THE ROAD TO VENEZUELA

When are ventilated the idea of doing an article with the above title to draw the attention of the country to the danger lurking ahead of us and how if we are not careful we will be headed to the well-advertised Venezuela situation whose most prominent aspect is citizens queuing on long lines, sometimes overnight for some basic consumer items. It was quite comical if not tragic to witness Venezuelans dashing across the border into Columbia upon the temporary opening of the shut borders to hurriedly purchase some basic household items. The point about this article is not to display masochistic tendency of wishing that the situation in Nigeria becomes like Venezuela but to draw urgent attention to the fact that from the trend of economic development that it is quite discernible that the most ugly and often advertised aspect of shortages of essential consumer goods is not farfetched in Nigeria. It happened in the past in the early 80s when following the precipitous and massive crash in the price of oil, the country found itself short of badly needed foreign exchange to continue with importation to assuage its appetite for the unbridled consumption of foreign products and services. And therefore product rationing became imperative and for some of us we had to leverage on the access we had with the store managers to obtain some of these basic items without having to go through the excruciating and humiliating stress of queuing to obtain them.

But the similarity of the Nigerian situation to the Venezuelan one goes beyond the inglorious situation of unjustifiable scarcity of basic consumer items to the fact that like Nigeria, Venezuela is an oil exporting country which has very little local production capacity but also massively imports, almost like Nigeria also its requirements from overseas therefore denying the country the opportunity to grow local capacity, create employment that is now at a premium and overall facilitate the attainment of the rapid development of the country. Venezuela is reputed to have the largest proven reserve of fossil oil in the world. As the oil market nosedivedan ability to import was abridged, the country resorted to all manner of capital rationing with attempt made to peg the rate of exchange. Again like the Nigeria situation a vibrant parallel (black?) market developed and the differential in rate between the official and the parallel market rate was; wait for it 10 times! So we are lucky in Nigeria that we still talk of the differential in the Nigeria situation in percentage terms and the rate of inflation in Venezuela both on the occasion in the early eighties and now went beyond 100 per cent. Inflation rate of the order of 17 per cent in Nigeria is as biting talk more of inflation of the order of 100 per cent. It must be difficult to operate under such situation! With the situation in Nigeria as it is today there is hardly no aspect of our life that has not witnessed price increase and in reality these increases are across the board.

But the point of this article is to rally us around the consensus that we must all work to ensure that the Venezuela situation does not happen to us because the size of our problems is at least four times that of Venezuela. The population of Venezuela is currently around 35 million people while in Nigeria the population is around 180 million. The Nigeria situation becomes worrisome because this recession did not creep on us like a thief at night. For most of us who engaged in the public space of trading in ideas and have been privileged enough to have varied platforms to air our views, we warned continuously that we have to adopt expansionary fiscal posture to boost activities with a view to avoiding the looming contraction which has now happened upon us and so when Budget 2016 was under consideration we seized each andevery opportunity to canvass for an expansionary budget and when an unprecedented budget of over six trillion Naira was announced with a deficit of over 2 trillion Naira we celebrated that fact but since then what has happened?

Even in the last quarter of the Budget year we are still discussing approval to borrow from where which should have been all concluded by now. So the warning we wish to sound now is that if we do not buckle down to brass tacks and get down to action the Venezuela example would be a child’s play particularly as there is remote possibility of oil prices increasing up to 100 dollars per barrel which has often been the saving grace when we will again forget all and resort to business as usual until the next round of oil price crash. America discovery of shale oil is most certainly a game changer as the rigs that have gone dormant would be rapidly activated as prices reach a certain threshold and beyond when it makes economic sense to begin to explore other marginal field. So rebound of oil price will no longer come to the rescue in the foreseeable future!

What I intend to do going forward is to highlight some of the practical things we need to do and in the process to eschew generalizations such as;‘we would get ourselves out of recession by diversifying the economy and embracing solid minerals and agriculture.’ I think that the first thing is that we must make efforts to implement Budget 2016 as approved including executing the borrowing plans included in the Budget. It is not adequate to regale us with the claim that we have made capital releases of 400 billion compared with budget estimate in this respect of 1.8 trillion Naira which represented 30 per cent of the Budget.

We must hasten action with growing the tax revenue as it is a known fact that Nigeria has one of the lowest tax to GDP ratio at 7.8 amongst our peer countries and even relative to advanced countries of the world. We must however aim to do so by broadening the tax net to include those in the informal sector who are currently not paying any taxes and every effort must be made to make our tax administration progressive by ensuring that those better able to pay tax do so. One recalls that the immediate past administration outlined some luxury tax items it was going to pursue including tax on property of certain threshold value in the Federal Capital Territory.

But the tendency is to disconnect from the activities of the immediately past administration so nobody ever remembers all of that anymore and it is not only in this connection but also most prominently in agriculture where the immediate past administration spearheaded some technological driven innovation such as the electronic wallet. Since the commencement of this administration with the inauguration of its road map for agriculture there has been no mention of such laudable innovative achievements which for us to make desired progress we should have leveraged on.

If we implement the social programs in Budget 2016 it would most certainly give a boost to economic activities. We included 500 billion in the budget to create graduate teacher employment, provide meal a day at school, and undertake conditional cash transfers to a select number of our jobless compatriots. It was just the other day that one heard the Presidential assistant in this respect Mariam Uwais making some comments to highlight the commencement of the social program included in the budget and even then it is yet not clear if we are not only paying lip service.

We should ask ourselves some soul searching questions regarding the effectiveness of the Treasury Single Account in our present predicament of the pressing need to pump money into the system. To my mind it is anomalous to sanitize such a humongous sum of money in excess of 3 trillion at the Central Bank creating illiquidity amongst the banks and in the process undermining their ability to create badly needed credit. We must prioritize to my mind growing this economy over and above the imperatives to fight corruption which remains a journey and can never be a destination.

I doubt if we are in a position to end the insurrection at the Niger Delta by waging a war. The lessons of experience would recommend that we embrace dialogue. But ending the insurrection at the Niger Delta is a veritable strategy for impacting on the recession particularly if we factor into consideration the extent of loss in revenue which this insurrection has caused the country.

We must devise a strategy to pay workers their salaries. It has been reported that about 28 states in the country are delinquent in this respect. What is even more worrisome is that some oil producing states that enjoy addition revenue flow from the derivation allocation are also caught in this trap. In this respect we must clear the back log of payments due to workers and pensioners and pay off all public sector debtors. I have argued that we must find the money to make this payment if we are interested at jump starting the termination of the ravaging recession even if we have to resort to ways and means financing.

We must in the same breadth resist the temptation of causing increase in fees and charges; unity school fees, technological 9 per cent levy, duplication of all taxes, increase in the pump price of fuel even as the rate of exchange is further pressured  due to deteriorating exchange rate. The Central Bank must intensify action to facilitate access to its numerous targeted funds such as the Anchor borrowers scheme for the promotion of rice cultivation, the Graduate internship scheme which uses as collateral certificates and diplomas to encourage budding entrepreneurship, the Small and Medium Scale enterprises scheme and more, as an ameliorating strategy to counter the deleterious effect of the prevalent high interest rates in the country. We must deliberately resist all layoffs particularly as it is currently looming within the aviation sector and instead make efforts to create employment opportunities even if through public works but must persist with the current drive to clean up the payroll from the incidences of ghost workers. There is no doubt that if we are able to activate some of these recommendations that even if the inflationary spiral would temporary escalate; we must come to terms with the fact that the situation the country finds itself now that it is logical to deliberately prioritize growth at the expense of fighting inflation. These in my considered view will constitute some of the low hanging fruits available for the country to pluck as it strives to get itself beyond recession.

 

Dr. Boniface Chizea