on the government’s ability to deploy the right policies to stimulate local production and consumption as well as the citizenry’s microeconomic frugality.
2017 holds much promise, but we must take actions to actualise it.
Then shall we flourish.
