A country of Minors

I said before, and I repeat that Nigeria is a country that major in Minors; but I'm beginning to think we are also minors. Minors throw tantrum, they blame others, they can't make decisions and follow throw. Minors are children, they're not matured. They feel helpless. Here are four reasons why I think we are exhibiting Advance Minors Syndrome (AMS). Think of it:

1. Ogbeni is to blame for not being able to pay salaries for borrowing when the FG insist on selling its dollar to Dangote for 197 naira indeed of 340, reducing Osun's take from 3.3bn to 1.7bn? Ok , Osun had 1.695 bn worth of debt, but at least 1.6bn will remain if we are not playing Ostrich with the Forex to pay salaries and fuel his helicopter 😂

Some of you are crying about the subsidy for the rich kids Vis CBN employment. The biggest subsidy is the undersold naira given to the richest among us. Yet some say we've been blowing grammar. Ok now. Complex as the issue may be, Nigerians sweat the small stuff while the big elephant is ignored.

2. Ocholi's driver is to blame for overspeeding, but who is to blame for the massive craters that destroyed the tires on Kaduna-Abuja road? The FRSC guy gave a presentation and then put fixing the bad road as the last item when Fashola was seating in the room. 9 months after swearing in, we are deceiving ourselves!

3. Vandals are to blame for power outage and system collapse , when we are yet to point to exactly which installation was vandalized? Truth was we celebrate misinformation.  We told them when celebration ensued  late last year that the combination of weather and rains is making their day. Now that the heat is up, and our under invested transmission system is collapsing in response, they're blaming unnamed vandals. Who is deceiving who?

What happened to just being truthful and actioning a plan to decentralize the transmission system in 9-18 months while we build 100 MW (all sources welcomed) in every state? This is what we promised, lets do it!

4. Lastly, we've blamed the petrol scarcity that started before the strikes on the unions? Only in Nigeria! Now that we are 10 days after the strikes and the queues are refusing to disappear how about we admit we made a grave error in not moving fast enough to reform the sector? How about we look at the very premise of price control (when petrol prices are at historic lows) and explore if this is smart policy or dumb policy?

Oh no! Too hard! A nation of minors.

False Devaluation Debate of Emefiele and Buhari's Budget Excuses

The problem with Emefiele is that he is majoring in minors. The real problem of Nigeria is not devaluation vs ostrich policy. Devaluation has already taken place- the act of sending medical bills to parallel market is an act of devaluation. The selling of official rate to Hajj and pilgrimage folks is an act of economic subsidy of unproductive activities. Hence the debate is a false one. The real solution is revaluation.

The mechanism of forex demand and supply of Nigeria today is faulty. Emefiele however lacks the intellectual depth or the boldness to address this salient fact. There is no real forex "market" in Nigeria, where 90% of supply is dominated by one player - the Central Bank. This should not be so. The solution to Nigeria's problem as such is simple - and this will actually lead to a single rate market, and that rate will neither be 200 nor 345. It will be somewhere in between and enable banks and industry to focus on what matters instead of the nonsense going on now- growing production instead of worrying about exchange rate .

This solution is in constitution. All consolidated revenue should be distributed to all constituent bodies in the manner in which they were received. If they were received in dollar, yen, pounds et al- they should be distributed in that manner. This frees the CBN from the headache of being the sole market maker. Dollar and other currencies will be in the hands of 37-800 players who can trade it for naira or not with banks whom they will bank with who won't in turn distinguish these deposits or inflow different from normal exporters as it were and will be able to then stimulate a true forex market free from Emefiele fiat and market distorting nonsense. This is the structural solution that a compromised nonetheless intellectually Lilliputian CBN governor can never provide. You can't give what you don't have. Emefiele reflects the president that chose him.

PS: As I said earlier the independence of central banks was enshrined in central banking doctrine in the 1900s based on the reality that given the tough monetary decisions necessary to maintain a balanced economy, politicians should not drive both fiscal and monetary policy. In fact, it is in their interest to be insulated from it. Emefiele however has exposed the President by his inability to be independent because he is criminally exposed. The tail is now wagging the dog!

The only group benefitting from the current Emefiele Regime of fire brigade and jujitsu management of our monetary policy are the banks. Already denied the easy money of fixing government money via TSA with implicit carried interest of 8-25%, Emefiele have provided his buddies almost a 80% carried interest in Forex. I have friends that work in the industry and they confirm this. The forex policy have negated the potential effect of TSA which would have forced banks to lend to the real sector to stay in business. Now it is only their treasury department that are working- churning dollars supposedly allocated to manufacturers to round tripping - with no positive impact on the economy but their wallets. Nigerians need pitch forks and knives to deal with Emefiele and his band of bandit bankers!

The President and His Budget

The President should please start over, by assuming the first step in reorganizing the government was cutting down ministries Vis his newly appointed ministers to 24. Now ask the ministers to set the agenda, look through their ministries for who can implement it among current staff, examine existing agencies and parastatals and examine their viability and sustainability - recommend the ones to stay, go or merge, and then prepare a budget to fit the mission and the staffing.  Where staff are redundant by the exercise, launch a national retraining and redeployment program with part of the savings to not only engage them but boost the economy Vis investments, cooperatives and entrepreneurship. On the national level introduce serious ICT policy and shared services  mentality in ICT, Facilities and Building use by MDAs and vehicle use to cut cost.  Also constitute the NATIONAL PROCUREMENT COUNCIL and enforce uniform & sensible pricing and standards. A deep look at our foreign missions and if we need that many must also be undertaken . Time to tighten our belt!

Nigeria's Unique Federalism, its Unintended Consequences and the Middle Road

The field of political economics is often underestimated, when trying to understand the nature of nations and the socio-political environment of her people. Politics is intricately tied to economics, because more often than not - it drives it. This is why context on this blog in discussing Nigeria and her economic development must be given in view of our her politics - past and present.

Speaking about the past, nearly all the economic problem Nigeria is grappling with today - high corruption & leakages, public sector and infrastructure deficit, heavy dependence on a single resource and resulting unemployment, foreign exchange crisis and potential recession in face of dwindling global oil prices, as well as the lurking monster of insecurity - can be traced to her political structure. 

Nigeria's political structure is unique in the world. Federalist by name, it has a supremely strong central government that touches every facet of lives of her citizen, is by far the largest spender in the economy and employer as well, and is definitely the single largest stumbling block to the economic progress of her people. Under civilian rule, even though State Governors have equally received unique supreme powers within their states, their influence is extremely limited by the purse which is still by and large controlled by the Federal Government who controls the National Oil Company i.e.  NNPC - the number one money spinner in the country.

The unique structure of NNPC is food for thought. Here is a company owned by Nigeria, not just the Federal Government, but whom 36 of its 37 shareholders have no say whatsoever in how it is run. The state governments are all at the mercy of what NNPC managers who report directly to the President have to say. The Federal Government of course plies NNPC into its own purse, and state governors only get peanuts when it is all said and done.

But there is a reason why it is so...

Why Centralization?

The political history of Nigeria was one foundationally built on regionalism and devolution, true federalism and self determination but wrongly structured to favour the Big 3 at independence. The British handed over Nigeria to the Big 3 tribes of Nigeria, who went ahead to explore the very precipice of disintegration by never agreeing to doing anything right while trampling on the rights of Nigeria's vast minorities of 347 ethnic groups or more. Of course this led to the Civil War, where millions were slaughtered and ushered in an era of military led democracy - where the national was made unitary in all but name in line with military tradition of centralization.

Military tradition however only says half of the story. The lessons the Generals that fiught and won the civil war was to eliminate any form of regionalism and dissent by empowering Nigeria's Minorities by creating many states (from 3, now 36) and by making those states subservient and dependent on the central government for existence to foster national unity. Some of these states were also in fact created to be not just be dependent but to be totally unviable, as the Federal Government heavy dependence on oil ensured the vast non-oil states had the agriculture, mining and manufacturing economy destroyed in favour of Oil, Oil and more Oil. This was the end that justified the means..but there is no free lunch in political economics.

No Free Lunch

The first structures that was naturally centralized and accepted so were the security forces. Every gun totting or uniformed security or paramilitary agency in Nigeria was now controlled by the central government to prevent occurrence of Biafra War. States were no longer to be trusted with securing their local environment. Today, Nigeria reap this in whirlwind with constant inter-ethnic crises, Boko Haram terrorism and Niger Delta militancy. Policemen from grassland regions are sent to creeks as Federal Police and fail woefully at it. Our intelligence agencies became paper tigers, as the local population refuse to give information because they had no serious connection to the hinterlands. Police, Customs and even Prison Officials were housed in Barracks away from the local population they protect or work with, because they were subject to nationwide promotions and postings, and this was a practical provision for that reality irrespective of the fact that it undermines their work. Police were occupiers not friends of the populace.

Naturally, the banking and economic sector was the next victim of this centralization mentality. Nigeria's Central Banking developed a unique blend of profiteering and focus on big and mega profit making machineries in import licenses to feed the rapacious appetite for imports as the country made untold profits from oil. The direction of flow of money to the national treasury was also reversed; gone were the days when states contributed to the Federal Government (FGN), now the Federal Government allocated and handed monies to them from oil earnings. To do this and to maintain its power, instead of distributing money in the currency it was earned (mostly dollars), the FGN printed naira and kept the dollar in its "reserves", ensuring it became a virtual monopolistic source of foreign currency (exchange). This gave room for runaway devaluation, consequent inflation as the nation depended on imports as artificial scarcity in foreign currency was created even as too much naira was created.  Simple demand and supply theory. 

The allocation scheme described above instead of contributory, is unique to Nigeria. And blame the soldiers and their insistence on strong central government for it and the other problems - unintended consequences that it has created.

Is there a middle road?

Understanding this political economic history of Nigeria is essential to making practical arguments for her reforms - understanding her history. There is a reason why Nigeria's elite class will look the other way when strident calls for restructuring and "true federalism" are made. These reforms may create even bigger problems if they're not carefully handled. That that from someone that was once in the federalism or nothing camp. Age and I guess experience should teach us better and we can find a middle road.

Nigeria may be far off from the federalist days of regional governments with massive powers, but it can have a more balanced political economy ...how it can do that is obvious from this essay. Devolve some powers creatively - state police for example, de-emphasize central bank monopoly on foreign currency by distributing (yes allocating) revenue in the source currency, purposefully move the country and economy away from oil by divesting and listing NNPC who should be given a more balanced board to reflect its 37 shareholders. Politically speaking, demanding more accountability from sub-national governments will also go a long way in recreating the much needed balance that Nigeria craves.