Are The Fundamentals of Nigeria's Economy Suspect?
Not too long ago, the labour and trade unions in the country promised Armageddon; unless a certain minimum wage was paid: it was then to be N7,500.00 (seven thousand five hundred naira); the government at the time, after a drawn battle, capitulated.
Now, the same unions have pushed for an N18,000.00-minimum-wage into our law, and the battle line has been drawn, yet again, between the employers and the unions; but what has changed in terms of the productivity of the Nigerian worker to call for this determined must-fight battle? Eighteen thousand naira (N18,000.00) is a paltry sum to earn in a month in Nigeria, where one has to generate everything for oneself (light, water, ride as a passenger on a bike to and from work, etc.) - it is even less than $150.00 (one hundred and fifty U. S. dollars).
It is almost inhuman to pay a worker that kind of wages in a month; it, however, could have been acceptable as social security for anybody above the age of 18, who has no gainful employment. I can bet that we have not heard the last word on the upping of the national minimum wage in Nigeria in the nearest future; the fundamentals of the Nigeria's economy remaining the same.
As Nigerians, it seems we are burying our heads in the sand, like the ostrich? Demand for salary increase is becoming a recurring decimal. The productivity of the Nigerian worker has not changed, yet he is asking for more: this could only be attributed to an unrealistic take home package. Nobody is tackling the root of this phenomenon; experts, however, see the exchange rate as the tormentor. I do not think it is the value of the naira, against other major currencies, that is the real issue; but the method used to determine the value of the naira: that is what is depressing the situation as well as the Nigerian economy.
The major employer (the government) says in order to pay the minimum wage, it would have to remove some subsidies from the economy - chiefly, the subsidy on petrol. What is a subsidy in an economy like that of Nigeria? It is anything that operates outside the official exchange rate, i.e. what is being offered to the public below the commercial value to cushion the effect of an unrealistic market force. The exchange rate again? For as long as Nigeria's exchange rate is faultily determined, subsidies; demand for upping of minimum wage, etc. will always rear their heads. Most Nigerians, including those that should know, often confuse, maybe sometimes deliberately, the exchange rate itself with the method used to determine the exchange rate (the mechanism).
At present, the exchange rate of the naira is determined by a group of people, whose interests are varied and short termed, but not necessarily in the developmental interest of Nigeria. They gather at the Central Bank of Nigeria (CBN), weekly, at the Dutch Auction of the petrodollar that the Federal Government has on offer. Whatever they are willing to pay for that dollar based on their own interests, for that week, becomes the exchange rate for everybody within Nigeria for that week. What a depressing and frustrating policy! Were this auction offer only to those who are willing to pump the dollar back into further wealth producing enterprises like education, manufacturing and agriculture, one could presume it is based on productivity; and the resultant exchange rate would have been less distorted. Instead, it is open to all and sundry, where the dynamism of the trading sectors and those bent on capital flight outpace the long term interest of the wealth producing sectors of education, manufacturing and agriculture, whose harvesting (gestation periods) take a little while longer than those of the mercantile sectors.
The result is the sorry state of the these wealth producing sectors. What is even more depressing is that after nearly 25 years of dismal performance of this policy in our economy, a revisit is not even on the discussion table. There is no key aspect of the Nigerian life that one can say is promising except of course the proceed from oil: nothing else is working that gives joy to the citizens. That nobody is linking all these failures to the method chosen to determine the exchange rate of the naira, still beats me. Even the unprecedented corruption in Nigeria is a byproduct of the same exchange rate mechanism; and it is what fuels it. If one rules out every other thing, the reward of labour of the Nigerian, worker or employer, is somewhat determined by the whims and caprices of auctioneers, and not how much he has produced.
On the CBN website, there is a demarcation of what Nigeria has achieved on currency stability from the day the present Dutch Auction of the petrodollar was introduced in September 1986 till date. Me, I dey laugh o! The first bidding of the petrodollar in 1986 was slightly above N3.00 (three naira) to $1.00 (one American dollar); today, it is well above N150.00 (one hundred and fifty naira to one American dollar) - currency stability indeed. On the other hand within this same period, foreign investors have divested from Nigeria; factories have been shut or relocated to outside Nigeria, with Nigerian workers being retrenched; infrastructures have decayed (power, refinery, education, railways, airlines, shipping, etc.), and not to mention the ballooning of corruption in the land - as everybody is for himself and God for all of us.
The father of modern economics and a great philosopher, Adam Smith, had wondered, spellbound, at the effects of capitalism on human beings during the Industrial Revolution - for that, he wrote the Wealth of Nation. Adam saw some people cheat while others did not; and noticed how a seemingly innocuous decision of a few had a damning effect on the majority of the people down the line. In Nigeria, it has not been different: the process that brought the present exchange rate mechanism was supposed to be a national consensus, but the debate was, in fact, orchestrated, which means it was a decision of a few; those that took part in the debate that did not agree with the outcome were immediately relieved of their positions (the likes of Ibrahim Ayagi of Intercontinental Merchant Bank).
All in all, it is becoming certain that no amount of panel beating of the current process will put a shine on the Nigerian economy. The time to start discussing it cannot be better than now. I am happy that our brilliant managing director at the World Bank is back to help straighten things out. Exchange rate mechanism is a touchy issue in the West; and as such her resolve to be patriotic, first, may put her in collision with her long term employers - the World Bank - we shall see. The West, if they are sympathetic to our course, should allow Nigeria to tinker with the exchange rate for a while in order to kickstart our industries of education, manufacturing and agriculture.
Unless a method of determining the value of the naira is other than that of auctioning, no meaningful foreign investor will invest in this economy for wealth production except a quick-get-out like trading in stocks and merchandise - those do not create enough jobs. I am not against the auctioning of the petrodollar, but it should not be the method used to determine the value of the naira in my pocket.
Samuel Akinyele Caulcrick, Zaria.