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FG must invest in industries to save economy – Don

A development economist and Senior Lecturer, Department of Economics, University of Nigeria, Nsukka, Enugu State, Dr Tony Orji, speaks to GODFREY GEORGE about the floating of the naira, rising inflation rate and the expectations of Nigerians from President Bola Tinubu’s cabinet

The annual inflation rate in Nigeria accelerated to 24.08 per cent in July, which is the highest since September 2005, compared to forecasts of 23.7 per cent. From your assessment, how did Nigeria get it this bad?

It’s really an unfortunate situation that we are where we are currently. There are many issues when we talk about the problems of Nigeria. It is not probably a one-course issue. We have, first, leadership issues that have culminated in followership issues. We have policy issues and the influence of internal and external worlds. There are many issues that have contributed to the pitiable situation we have found ourselves in as a country.

If we look at it from the leadership perspective, we will see that Nigeria has been quite unfortunate in terms of having credible leaders who are really willing to sacrifice for this country. When we look at the early nationalists; they were willing to sacrifice. These people were thinking of what they could do for Nigeria and not what Nigeria would do for them. So, the issue of corruption was not as bad as it is today.

Right from the period of the military, we have had leaders who are no longer interested in the welfare of the masses, but are only concerned about accumulating wealth and misappropriating public funds. The loot of the late Sani Abacha is still being returned today. These are monies that would have been used to advance the course of Nigeria and used to invest in critical infrastructure.

When these leaders steal these monies and take them overseas, these countries will use them to build their economies and develop their countries. So, Nigeria’s economic problem is first an issue of leadership failure.

How do we raise our leaders? There is corruption everywhere. We don’t have credible elections. It is the leaders who emerge from credible elections that would be concerned about the welfare of the masses.

Corruption has become like a baptismal name for Nigeria in the comity of nations. The International Monetary Fund at one time described Nigeria as the poverty headquarters of the world. We are supposed to be one of the wealthiest in terms of natural and human resources. How did we become so poor? It still boils down to leadership and corruption.

Inflation figures used to be in the single digits in the early 2000s. How did it get to double digits and has almost hit 30 per cent now?

Inflation is the general rise in the prices of goods and services in an economy. What causes this rise? We are not producing as we ought to as a country. Most of the things we use as a country, we import. When a country keeps importing, it becomes import-dependent. Countries need foreign exchange to import. See what is happening to the naira now. The importers are looking for dollars to import. This is simple logic – demand and supply. We demand more dollars than the export we have. We need more dollars to import and we have little to export. When an importer spends more importing and bringing goods into the country, the citizens have to buy it at an exorbitant price so that he or she (importer) can break even as a business person.

When we look at fuel prices, we have remained a mono-resource economy for several years. We have refineries that are not functional. If they were, we would not need a lot of dollars to import fuel. Since we are importing refined petroleum products, the cost of fuel is expensive in Nigeria. Because this is so, it also impacts the transport sector. So, when one has a product which he or she wants to take to the market, one has to pay exorbitant transport fares. This must be included in the cost of production. All these lead to inflation.

We also have selfish reasons where someone would buy a product for a particular amount and decide to hike the price simply because there is an increase in the price of that product in the market. We saw this in play in May when the President, Bola Tinubu, announced that the fuel subsidy was gone. Those that had products which they bought for N185 per litre hiked the price and sold at N516/litre and above. There is a web of relationships. If one sector is affected, it affects the other sectors. If the cost of raw materials is high, the cost of produced goods will also be high.

Nigeria, according to 2022 official figures, has 133 million multidimensional poor people. What does this inflation rate portend for these poor Nigerians?

It is really a sad situation. This means that with this level of inflation, the income people get from their work or effort becomes valueless. This is because the purchasing power has been reduced to nought. Something that used to be N1,000 before has now risen to about N3,000 and even more because of inflation. If one earns a minimum wage of N30,000 and the inflation rate is 24 per cent; that N30,000 will no longer have the value of N30,000. The value will reduce and make the money almost valueless. The impact of inflation and poverty is very serious. People can no longer meet up with their basic needs. We are talking about more than 60 per cent of Nigeria’s situation.

By the next official release, this number will increase except they are doctored. Go to the market and see what is happening there. People can no longer afford the essentials. A bag of rice is around N45,000 from N8,500. A tin of milk that used to be N70 or N100 now sells above N400. How about garri and bread? People have become poorer and can no longer afford food to eat. That is why Nigeria is having a severe challenge with malnutrition. A recent figure by the United Nations says we are the second most hit in the world. Most of these poor people cannot even afford to manage their health needs because of how expensive medicines have been. Nigerians are dying because of things money can solve.

On what side of the divide are you as regards the issue of removal of fuel subsidy, its timing and the release of palliatives to the poor masses?

The issue of subsidy has been a recurrent decimal in our national discourse. There are various schools of thought but the point is that subsidy is not bad in itself. In Western countries, education is subsidised. Why do we have subsidies? This is so that public good can get to the poor who need it. Why is our own subsidy in Nigeria problematic? The issue is this hydra-headed monster called corruption.

The government said they were subsidising fuel for the benefit of the masses but actually, the masses were not benefitting from that subsidy as they should. The people benefitting are the few rich people – the cabals – who are into the oil and gas business and the government. If we look at the budget, there was no provision for subsidy beyond June. The reason was that the people who bring invoices for government to pay subsidies collect the money to import fuel, do so and do not give proper account.

These people use the fuel produced to trade. Some even sell to other neighbouring countries. That is the criminality in the subsidy and the government decided to do away with it. But it is not about just doing away with the subsidy that was the case. After all, the masses were still suffering even when there was a subsidy. We were still having long queues and artificial scarcity of petrol in the country. When one eventually sees the product, it would not be at the official rate. Sometimes, marketers hoard products.

People collect money for subsidies and still do not deliver to the masses. At that time, we were just subsidising corruption for those who were involved in the oil business. Removing the subsidy could have been done in a more strategic way. Nigerians feel that this is the only benefit they have. Tinubu should not have made that statement that day. He would have calmed down and discussed with his advisers and technical assistants to put some measures in place. That someone is a president does not mean that he knows everything. It is true that it was no longer in the budget, but how to implement the removal of the subsidy and mitigate the impact on the poor masses is the first step he would have taken before making such an announcement that the subsidy was gone.

When there is a policy swift, it sends a shock both to the economy and the masses. The presidency would have been more strategic and prudent in the use of words. If you make statements before thinking of possible outcomes, the feedback from the poor is not always palatable. This is because they are always at the receiving end. Politicians earn in multiple streams of millions but the poor may not even have up to $1 a day. Look at what the dollar is now. The removal of subsidy and the lack of foresight from the government to put palliatives in place plunged more Nigerians into poverty. We did not get it right in making that policy statement on that very day. As we speak, the palliatives put in a measure have still not reached the hand of Nigerians.

But the Governor of Borno State, Prof Babangana Zulum, after a meeting with the Federal Government, said the government has mandated each state to buy 100,000 bags of rice, beans and other food items for citizens to cushion the effects of the removal of fuel subsidy. What is your take on this?

When the government goes to a state and says they are giving bags of rice, what will these bags of rice do for the 15 million or 20 million people in a state? How do they intend to distribute these bags of rice? They first said they were going to provide buses for students. Which students and from which institutions? These are the things that should have first been discussed and put in place before the announcement by Tinubu that the subsidy was gone. It shows that there was no proper planning before these statements are made. This may lead us to policy reversals, as it is already been rumoured that the government is already planning to reintroduce a partial subsidy. It makes a mess of the whole process as if they did not think through some of these policies. We are waiting for what this ‘partial subsidy’ is.

The naira was floated and the exchange rate was unified. Since then, it seems that the naira has been on a downward slope, trading at almost N900 per dollar at the investor’s window. Why is this so?

What gives any currency value is the level of productivity and foreign reserve, amongst other issues. Now, when the naira is floated; as an import-dependent nation, the naira will keep nose-diving. We don’t have a solid productive base. This is why we depend on dollars to import critical goods and services into the country. So, what we are seeing is a simple demand and supply effect. People are looking for more dollars than they are looking for our export. If we become more productive, the naira will stabilise. How do we become more productive if the environment for production is not there? We have a high cost of registering a business. The ease of doing business is poor and the environment is not sustainable. Many micro, small and medium enterprises close up before they clock two because of the harsh business environment.

We have issues of insecurity everywhere and investors don’t find it easy and comfortable to invest in Nigeria. The tax regime is not favouring some of these small-scale businesses. If the environment is not conducive, how will the naira rise? There is also an issue of corruption. When money is released; the politicians take a chunk of the money and leave the poor masses with nothing. The President secured some N500bn for palliatives, but about N70bn is already earmarked for lawmakers. How many of them are there?

When we make local policies, it can only affect the country here, not the value of the dollar because we do not control the dollar. We don’t have what it takes to attract the required foreign exchange. Our export-to-GDP ratio is low. If we produce more and export, we will have more dollars looking for our products which will be bought in dollars. All we export is crude, and we still look for dollars to import refined crude. If we remain like this, we should expect worse days. There must be policies to ensure that production increases. Our country must be production-friendly. Government must invest in industries more than it is investing in maintaining politicians. We need to create more productive outfits so that when people come out of school, they will not be looking for government jobs or who to employ them, but they will become wealth creators themselves.

Nigerians must also learn to patronise locally-made goods. How many senators and government officials will love to use official cars manufactured in Nigeria? They prefer Toyota and Hyundai, and they still need dollars to import these cars.

However, floating the currency is not a bad idea but it will not help the currency in the long run if Nigeria does not produce anything. The major reason why the naira was allowed to float was because of the multiple exchange rates and currency speculations. Many people became billionaires overnight because of this. The Central Bank of Nigeria decided to do away with the multiple exchange rates. We must tell ourselves the truth as a country. We must determine to become productive and begin to export in order to get foreign exchange. We must look at other sectors other than the oil sector. We must begin to invest in agriculture in a more sensible way. It is not about giving agricultural loans to politicians who don’t have farms anywhere. We must invest in innovation. When these things are done and production begins to increase, naturally, the naira will begin to stabilise.

We have refineries. All the trillions we have spent on importing refined crude should be used to fix the refineries. There is no reason why our refineries cannot work if not for corruption and government inefficiency.

What is your take on the newly-created ministries and the number of ministers in Tinubu’s cabinet?

This is part of the issue we have been talking about. How do we reduce the cost of governance? America as a country is bigger than Nigeria but they don’t have up to 20 cabinet secretaries, but they have been working well. For a country where 133 million people are very poor, having a bloated cabinet that will require millions to manage does not show seriousness on the part of the government.

When the ministries merged by the immediate past President were handled by single individuals, they were not efficient. This is not because they were together but because the Nigerian system rewards mediocrity and promotes corruption. This government should have shrunk the number of ministers and get technocrats. I know people can be multifaceted in knowledge, but when a lawyer is made a minister of aviation and aerospace development, what happens to all the engineers in the country? It is high time we began to do things the right way in this country. Everything must not be politics. As for the ministers in charge of finance, the economy, trade, investment and others, they must work to bring back the Nigerian economy to its place of glory. Poor performance should not be rewarded.

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