An economy on bended knees: Nigeria’s belated contingency economic plan

By Dele Sobowale

“Last year, 60,000 ghost workers were weeded out, which saved the government about N160bn”

– Dr Okonjo-Iweala,  Minister of Finance, Tuesday, October 21, 2014, at Abuja press briefing.

That was how the PUNCH reported it the following day. The VANGUARD, on its front page, reported the Minister to have said that NIGERIA IS NOT BROKE. Apart from the fact that economics/finance does not recognize the word “broke”, the Minister had, on the one hand, denied there is a serious problem while, on the other hand, admitting there is one.
No executor talks about a contingency plan being introduced without the tacit admission that the existing plan had gone burst. And, the Minister fools nobody by denying what had already been predicted on these pages, months ago, about the economy and which are now turning out to be true.

For instance, crude oil was selling for well over $100 per barrel when the alarm was raised on these pages that, due to circumstances beyond Nigeria’s control, it will eventually go below $90 or even $80. Not only that, volume would also drop. The reasons will be recapitulated later.

But first, let us examine the illusions on which Dr Ngozi’s economic plan is based.

ILLUSIONS

“The most obstinate illusions are ultimately broken by facts”- Trevor Roper (VANGUARD BOOK OF QUOTATIONS p 100).

The first and most obvious illusion on which the Minister based her briefing is the conventional wisdom that there were ghost workers. Nothing could be further from the truth. Instead, there were corrupt departmental and agency heads as well as Permanent Secretaries and Ministers skimming the cream for their own benefit.

How on earth is it possible for a departmental head who had approval for 20 staff to, at month-end, claim salary for 25 without the supervisor, all the way to the Perm Sec knowing that the payroll had been padded? That sort of story should be told to grandchildren at bed-time – not to thinking adults.

Furthermore, it says volumes about a government that it took all of four years for the Head of Service or President to realize that it was carrying excess and illegal baggage. Okonjo-Iweala’s revelation that government had written to the ICPC to investigate and prosecute those responsible for the heist is the most disingenuous way of saying, “We have been robbed, but we don’t know who did it”.

How on earth are Nigerians, or anybody else, supposed to believe the story?

Were there no staff rosters and were people not supposed to be identified as staff before collecting salaries? If the “Authorities stealing” could not know their own staff, how on earth will the ICPC do it?

At any rate, is it the same ICPC which has failed to prosecute more than 200 cases, since 2003, which will now go after 60,000? Surely, the Minister knows that every Nigerian alive today would have migrated to the Federal Republic of Dust and Ashes by the time they finish. If this is a joke, Ngozi should know that, like Queen Victoria, 1819-1901, “We are not amused.”

Invariably, when officials in charge of huge national policies resort to comedy, it is a clear sign that they have run out of ideas – if they ever had one. Saving N160bn from weeding out ghost workers, even if it is true, and nobody is sure, it does not start to address the enormous problems confronting

Nigeria at this time.

WHO SAID NIGERIA IS BROKE?

“Every government is run by liars and nothing they say should be believed” (VBQ p 80).

When the Minister announced that external reserves had risen from $36.6bn in June to $39.48bn as of October 16, she certainly wanted to re-assure her fellow countrymen, the gullible ones at least, by dispensing a half-truth bordering dangerously on becoming a colossal lie. More than anybody else Dr Okonjo-Iweala knew that the external reserves stood at $45.66bn in September last year. Obviously, she does not want the truth to get in the way of the half-truth which serves her interest and the government she serves.

Does that mean Nigeria is “broke”? Certainly not yet.

It is just on its way to the economic intensive care unit. The Finance Minister, who had so far called all the wrong shots, would prefer Nigerians to continue to live in fools’ paradise until it is impossible to deny the truth.

One cannot help getting the impression that our Minister had forgotten all she read in Paul Samuelson for Economics 101a and 101b. No nation depletes its external reserves by 13 per cent in one year if its economy is in good shape; just as no reasonable one draws down its savings by the same percentage unless current revenue no longer matched expenditure.

HISTORY REPEATING ITSELF

Perhaps it’s just as well that President Obasanjo once advocated the removal of history from our school curriculum. Even now, we fail to profit from it. Otherwise, many more economists would have taken Okonjo-Iweala to task for the mis-management of the economy.

Back in 1981, the late Chief Obafemi Awolowo, GCFR, had warned the Shagari administration that the economy was heading for the rocks.

Because Awolowo was the leader of the Unity Party of Nigeria, UPN, the leaders of the National Party of Nigeria, NPN, dismissed his observations as prophecies of doom which should be ignored. Shagari’s Chief Economic Adviser, CEA (does Jonathan have one?), a professor of economics, wrote a full page rejoinder to Awo – full of the lies and half-truths governments indulge in. 25 months after that warning, Shagari, elected by a “moon slide” (credit to the late MKO Mbadiwe) was toppled by Buhari; who was in turn sent packing by Babangida. What was the cause of the problem?

Nigeria’s crude oil price had risen steadily from $3 in 1973 to about $28 in 1981. Based on that, “technocrats” had advised Obasanjo to take a $2.8bn loan – on the grounds that the loan could be easily repaid. The civilian federal and state governments, elected in 1979, also went on a borrowing spree. The impression one had was the belief that crude oil price was on an ever-rising escalator.

Unfortunately, the escalator not only stopped moving up; it actually reversed itself when a global recession severely slashed the demand for crude oil as well as other commodities. Nigeria’s crude eventually hit the bottom at $9.9 per barrel under IBB. The loans, which were said to be easily re-payable, became the albatross called the DEBT TRAP of the 1980s and 1990s.

Okonjo-Iweala is only taking us down the familiar path to severe economic hardship – from which she will escape to America. Why? Because the longest global economic expansion which brought crude prices to over $110, at one point, has also come to an end. Furthermore, while the number of oil producing countries was less than 20, the number today is over 40.

Some of our customers have started producing oil. Moreover, with weakening demand, every producer is forced to cut prices to gain customers. Finally, America, formerly the world’s largest importer of crude, is now an exporter.

America intends to become the largest exporter of petroleum products; thus encroaching on more of our existing markets. Nothing suggests that the contingency plan had taken this into account. Clearly, only a miracle can restore $100 per barrel crude.


- Culled from: http://www.vanguardngr.com/