Where are the Sam Alukos of the present time? Years gone by, bold economists were never afraid to come out of the cupboard and challenge populist economic theories. Nigeria, meanwhile, is littered with celebrated economists - graduates of faculties of social sciences of ivy-league colleges. Where are Nigeria's graduates of the best world faculties of engineering? The Nigerian society accords them high regards; offering them recognition, but there is no better time to earn that respect than now. Most of these fellows graduated with flying colours - at least on paper. Why can they not take Nigeria out of this logjam? These people ought to realise that they were trained with the wealth of this nation (either personal or public). Besides, most still carry Nigerian passports, in spite of dual nationality. In other countries, economists and engineers, in their separate fields, argue from both sides of schools of thought for a way-forward; in Nigeria, they all hum the same tune with no positive result. Everyone considers it wise to conform with a popular theme; afraid to differ.
Nigeria's economic growth is gloss-painted and that is why it has not translated to jobs or joy. The country's external earning is made up of 96% of the proceeds from oil that is extracted by foreign companies that operate 90% outside of the economy. It is the reason why many public holidays have not affected the economy. That Nigeria needs to diversify,
sounds like a broken record, as if Nigerians are not willing. We are bamboozled everyday with economics and technical jargons that have not improved the living standards of Nigerians - both rich and poor. It is not that the rich live a better live, they are only able to afford unnecessary alternatives to a good life. The Nigerian economy has faltered long enough; electricity, that the rest of humanity has taken for granted, has become a puzzle. Every Nigerian knows how to produce electricity, because we all have individual generators; it is the production of electricity of sound economies of scale (the commercial electricity) that is eluding us. Enough of the lame excuses and unfulfilled promises; most people are beginning to lose their patience.
To say there is nothing wrong with us, is to put it mildly. The elites in Nigeria fiddle, whilst the country burns. The madness is such that even the privileged amongst us still live below par when compared with the living standard of the least privileged in some sister countries - where you turn on any switch, there is always light; you open any tap, there is always water. We are so busy trying to survive individually with little or no capacity left to nation building. Those in position of trust and responsibility often lace their decisions with personal interest. Whatever that is suggested for nation building that does not put money into their pockets is considered rubbish. So, for many years we continue to panel-beat unworkable systems, hoping that it would work for individual self and not for the country. Monetarism as a form of capitalism, for example, is not working in Nigeria; yet it is not on the discussion table. Most people hope that their time will come, just as it had profited some of their friends or relations. Do not get me wrong, capitalism is still it, but it not this type that has fuelled corruption.
However, if we have to continue with this madness, we need to fix three things with all sincerity:
1.We must revisit the method used to determine the value of the currency (naira) against other currencies in order to reduce distortions that militate against an equitable value;
2. We must find a way to empower government to control the cost of borrowing, i.e. interest rates, and
3. We must reduce the pressure on the oil receipt that government, its arms and agencies exert, by funding the national treasury through tax and only that.
The first must-do, as listed above, concerns the exchange rate of the naira. As of today, because of the faulty tax system in Nigeria, majority of those that are willing to buy the forex from government at whatever price are largely under-taxed. This generates a faulty market force and the ensuing value of the naira is, therefore, suspect. The system produces a large volume of loose money in the system, that causes a distortion of unparalleled colossus, particularly as what they are willing to pay is what is used as the official exchange rate for everybody in the country. Even if we say it is OK for Nigerians, what about those wanting to invest in Nigeria? It definitely is a disincentive to foreign investors, who fear that such a system will dilute their investments down the years. You could imagine an investor bringing in a billion U.S. dollars into Nigeria, only to have it valued to a fraction of what it is worth in dollar term, say in 10 years due to the madness at the bi-weekly WDAS at the CBN. In these regards, only quick-get-in and quick-get-out kind of investment would risk coming to our shores.
second must-do is how to effect a workable cost of borrowing. It is a fact that the money in the banks does not belong to the banks; it is depositors' money. The banks need deposits to remain in business, and we all know that who pays the piper dictates the tune. For as long as the largest single depositors in Nigerian banks are still individuals, government's control of interest rates will remain a mirage. One of the ways most states, in a capitalist economy, use to dictate the tune of interest rates is through the proceeds of the Insurance Industry. Since it is through legislation that we have to insure this or that, the volume of premium deposits in such a regime would soon add up to become the largest single deposits in local banks. With the high volume of insurance premium deposits, the government would have created a pool for domestic borrowing at cheaper costs. The government could then use that leverage to exert authority on the banks to enforce CBN or whatever regulatory stated interest rates. Individual depositor would have no choice, but to conform.
The third must-do is the urgent need for Tax Reform. Most economists agree that government is a collective entity that has to be funded by compulsory contributions from every matured member of the community that meets certain criteria. The process is known as taxation. There is no alternative to tax for the running of governments and there can never be a perfect tax system, but the goal is toward social equity. Usually, government owns certain percentage of every naira in the citizen's pocket as tax. People pay higher as their wealth increases. It makes sense because they have more to lose. The thorny issue of the removal of subsidy, for instance, from the premium motor spirit (PMS) could easily have been addressed by tax that compels the rich to pay their fair share. Besides, one of
the reasons given was that the not-too-poor were those benefiting from the subsidy. That group could have been made to pay more through tax. In doing so, the process would have shielded the poorer members of the society from the "poll-tax" or equal tax, which is what the removal of subsidy tantamount to.
This writer supports the removal of subsidy from PMS in the long run, or better still, the deregulation of the downstream sector of the oil industry. However, PMS and Kerosene, in Nigeria of today, are still key commodities just like education and health. The palliatives being suggested ought to shield the very poor from the use of PMS; after which government could remove the subsidy. In other economies, the poor does not come in contact with petrol in any form. Right now, because there are no mass transit that does not depend on PMS and no steady commercial electricity, the poor, like everybody else, still have to move around on Okada, or in minibuses that use PMS; they still have to generate their electricity with PMS fuelled generators. Until the palliatives that make the poor ride on a bus or on a train that use diesel or electricity are put in place, there is no moral justification to remove fuel subsidy.
One way of shielding the poor from the removal of fuel subsidy is to provide steadier electricity for domestic use.
Here is a suggestion: most protagonists agree that if we have to subsidise, we should subsidise production and not consumption. In that light, I suggest that some industrial users of electricity should be disconnected from the national grid in the meantime. This will create extra capacity for domestic and light business use. That being so, we would be shielding the poor from the use of PMS and
kerosene. The electricity tariff will be such that the first part of billing for every user across the board, irrespective of class, is affordable and equivalent to the cost of electricity consumption of six lighting points for six hours everyday for 30 days. Thereafter, the electricity tariff should go up geometrically. Those disconnected from the national grid, meanwhile, could then have their energy costs subsidised. Since they will be the only users of diesel and industrial gas, they will still buy the fuel at commercial rates, but apply for discount from the national treasury with evidence of unit production. This will go on until the country is in a position to provide enough commercial electricity for both domestic and industrial use put together. Right now, we do not have that capacity: whatever we doing is self delusion.
All these things I have written in the past repeatedly, but nobody looks at it with a second glance because I am not a paper certified economist. But, whatever the gurus have proposed is not working and that is because they are short of fundamentals. How can you have a robust economy that is not translating to jobs. Then something is fundamentally wrong. Why are we scared to even discuss these fundamentals, instead of chasing shadows. They want to re-invent government and economics with flawed economic tools. Of course they cannot, because they do not have the capacity. From the time government was invented in Mesopotamia, there has never been a substitute for tax to fund progressive government; you cannot have an equitable value of a currency, for example, through auctioning, it has to be through productivity. Anyway, as Nigerians we prefer an easy way out of a situation. Instead of demanding steady electricity we rush to buy generators; instead of constant water supply, we sink individual boreholes. We too are trying to re-invent by making government irrelevant.
Samuel Akinyele Caulcrick,Lagos