Our last chance saloon?

PMB’s administration finally seems to have accepted the reality that we must ‘survive’ as we wait for medium to long term plans to take effect. In other words there is a need to get the economy going now – Right Now!!

And there lies the rub.

We’re not talking about the sale of fish or mince pies here; or even a fleet of cars. This is the sale of some of the nation’s most valuable assets!

How long did that disastrous sale of Nitel take?

How long did the power privatisation process take?

Both took at least eighteen months!

The aim is a quick injection of cash in order to get people spending again. But in truth it won’t be quick at all. At best the sale will come to fruition in twelve months or so. Can Nigerians survive another twelve months of this present pain??

I’m sure some of you can recall me pointing out a few months ago that the medium to long term solution of making Nigeria self-sufficient, particularly via agriculture, will take between ten to fifteen years. What’s the plan for survival till then? Surely not to live on the proceeds of the sale of the said assets!?The government believes the proceeds from the sale will be around US$15bn, but the buyer will still do his or her own valuation.

How long will US$7.5bn last???

Yes it’s a large sum of money but the fact of the matter is unless the right economic policies are implemented US$7.5bn will disappear before we know it. Why? Because unless policies that encourage investment and public spending are implemented the government will rely too heavily on the said funds.

Let’s say for instance you’re given NGN30m. Being a fairly decent amount, if invested wisely, such money could be a very useful nest-egg in your latter years. In other words neither the principle nor the interest gained will be touched for a few decades.

But if your current income isn’t enough to sustain you and your family you’re more than likely to keep dipping into that NGN30m, and before you know it the cash is gone.

In the same manner, unless this administration implements policies that generate funds now, the proceeds from the sale will disappear faster than you can say ‘bring and buy’.

When I asked him his view regarding the government’s plans, my friend Simon replied with the following question.

“How much oil revenue do you think Nigeria has generated since independence?”

When I replied ‘I don’t know’, like an irritated teacher addressing a less than astute pupil he told me to ‘’go and find out’’. He then went on to point out that should we get this wrong Nigeria will be finished. In other words, should the sale go ahead, the key will be how it’s disbursed and managed.

Will we witness the kind of ‘padding’ we’ve come to get used to?

Will the funds be managed efficiently or recklessly spent /stolen without thought of the huge detrimental ramifications?

The thought of another opportunity for the nation’s pillagers to wreak havoc on our economy and future well-being sent shudders down my spine. So much so that as soon as I hung up the phone I did a little research on Nigeria’s oil revenue since 1960.

According to Vanguard Newspaper, Nigeria has generated over NGN96 Trillion in oil revenue since 1960 from the Niger Delta region alone.

Let’s also take into consideration the oil boom of the seventies as well as increases in the price of crude oil between 2011 and 2014. An overall conservative estimate is about NGN200 Trillion.

Question – What do we have to show for it?

UAE – you can see very clearly what they have to show for it

Dubai – you can see it right from the airport

Qartar – these guys are financially making the world their own personal corner-shop

Nigeria? – mired in poverty, bad roads, no light, poor education, very little healthcare, an airport that’s an embarrassment at best, and zero infrastructure.

Yes we all know the money went into individuals’ pockets, but for the sake of clarity I must ask;

“WHERE DID THE MONEY GO?”

If, as Simon pointed out we find ourselves asking the same question about the proceeds from the sale in a few years’ time then we may as well switch off the lights and leave Nigeria be.

Once again, the idea in itself is not at all bad. However we should in no way imagine it will provide quick relief (it will take at least 18 months), and we should not for one second think it’s enough to sustain us.

No matter which way we turn we cannot avoid the simple reality that the only immediate route out of this unfortunate quagmire is to create an environment that promotes foreign investments. This is the best way of generating more foreign currency at present, and hence the most effective way in which boost liquidity, thereby encouraging more public spending.

How?

Free the FX Market. Stop trying to control the exchange rate. It’s never worked before and it definitely won’t work now. And as you can see no matter how much you try to control the market the rates will continue to fall. One can’t help wondering whether the exchange rates would have stooped to such levels had the market been allowed to naturally find its way several months ago.

The biggest driver of economic stimulus is public spending. Public spending is usually closely tied to employment /unemployment.  As of today thestupendously rich (those that attained absurd wealth via dubious means) are watching how they spend so as not to be interrogated by the EFCC. The legally wealthy (those that attained great riches via hard work and dedication) have tightened their purse strings to the point of suffocation. The middle class is barely surviving, and the largest segment of all, the working class, are losing jobs by the thousands on a daily basis. In other words the two questions on the mind of this administration should be ‘How do we create more jobs? And ‘How do we get people spending again?’.

Expenditure on Infrastructure projects, companies’ confidence in the economy, tax cuts/incentives for small and large businesses.

So what am I saying?

1. Be practical – free the FX market in order to give foreign investors the confidence to invest – thereby generating much needed FX income. When this happens the service industry will get the boost it so desperately needs – enabling small and medium scale businesses (service providers) to once more get business from companies within the financial services sector. They (small and medium sized businesses) in turn will have the funds to expand and employ more staff.

2. If and when the proceeds from the sale arrive, the funds must be pumped into Infrastructure projects as against giving money to state governments for salaries and doling out cash to the poor. This will not only lead to job creation but also an immediate and far more sustainable increase in public spending.

4. Provide incentives and opportunities for individuals and small businesses to get into the agricultural sector right away –as in now now now!!!!Enough of the philosophical and idealistic claptrap.Just get on with it. There’s land, there’s people, there’s produce. Give incentives to encourage people to get stuck in.

Though not in any way a quick fix, if the funds are used wisely the sale of assets is a good idea. It could potentially enable Nigeria to overcome its infrastructure crisis in the medium to long term. But in the meantime the necessary policies for more public spending and job creation must be put in place.