The nationwide economic hardship and bad governance protests of the last week should be food for thought for all and sundry, not least the federal and state governments. The President, in his August 4 address, expressed his pain at the loss of lives of protesters, the wanton destruction of public and private property, and the looting, especially in some Northern states, and commiserated with the families and relatives of those who died in the protests.
He went into great detail to explain what his administration has done to reset the economy since he assumed office. These include the painful but necessary decision to remove fuel subsidies and abolish multiple foreign exchange systems, which had hobbled the economy in a vicious cycle of low productivity and import-dependency syndrome. Government revenue has more than doubled to 9.1 trillion since he assumed office. Debt service has been reduced from 97 percent of annual revenue to 68 percent, and outstanding foreign trade obligations of about $5 billion have been cleared. Crude oil production has increased to 1.61 million barrels per day. The compressed natural gas (CNG) initiative is expected to reduce transportation costs by approximately 60 percent and help to curb inflation.
“The compressed natural gas (CNG) initiative is expected to reduce transportation costs by approximately 60 percent and help to curb inflation.”
The administration has established the Nigerian Education Loan Fund (NELFUND), which has processed N46 billion in loans, initiated the Consumer Credit Corporation (with over $200 billion), and ordered the release of an additional $50 million each to both organisations. Additionally, the government secured $620 million under the Digital and Creative Enterprises (IDiCE) program, a program to empower our young people. More than N570 billion has been released to the 36 states to cushion the effects of economic hardship, while 600,000 nano-businesses have benefitted from nano grants, with an additional 400,000 more to benefit. 75,000 micro and small businesses are to receive N1 million loans each at a single-digit interest rate, and an unspecified number of large-scale businesses are to receive N1 billion loans at a single-digit interest rate. There are also plans to build over 100,000 houses all over the country.
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However, the president’s address has been criticised, notably by Professor Wole Soyinka, for not acknowledging the police brutality that resulted in the deaths of 21 or more people, as alleged by Amnesty International. The Nobel laureate has made a strong recommendation against the use of lethal weapons in quelling peaceful protests in Nigeria, along the line I suggested in this column last week. Other critics have claimed that the President did not address the demands of the protesters, which principally are reverting to the regime of subsidy in both petrol and foreign exchange, which are not practicable. The era of subsidy is largely over. Unless we work hard to effectively reform our key markets for gasoline, electricity, gas, and foreign exchange and create true and efficient markets for price discovery in these key markets, the Nigerian economy will not get out of the woods. When the reform efforts succeed, in the medium to long term, these markets will stabilise and prices will moderate. It happened in telecoms. It will also happen in electricity, petrol, and foreign exchange. But we have to be a bit patient. When the Nigerian Electricity Supply Industry (NESI) begins to generate, transmit, and distribute between 50 and 100 megawatts of electricity or more, tariffs will stabilise and moderate across the board. As the late Singaporean Prime Minister and legend, Lee Kuan Yew, said, subsidy is a race to the bottom for everybody.
It must, however, be noted that the cost or burden of the economic reform has been borne unevenly by the poor and vulnerable segments of our society. That is vividly clear from the hunger protests across the nation. Our economic and political history has shown that it is easier for government people to introduce necessary economic reforms than for them to share adequately in bearing the necessary costs of economic reform. This is primarily due to the lingering effects of military governance.
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The president’s address was long in impressive efforts at sound economic governance but short or silent on political governance. This is the crux of the matter. What the young protesters term ‘bad governance’ includes the absence of any form of sacrifice by policymakers and implementers. History has shown over and over again that the best way to successfully introduce and carry through tough reforms is when the people see their leaders who are exhorting them to make sacrifices, leading by example by making tangible and visible sacrifices themselves. Until that happens, they will not be persuaded to continue to make sacrifices, even when the economic reforms appear close to the light at the end of the tunnel.
What is needed going forward is a comprehensive set of governance reforms that will lead to a tangible and visible reduction in the cost of governance—both at the national and sub-national levels. The angst of the protesters was directed mainly at the President, but the governors, who are beneficiaries of a triple-size increase in monthly federation account allocations, have their own fair share of the governance challenge.
Finally, three additional areas where the federal and state governments need to double down are human capital development (education and health), agriculture and rural development, and water and sanitation. These sectors should take the lion share of our annual public sector budgets. Particular attention should be paid to designing a comprehensive national open apprenticeship program targeted at secondary school leavers. This should be prioritised over higher school certificates and the certification syndrome. Similarly, agriculture should be repositioned as the key engine of economic growth and poverty reduction.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos
