Agenda for Presidential Economic Advisory Council
By Ono Patrick Emerhana FCA
I CONGRATULATE President Muhammadu Buhari, GCFR, for setting up a special Economic Advisory Council with a view to rejigging the Administration’s economic think tank. I also congratulate Members of the Presidential Economic Advisory Council (PEAC) for their appointment to this strategic platform.
During yesterday’s inauguration of the PEAC, Mr President harped on the need to gather reliable data that Government and Nigerians can depend upon to take proper decisions as it is only external sources that we have relied upon in the past for reliable data. The Presidential appeal to the PEAC is key to the success of the Council’s assignment and is important to our wellbeing as a nation as will be deciphered from the analysis that follows.
The Presidential Economic Advisory Council should analyse historical and contemporary data on the twin issues of INFLATION and FOREIGN EXCHANGE PARITY which have caused the so-called ‘fuel subsidy’ in the past and which has continued to rear its head.
Successive Governments and its Agencies have not addressed these issues professionally in the past and these have been the issues that have made Nigerians to groan for breathe for several years now unknowingly.
Inflation refers to an environment of generally rising prices of goods and services within a country’s economy. The inflation rate is the percentage change in prices from one year to the next or year-over-year. Inflation reacts to each phase of the business cycle: the expansion and the peak phases. In the expansion phase, growth in the economy is positive and healthy. As a result of such healthy growth, the economy expands beyond a certain percentage and create asset bubbles which dovetails into the peak phase that leads to contraction or recession.
We note from experience that in countries like the United Kingdom and the United States – strong economies with 1.8% and 1.5% inflation respectively – inflation falls below 2% during recession, and deflation occurs, a threat; as inflation falls into negative territory. BUT IT IS NOT SO IN NIGERIA. During Nigeria’s recession in 2016, inflation rose aggressively from 9.01% in 2015 to 15.7% in 2016 and 16.5% in 2017. As a result of this, there was a general rise in prices of goods and services and Nigerians were groaning and blaming the Government. The prices of imported goods (including imported petrol and diesel) increased dramatically too, to our angst.
This calls to question, the wisdom and level of expertise with which our economy handlers are managing the Nigerian economy, a situation that has also affected the foreign exchange regime as addressed below.
It is submitted that the Presidential Economic Advisory Council in consultation with the Central Bank and the Federal Ministry of Finance should, as a management style, tame inflation which, in essence, is strategically important to our wellbeing as a people after security, and welfare of the citizens. Uncontrolled or unmanaged inflation would bring all our efforts and productivity to nought and life would not be worth living. This is the reason why kidnapping, armed robbery, militancy, Boko haram, cattle rustling, etc. have increased!
THAT BRINGS us to the issue of the ineffective management of Nigeria’s foreign exchange parity which has eroded the quality of our wellbeing as a people through recent years.
Since 2018, Nigeria has been identified as the country with the largest population of 86.9 million with extreme poverty representing nearly 50% of its estimated 188 million people. It is projected that Nigeria will become the world’s third largest country by 2050, after China and India. This extreme poverty status is an indictment of successive governments at all levels, who have mismanaged the country’s vast oil and gas reserves through corruption, incompetence and nepotism. A large population is a strength and not a weakness because China and India with several size of Nigeria’s population have continued to grow their economies and strengthened their foreign exchange parity and managed their inflation.
The foreign exchange parity of a nation’s currency (in our case the Naira) is – in the majority cases – a subjective assessment by the key players in the foreign exchange, money, and stock markets (in London, New York, Japan, the IMF, the World Bank, etc.) of the value of a national currency based on established parameters or indices. Following the inauguration of the Presidential Economic Advisory Council as economic handlers of the Nigerian economy, they should play a key part by advancing appropriate arguments to defend the country’s Naira value. A weak argument or poor defence can result in the devaluation of a currency by our international partners!
Nigeria is an emerging market with expanding manufacturing, financial, service, communication technology and entertainment sectors. With a gross domestic product (GDP) of US$411 billion in 2018, and ranked the 27th largest economy in the world in terms of nominal GDP, and 22nd largest in terms of purchasing power parity according to Wikipedia, it is uncharitable for Nigeria to be classed as a country with the poorest of poorest in the world by the World Poverty Clock because the authorities have failed to argue that we were better than we actually truly are.
FOLLOWING our recent recession the Central Bank of Nigeria removed over forty import items that were no longer allowed to access official foreign exchange, in an effort to sustain and strengthen the naira which had crashed from about N150 to the US$1 in 2015 to about N500 several months thereafter. The naira is now exchanging at N360 to the dollar which has prompted some for the calls for the removal of ‘fuel subsidy’ because Nigeria still depend largely on petroleum imports. It is strongly submitted that our economy handlers have not professionally handled the foreign exchange value of the naira well.
Because the PMB Administration has reduced rice imports during the past four years. Oil revenue has also increased. Several other foreign exchange-draining issues have been removed from contention and our dollar demands have been curtailed. All these are positive factors that should have enabled the naira to be stronger from all intents and purposes. Analysts believe that the naira should have been exchanging for between N200 and N250 now, with a view to bringing it down to N150 or N100 to the dollar in later years. It is not impossible. Paying with more naira for the dollar is evidence of lax or poor management of the Nigerian currency and economy.
THIS ARGUMENT is premised thus. In 1972, the US$1 was equal to 65k, which meant that with N650,000, a Nigerian got US$1,000,000.00. The naira increased in value to 59k to the US$1 all through 1979 (N590,000 for US$1,000,000). US$1,000,000 now is approximately N360,000,000.00: a colossal national tragedy!
It was after the military entered the political scene that the fortunes of the naira started to plummet starting from the IBB years through Abacha. Between 1999 and 2003 during the OBJ years, the naira declined from N21.89 to N127 to the US dollar respectively. There have been cries that Government should arrest the decline in the value of the naira since that time. That explains why a loaf of bread we got for N0.25 then now sells for N300.00. So it is for several commodities including garri, rice, beans, melon, pepper, onions, etc. and it is the reason why almost all Nigerians are shouting “things are hard oo”. It is the poor management of our foreign exchange parity by our economic handlers.
I have researched into the foreign exchange parity profile with our neighbours in OPEC including Saudi Arabia and the United Arab Emirates whose economies are also dependent on petroleum like Nigeria, as well as other African, European, American and Asian countries and nowhere have the value of their currencies plummeted the way the Naira has been bastardized over the years!
In OPEC countries and elsewhere, the graphs have been near horizontal, but in Nigeria it has been in a staccato manner – rising, stabilize a little, and rise again! The recently inaugurated Presidential Economic Advisory Council should kindly address this negative trend following the Naira and release Nigerians from heat and needless stress at the earliest opportunity and strive for a stronger Naira against world currencies.
The naira has plummeted by 54,611.25% since 1972 when the exchange rate was 65k to the dollar. The naira could rise to N1,000 and over to the dollar in a few years time considering the way it has declined since 1972 except PEAC does something to change the narrative. No where on earth has a country’s currency been so bastardized in peacetime as in Nigeria, let alone an oil producing country: not even in Zimbabwe or Venezuela.
Discerning Nigerians trust in the Presidential Economic Advisory Council, and with the pedigree of its Members believe they will work assiduously for the long-term benefit of our people.
ONO PATRICK EMERHANA, FCA
Emevor, Delta State