Protocols
I wish to express my profound appreciation to the leadership of Covenant Nation the organisers of the event which marks the 12th edition of The Platform Nigeria for affording me the opportunity of participation in the capacity of Guest Speaker. May I also commend the organisers for their diligence in the choice of the theme: ‘Democracy and the free market economy’ underpinning the importance of deepening our democracy and its tools on a day we have chosen to celebrate our return to democracy after years of military dictatorship.
Read also: Living large in the midst of mass poverty!
INTRODUCTION AND DEFINITION OF KEY CONCEPTS:
Reading or listening to the news these days, it’s easy for one to despair about the state of our democracy relating to its failure to protect our economic and social rights. More than two decades of unbroken democracy has not resulted in adequate security of lives and properties of our citizens, quality infrastructure, decent employment, access to qualitative education, health, shelter, food and water nor afforded the generality of our people adequate standard of living – these are the economic and social rights that enable people to live with dignity and participate fully in society.
I believe these are the factors that necessitated the choice of today’s theme, ‘Democracy and the free market economy’ which is apt in the sense that when citizens lack access to their economic and social rights, they cannot fully participate in civic life and therefore can not do the work of democracy. But we must thank God for the freedom to engage in an open conversation about the near total absence of those rights that empower citizens of democracy, utilizing the freedom democracy offers to build the kind of society that better meets their needs and aspirations.
Without sounding very academic, it is obvious that my speech would not be complete without understanding some basic concepts relevant to today’s theme.
Read also: Poverty is greatest threat to Nigeria’s democracy, says Dogara
DEMOCRACY
What, therefore, is democracy and how has it evolved over the years? It seems from available evidence that there are no settled definitions of democracy. Historically, democracy comes from a Greek word, ‘Demos’, meaning ‘ people’ and ‘ kratos’, meaning, ‘rule’. It is, thus, a system of government in which the people rule. Democracy also has roots in the Magna Carta, England’s “Great Charter” of 1215 that was the first document to challenge the authority of the English king, subjecting him to the rule of the law and protecting his people from feudal abuse.
In our modern era, perhaps the most popular definition of democracy is credited to Abraham Lincoln, the former President of the United States, in his Gettysburg Address, where he described democracy as: ‘Government of the people by the people for the people’. It was Winston Churchill, the former British Prime Minister who said: “Democracy is the worst form of government, except all those other forms that have been tried from time to time.”
The Britannia online description of democracy, is perhaps a good foundation of understanding the different strands of democracy, thus: “The term has three basic senses in contemporary usage: (1) a form of government in which the right to make political decisions is exercised directly by the whole body of citizens, acting under procedures of majority rule, usually known as direct democracy; (2) a form of government in which the citizens exercise the same right not in person but through representatives chosen by and responsible to them, known as representative democracy; and (3) a form of government, usually a representative democracy, in which the powers of the majority are exercised within a framework of constitutional restraints designed to guarantee all citizens the enjoyment of certain individual or collective rights, such as freedom of speech and religion, known as liberal, or constitutional, democracy.”
In the case of Nigeria, it won’t be out of place to posit that ours is a constitutional democracy. That Nigeria is a democracy is even stated in the Constitution itself. Indeed S.14 (1) of the Constitution of the Federal Republic of Nigeria (the Constitution) provides that ’14. (1) The Federal Republic of Nigeria shall be a State based on the principles of democracy and social justice.
FREE MARKET ECONOMY
A free market is said to be a type of economic system that is controlled by the market forces of supply and demand as opposed to one regulated by government controls. It is opposite on the spectrum to a command economy, where a central government agency plans the factors of production and use of resources and sets prices. In a purely free market, buyers and sellers arrive at prices based only on supply and demand. As such, buyers and sellers compete with one another and among each other to pay the lowest price (for buyers) or receive the highest price (for sellers). How free markets can motivate individuals, acting in their own self-interest, to produce what is societally necessary was what Adam Smith, the father of modern economics referred to as the “invisible hand” in his famous work, “The Wealth of Nations”.
In a free market, undertakings are owned by private individuals who are free to trade contracts with each other without any let or hindrance. Undertakings sell goods and services at the highest price consumers are willing to pay while workers earn the highest wages companies are willing to pay for their services. A free market economy is characterized by private ownership of resources, thriving financial markets, and most importantly, the freedom to participate. But in reality, the idea of a purely free market is utopian.
No country on earth runs a purely free market. Most countries’ economies contain elements of both free market and command economies – some sort of combination of markets and regulation, with different countries falling at different places on the spectrum. According to the Heritage Foundation’s 2022 Index of Economic Freedom, Singapore’s economy is considered the freest, followed by Switzerland and Ireland. The United States, with its much touted democracy and openness, ranks just 25th on the list and understandably with Venezuela and North Korea ranked last in terms of economic freedom.
It is said that the promise of democracy is “ life, liberty and the pursuit of happiness”. According to Thomas Jefferson, these are God-given rights. Therefore, it is not enough to be alive and free, one must also be engaged in the pursuit of happiness in order to be said to enjoy the promise of democracy. The 2022 Multidimensional Poverty Index survey for Nigeria revealed that: 63% of persons living in Nigeria (133 million people) are multidimensionally poor. That being the case, we can say without the fear of any contradiction that our Democracy is not working for majority of our citizens. This is because, although they are alive and free, they lack the means with which to pursue happiness.
Poverty is a greater threat to a democracy than weak institutions simply because it deprives poor citizens not only of their political voice but prevents them from holding their governments accountable shattering public trust in the emerging institutions of democracy. The challenge before us now is how to utilize our democratic rights to build an all-inclusive economy that empowers an overwhelming majority of our people to unleash their full potentials. Staying engaged just as we are doing today, is one of the ways of making our democracy work. We must never stop putting pressure on Government to set clear targets and monitor progress when it comes to addressing the causes of poverty because poverty, though experienced by individuals, is created by parlous systems that fail to protect citizens rights to a decent standard of living. When the right systems are in place, recent experience has shown that a nation can pull hundreds of millions of its citizens from poverty. After forty years of policy implementations and effective governance, China has successfully lifted 770 million of its citizens out of poverty, and India, too, has revealed that nearly 250 million people have been lifted out of multidimensional poverty. With purposeful leadership, Nigeria can achieve that.
Nigeria is in a demographic transition with a major problem which is that our population curve has far outpaced the hope and opportunity curve leaving us with no option than to expand our economic space if we must save our democracy. Unfortunately, the “youth bulge” has turned out not a blessing as it is only producing disaffected rebels instead of productive laborers. There is no Nigerian out there that doesn’t want change, but the problems are so consuming and absorbing that we fail to articulate what changes we need to adopt. Most times, we fail to realize that the heart is more important than the brain. While people know what they are against , the majority don’t know what they are for. Change to me, therefore, is not about what you are prepared to abandon but what you want to embrace.
I have realized that apportioning blame is not a solution anywhere. In as much as I don’t want you to trust me to land the plane when it comes to proffering economic solutions as I have seen countless first class economists in CBN and other financial Institutions doing so much over the years but not getting anything done. It is like they have always sailed on clay boats all this while. I won’t even bother talking about how we got here because that is the discussion that saturates the media space. But permit me to bore you with what I consider commonsensical solutions to some of our nagging economic challenges.
FOREIGN EXCHANGE (FOREX OR FX) CRISIS
This is by far the major malaise afflicting our economy at the moment. In June 2023, the CBN undertook a critical policy decision to implement a new foreign exchange policy that provides for a unified and free-floating exchange rate. This means that the exchange rate of the local currency to the USD (and indeed, to all other currencies) will henceforth be based on freely priced transactions between willing buyers and willing sellers in the official market. Since then, the Naira has depreciated against the USD in both the official (NAFEM) and parallel markets. This has seen the value of Naira cascading to a near death downward spiral in the parallel market where it has lost more than 100% of its value.
Governments all over the world are tasked with strengthening the value of their national currencies for obvious reasons including but not limited to the following: (a) Strong currency increases the purchasing power of citizens and enterprises in the country. (b) The stronger a currency the more likely the surge in investors confidence because foreign investors make rational choices and are more inclined to invest in countries with strong currencies, as they stand to gain higher returns on their investments when converted back into their home currencies. (c) A strong currency is frequently associated with stability and prosperity. In other words, it determines the health of a nation’s economy. As we can see, a strong currency creates humungous surface-level and nuanced advantages for citizens.
So many reasons have been adduced by pundits to be responsible for FX rate instability in Nigeria, which to my mind are a complete technical application of economic theories that do not capture the reality on the ground. I agree with the slogan that we must transform to thrive by transiting from a consuming economy to a producing one. That is rational, but it is not the cause of our FX volatility. I believe the Naira is grossly undervalued. This is because the most productive nations are not necessarily the nations with the strongest currencies. China is a perfect example.
Take a look at the West African CFA franc countries. What are they producing and exporting relative to Nigeria? Why does CFA seem immuned from the volatility our Naira suffers? What can we find in economic theory that justifies the strength of the CFA against the Naira? What was Nigeria producing in Gen Abacha’s days or Presidents OBJ and GEJ’s days when Naira was a bit stronger and stable that we are not producing now? The only infliction point we witnessed was due to the advent of the BVN, which crippled the ability of corrupt officials and other shady characters to keep their loot in anonymous bank accounts. Almost all ill gotten money is stashed in USD in private vaults as the Naira is too bulky to warehouse. The initial withdrawal of such funds from the banking system was what triggered the first wave of the hyper demand for USD.
Therefore, I am of the firm belief that our insatiable appetite for USD is what is killing the Naira. Believe it or not, nearly all big ticket deals and transactions both legitimate and shady are closed in USD. Just find out, there is no hefty bribe that is not paid in USD. Some schools in Nigeria charge fees in foreign currencies, and even our most valued export is paid for in USD. So, to me, wittingly or unwittingly, the USD is our currency of choice, and as long as we don’t kill our appetite for USD, the demand for USD will always outstrip its supply.
The truth is that as we speak, Nigerians have lost faith in the Naira as a store of value and that faith cannot be restored anytime soon, even the average Nigerian investor is now thinking of how to invest in ventures that will bring in USD returns. PMB’s currency swap with China didn’t work out for obvious reasons. The EURO, a very stable currency, has also been around for many years but is still unable to replace the USD. It’s better to tell ourselves the home truth. The USD is not going away anytime soon. The challenge before the government is how to unlock and make the USD locked up in private vaults in Nigeria begin to chase the Naira. That, to me, is the commonsensical solution. To achieve this:
1. The government must demand that all Nigerian exports, including crude oil exports be paid for in Naira just as we don’t pay for any imports from any country in Naira.
2. Government should raise loans from Nigerians with large FX holdings by applying moral suasion. As we all know, Nigerians at home and abroad are said to hold substantial amount of FX in domestic and foreign domiciliary accounts, which are currently idle. For Nigeria to reach some understanding with holders of these funds, two conditions must be met. The government is able to build trust and engender confidence in the economy, and the holders of the funds are sufficiently incentivised to act. The incentives will have to be agreed upon mutually. For example, (a) no one is compelled to disclose the source of their FX, and (b) government provides sovereign guarantees to repay on agreed terms.
3. Government should improve inward remittances of funds by Nigerians in the Diaspora. Diaspora funds are excellent and reliable sources of funding development in several developing and emerging market economies. There are said to be between 5 and 15 million Nigerians in the diaspora with remittances in excess of USD20 billion. This is more than 80% of FGN’s Budget. However, these funds do not go through the proper channels, and the CBN is unable to reap the benefits of foreign currency transfers. Again, Nigeria must make an attractive value proposition to its citizens abroad to engender their confidence and attract remittance through proper channels.
4. Government, through credible intelligence generated by our security agencies, should know those individuals with idle USD stashed in their private vaults. Such individuals should be offered the incentives in paragraph 2 above, and should they fail to respond, it is my considered opinion that Mr. President should invoke and apply the MBS solution. No one who has taken advantage of the system should have the liberty to store in excess what his/her country desperately needs in order to lift millions of its people out of multidimensional poverty. Mr President must be told that nothing done to afflict the comfortable in order to comfort the afflicted and heal our economy qualifies as a vice. Likewise, comforting those who have put our economy on a chock hold by taking unfair advantage of the system is not virtue.
If the current downward spiral of the Naira is not arrested, I fear We may get to a point where we will have to ditch the Naira altogether and Nigerians won’t bother then whether their CBN is headquartered in London, Washington, Brussels or Beijing provided their currency is strong.
After fixing the FX conundrum, the next thing is to formalize our informal sector. This is called broadening the tax net. We all know how that will impact government revenue and stimulate economic growth if the proceeds are well invested.
Government must also create and deploy a robust ecosystem of Micro, Small, and Medium Enterprises (MSMEs) to create millions of jobs, fuel high economic growth, build our foreign reserves, and strengthen our currency. I suggest the country should be subdivided into strategic economic zones, according to the natural economic endowment of each part of the country.
i) The North should be an Agric/Agro-Allied Zone, to concentrate on massive commercial farming involving sustainable transformation from rain fed to irrigated agriculture and manufacturing and supplies of agricultural plants and machinery, food processing, innovation and entrepreneurship.
ii) The South East, to concentrate on industrial activities (such as currently exists in Aba and Nnewi), which that part of the country is well known for – Car manufacturing, Shoes, Clothing, Machine Tool industries, and other manufacturing activities.
iii) The South-South and Delta regions, Petro-chemical Zone – oil and gas related industrial activities
iv) The South-West, heavy industries, Shipping, Hi-Tech, AI, Cocoa, commerce, etc.
1) Technology & Innovation Incubation centers/hubs and accelerators should be established, or boosted, all across the country, congruent to the strategic endowment of each part of the country. This would enable more specialized MSMEs to sprout and thrive.
2) The government should provide/boost startup grants for promising inventions/innovation, as is currently being done in the US and other countries. Promising inventions then would present opportunities for private investors (both foreign and domestic) to invest and scale these up into profitable ventures.
3) In order to ignite/energize the spirit of creativity and entrepreneurship, especially among the youth, the government should establish a prestigious annual Invention & Innovation Award, to be presented by the President every June 12 . If this is agreed upon, our Democracy Day would no longer be a day in which we simply mark the return to civilian rule but a day to celebrate innovation and progress.
4) Focus on Export Manufacturing-Our development policy should mimic the already tried and tested East Asian Export-Driven model, used by Japan, S. Korea, Taiwan, and Singapore, and later copied with phenomenal success by China. Nigeria has an abundance of cheap labor right now, which it could use to produce and manufacture labor-intensive exportable goods and services. Thus providing employment to its teaming unemployed youthful population. The MSME ecosystem would thrive on this.
5) Just as China and India did, foreign companies, who wish to market high volume consumables in Nigeria, including those who hitherto are used to manufacturing and dumping large volumes of their products into our country, should be asked to manufacture those products right here in Nigeria, by way of Foreign Direct Investment (FDI). This would give employment to our large number of unemployed young graduates. Manufacturing within the country, would no doubt upgrade our local managerial skills, in addition to enabling technology transfer into our country. This strategy is what enabled China, and other East Asian economies, and also India, to acquire technological and managerial skills, making them today globally competitive. This strategy, too, would invariably lead to the growth of our MSME ecosystem.
6) Government policy in the area of education should emphasize STEM (Science, Technology, Engineering, and Maths) education. It is this strategy which has seen China, Japan, Taiwan, S. Korea, and Singapore leading the world, and about to overtake the United States, in the area of hi-tech/AI.
7) In the area of infrastructure, a whole lot more needs to be done. The most obvious areas of need, what we might call mission critical needs, are:
i) Roads, which should last a minimum of 10 years connecting key cities, and strategic regional industrial/economic zones.
ii) Same with railroads. Concession these out too, to qualified foreign and domestic companies.
iii) Dredging our inland waterways. Just think of the new towns, cities, holiday resorts, industrial parks, and tourism activities that this would enable to emerge along those waterways corridor.
iv) Power. Of course, without power, our efforts to industrialize would continue to be a pipe dream.
In closing, permit me to counsel that we must learn to work circumspectly in the midst of the noise in Nigeria as all healthy democracies are noisy. That must be the case when the culture of democracy takes root. The free press, democratic elections, parliamentary debates, civil society activities, Labour unions, conflict, compromise, consensus are all entranced parts of a vibrant democratic culture.
We must understand the responsibility of freedom, which means that we are free not to be irresponsible. No democracy anywhere has ever licensed its citizens to be their worst selves; fascism does that. We must, therefore, deploy our democratic rights to build rather than to destroy. For progress to be made, we must creatively create a reward system that works only for citizens who are bakers not those that are hunters – those rent seekers masquerading as business men and women who now promiscuously litter our economic space.
If Nigeria keeps holding on to what is normal, it will keep letting go of what is possible. We must never lose sight of the fact that scientists built the titanic while amateurs built the ark, but the titanic couldn’t survive a collision with an iceberg while the ark defied the global floods. The fight to rebuild our faltering economy is our collective fight. We must at all cost reduce the present poverty level and Government must lead the way by being very aggressive in the pursuit, design, and implementation of appropriate policies that would give birth to a robust ecosystem of MSMEs all over the country.
Finally, we must learn to resist the temptation to define our happiness as the other groups unhappiness and we must tame our misdirected rage at a Government we wrongly believe is big enough to solve all our problems but unable to do so. The sooner we accept the fact that our government is limited and therefore limited in what it can do for us as individual citizens, the better. As difficult a message to sell, but it is the raw truth.
Thank you for listening. May God bless you and our dear country Nigeria.
YAKUBU DOGARA, a former speaker of the House of Representatives, delivered the speech at the PLATFORM NIGERIA on ‘DEMOCRACY AND THE FREE MARKET ECONOMY’ on June 12, 2024 at Marriott Hotel, Ikeja-Lagos.
