THE Jonathan administration has said that the economy has been experiencing jobless growth. During the past one decade, official real GDP growth rate averaged over 6 per cent annually. But widespread doubts have greeted the robust growth figure as well as the latest official unemployment rate of 23.9 per cent, which, it is widely held, understates the reality.
About 70 per cent of the working population is reportedly employed in the agricultural sector. With modernisation and improved agricultural productivity, the sector would engage perhaps not more than 20 per cent of the population. The focus on rapidly creating employment should therefore be placed on the other sectors of the economy with the manufacturing sector receiving special attention. About a fortnight ago, the Trade Union Congress (TUC) called on the Federal Government to create an enabling environment for businesses and industry to thrive so as to expand opportunities for employment. It decried huge debts owed to construction companies, which had sparked mass lay-offs to further swell the ranks of the unemployed.
There exists a substantial pool of debts owed by the Jonathan administration to public employees and contractors alike. The now routine long delays of debt repayment by successive administrations in the past decade or so were not occasioned by shortage of funds because revenue accruing to the Federal Government throughout the period far exceeded budget projections while habitual under-implementation of the annual budgets left large amounts of budgeted funds unspent and thousands of approved projects uncompleted. But economic analysts knew all along that the actual reason for the payment delays, which the National Bureau of Statistics inadvertently confirmed early this year, was the desire to slow inflation by holding down the volume of money available for spending in the midst of persistent liquidity surfeit created by extant faulty fiscal and monetary practices.
Ordinarily, given sound fiscal and monetary measures, prompt payment of government bills stimulates the economy. Sadly, the culture of tardy payment of government debts has led to, for instance, recurring distress in banks, rampant company closures, mass lay-offs with countless tragedies in their wake and a scorching environment that wilts practically all new Nigerian private enterprises.
Recent media reports rehashed the argument that the unyielding economic difficulties emanate from the country’s heavy reliance on crude oil. That is incorrect. Through oil exports, Nigeria enjoys enviable export proceeds-to-total revenue and export earnings-to-GDP ratios. Indeed, the sheer volume of foreign earnings translates to self-generated unlimited supplies of foreign capital for accelerated economic diversification and rapid development. Proper management of the export earnings will not only render external borrowings by government completely dispensable but also consign Foreign Direct Investment (FDI) to a supplementary role. Thus it is misplaced priority as well as diversionary for the administration to preoccupy itself with seeking multilateral loans and begging for FDIs as the best option for achieving job-inclusive economic growth.
Ruefully, creditor countries, true to their remorselessly self-seeking nature, found the Nigerian economy’s Achilles heel to be failure to correctly infuse the ample crude oil export earnings into the system and had long exploited that to prevent Nigeria becoming the economic powerhouse that would compete on equal terms and even overshadow most of them. For example, the recently released 2011 World Bank (WB) report, which chronicled Nigeria’s low labour and capital productivity, is a celebration of how WB-administered measures have successfully destroyed the manufacturing sector. Despite extorting over-generous payoff of $12 billion for Nigeria’s debt exit, the Paris and London clubs of creditor nations still extracted an undertaking by then Obasanjo administration to execute a Policy Support Instrument (PSI) dictated by them. The creditor nations commissioned the IMF/WB to administer the PSI whereby in February 2006, the Wholesale Dutch Auction System (WDAS) was emplaced and two months later the apex bank began to release oil export earnings to bureau de change (BDCs) for no-question-asked sale to all-comers.
Under WDAS, the naira becomes chronically overvalued, thereby requiring periodic devaluation with adverse effects on inflation, lending rates and cost of production. The BDC-dispensed oil proceeds escalate smuggling, export of treasury loot, money laundering, capital flight and speculation in foreign exchange. That explains the challenges, which the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Manufacturers Association of Nigeria (MAN), and the Lagos Chamber of Commerce and Industry (LCCI) repeatedly call on government to stamp out. Surely, the implementation of the PSI is not legally binding and should therefore stop immediately. Its adoption in the first place is galling and indecent since not a single member of the Paris and London clubs has ever deployed WDAS and BDCs as foisted on Nigeria. The PSI is not even approved by the National Assembly as mandated constitutionally for an international agreement, if indeed it is such.
The genesis of the mishandling of the oil proceeds is the wrong interception by the CBN of dollar accruals to the Federation Account (FA) and the substitution for same with freshly printed naira funds. The action amounts to deficit financing of FA beneficiaries’ budgets. The economy owes to these unintended deficits the excess liquidity and the legendary debilitating harsh environment, which the IMF/WB and the so-called development partners have turned to a singsong.
Secondly, when FA dollar accruals are appropriately released to the three tiers of government (in a form that is abuse-free) for them as primary retail transactors to convert to naira revenue through deposit money banks, the excess liquidity and attendant accumulation of non-investable but costly national domestic debt will cease while the value of the naira will become realistic and stable, inflation will trend to near-zero and lending rates will fall to internationally competitive low-single digit levels. It will also eliminate, for example, the extraneous CBN offer of special intervention funds (SIFs). The SIFs, which lack requisite prior legislative authorisation, are being offered at illegally subsidised interest rate of 7 per cent while the law prescribes the going monetary policy rate plus 1 per cent.
Thirdly, only eligible transactions access such foreign exchange to procure foreign goods and essential inputs to complement local raw materials for domestic production while smuggling and other PSI-facilitated anti-economic activities will peter out. Fourthly, cheap and abundant bank credit in the ensuing conducive environment (not provision of infrastructure, which takes time and has no end) is the most critical economic factor. With this factor in place, businesses ranging from small enterprises to conglomerates would freely undertake various investments, including public/private participation projects running into multi-billion naira subject to specific repayment periods to be set for different categories of bank loan.
Thus, for instance, the 55 per cent unutilised installed manufacturing capacity would drop rapidly as most of the factories that are currently shut may be expected to resurrect their mini-power plants and resume production. In the process, forward and backward linkage industries will spring up. And as the economy revs and gathers momentum, employment will receive a fillip, too.
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