oby ezekwesili: a holistic look at the nigerian economy and its potentials
TRANSCRIPT
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THE HOLISTIC LOOK AT THE NIGERIAN ECONOMY AND ITS
POTENTIALS
BY OBIAGELI “OBY” EZEKWESILI
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GOOD GOVERNANCE
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ECONOMIC PHILOSOPHY
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A CASE STUDY OF CHINA
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The Rise of China & Embrace of Markets
• From 1981 to 2008, China’s poverty rate fell from 85% to 15.9%, or by over 600 million people
• China accounts for nearly all the world’s reduction in poverty
• Excluding China, poverty fell only by around 10%
globalissues.com
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Singapore & NigeriaA tale of two countries
World Bank; Google Public Data
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Monetary and Fiscal Policies are the instruments of response to changes in local and global economy.
Key highlights of our Relative Macroeconomic Stability through monetary and fiscal policies since 1999 to May 2015
FISCAL PRUDENCE/FISCAL DEFICIT NOT ABOVE 3%
DEBT MANAGEMENT
SINGLE DIGIT INFLATION
INTEREST RATE & POST 5% GDP GROWTH
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PILLAGING AND MISUSE OF HUGE OIL REVENUE
OIL PRICE SHOCK & THE GLOBAL ECONOMY
EFFECT OF WRONG FOREIGN EXCHANGE POLICY
PRICING A NATIONAL CURRENCY
DIVERGENCE OF OBJECTIVES
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$690bnNigeria’s Federally Collected Revenue from 1999 – 2014 stood at $690bn
WHERE IS THE MONEY?
CBN; Budget Office of the Federation
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CURRENT ACCOUNT DEFICIT GAP
World Bank; Google Public Data
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In era of low oil prices, what are petro-states doing?
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THE VENEZUELA WAY
Venezuela has challenges with currency controls and state planned economies
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NIGERIACapital ImportationDeclines
Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.
Source: NBS
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NIGERIAGrowth is tanking
Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.
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NIGERIAInflation rises to double digits
Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.
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NIGERIAUnemployment RisesEvidence shows that as the Nigerian Government tries to “protect” the currency, fiscal and monetary indicators are blinking red.
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NIGERIAExternal Reserves Sliding
Evidence shows that as the Nigerian Government tries to “protect” the currency, fiscal and monetary indicators are blinking red.
-$2.4bnNigeria foreign reserves from $29.59bn to $27.1bn has lost $2.5bn since this government took over in May 29, 2015. Is this currency inflexibility working?
We are stuck with $27bn as our reserves needs a six-month import cover.
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• Non-Oil Exports Volume Declines Volume for non-crude exports declines from N4.4tn to N2.7tn in 2014
• Job losses & Industry Contraction Stagnancy at retail industry as e-commerce platforms and other agencies are downsizing
NIGERIAIt is time to rise up
Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.
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• Currency Peg and Fuel ScarcityCurrent selective allocation of forex when price adjustment is needed stopped private marketers from importing thus creating an import logistics and availability crisis.
• Budget Crisis with fiscal stagnation Nigeria fiscal deficit rises to N2.2tn and government without price adjustment is starving itself of revenue, putting unnecessary strain on borrowing for capex.
• States Fiscal CrisisDespite a bailout of N1tn in salary assistance and loans, states are not out of the woods.
NIGERIAIt is time to rise up
Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.
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DEVALUATION THINGS TO NOTE
• Flexibility ensures you do not run out of reserve, ensures manageable uncertainty and keeps policy responsiveness attractive to both citizens and business. More effective in combination with Tariffs in controlling import.• Defreeze Forex Supply-Side Barriers:
Agriculture productivity and export can respond and expand on the back of our weaker currency. Don’t say we have “nothing else but oil to export”. China, Vietnam, Indonesia, South Korea all once had “nothing to export”. Exchange rate policy was key to their global competitiveness and it was not just about “strong currency” .• Transparent market based allocation reduces
opportunities for misallocation of scarce exchange resources.• Sort out petroleum subsidy mal-governance
for it is strongly linked to Forex challenges. Be courageous . The Subsidy scheme has run its course .
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THE DOWNSIDES OF DEVALUATION We are right to worry about the inflationary impact of Devaluation. It is real. Regrettably though, current indicators all point to the fact that under the extant forex policy stance we are already suffering that impact without getting the aforementioned benefits of a more deliberate approach at adjusting the Naira. THE POOR ARE WORST HIT.CURRENT SYSTEM PROMOTES DISCRETION, OPAQUENESS, CORRUPTION& PATRONAGE. INEFFICIENCY, DISTORTION, UNCERTAINTY AND DECLINE. WRONG SIGNALING.
Devaluation is part of a clear and comprehensive policy framework and NOT a Silver Bullet……Not a Panacea. We must complement with all the policy prescriptions under the medium to long term section.
DEVALUATION
THINGS TO NOTE
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MEDIUM- LONG TERM ECONOMIC DEVELOPMENT
DISRUPTING THE STRUCTURE OF ECONOMIC STAGNATION.
PART 3
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The biggest economy in Africa is one of the least diversified
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Economic Diversification Index
Source: ACET research.
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THE UNDERPERFORMANCE OF THE NIGERIAN ECONOMY IS SEEN IN ITS SHRINKING MIDDLE
CLASS
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MY ADVICE FOR NIGERIA
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LET’S FACE FORWARD NOW!
Mentally shift the mindset from moaning and groaning about what was done by the previous administration to a “THE-CHALLENGE-IS-DAUNTING-BUT- WE- SHALL- FIX IT-MINDSET."
Once new government was sworn in 29th May 2015 it inherited both the assets and liabilities of Governance: The Theory of Accountability!
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RebuildOur SocialCapital
• Commence Rebuilding our social capital- inclusion, cohesion and justice. Hard work. Effort, healthy
competition. Creativity, Innovation.
• Our President cannot “dislike” any segment of his population.
Magnanimous in victory. • The Igbos &the Niger Deltans, expressed their own legitimate choice in an election.
• It must not lead to their becoming “ostracized” as a tacit policy of state.
#OfficeOfTheCitizen
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Tackle Internal Insecurity of all Manifestations
INTELLIGENCE. INTELLIGENCE. INTELLIGENCE.
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KNOWLEDGE MUST INFORM POLICIES:Evidence Based Choices: Analytics and
Empiricism
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RAISING NIGERIA'S PRODUCTIVITY AND COMPETITIVENESS- HUMAN CAPITAL LED
ECONOMIC DEVELOPMENT STRATEGY
Defining our economic vision and strategy
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JOBS, JOBS AND MORE JOBS: At least 3-4 million NEW JOBS needed
annually.WHERE WILL THE JOBS COME FROM?
EMBRACE THE PRIVATE SECTOR IN BOTH WORDS AND DEEDS.
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Where Shall the Jobs Come From?
• Agric and Agri-business, Power, petroleum, gas, solid minerals, aviation, roads, ports, water and waterways, penetration of ICT, housing, tourism.
• Become an Investment Friendly Destination
• Critical Infrastructure: Industrial Clusters
• Build massive army of World class skills and talent for industry and enterprise
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Where Shall the Jobs Come from?
• Increase the Role of Private sector in Economy:
• Reset the Incentive- Reward and Sanctions- regime
• Make Manufacturing Cornerstone of Growth strategy: Be Deliberate in targeting light manufacturing industries in Asia seeking lower labor cost destinations.
• Another look at the Economic Liberalization and Deregulation Agenda using a sources of growth identification process.
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Equitable policies for young people, women and the most
vulnerable in the society
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National Economic Governance Conference: this must be fully
representative
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Think in time scenarios of short, medium and
long term
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Lay the foundation for a new political context for lasting legacy
Reform our politics and save it from a decadent elite class. End the nexus between politics and corruption money and other forms of illicit wealth.
The generation of our children are ready to take over the nation from us but we must not allow lack of campaign finance stop them.
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UNCERTAINTY IS COSTLY AND PUNISHES NOT JUST AN ECONOMY BUT THE POOREST OF THE PEOPLE.END IT NOW!
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ECONOMIC MANAGEMENT IS NOT ROCKET SCIENCEBUT IT MUST BE SCIENTIFIC
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SOUND MARKET ECONOMY POLICIES HAVE THEIR RISKS (Inequalities) BUT THEY CAN BE WELL-MANAGED BY CAPABLE GOVERNMENTS THAT UNDERSTAND THEIR ROLE.
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JUST DO IT!
Thank You.