NESG, Insincerity and the economy

The Nigerian Economic Summit Group (NESG) concluded its 15th Annual Summit last week in Abuja. As is the custom, the heavy weights of industry and commerce and other representatives of the major stakeholders in the Nigerian economy and public sector were well represented.

I recall that in an earlier article titled “Post NESG: Self Against Communal Interest”, published in Daily Independent edition of June 13, 2006, we observed that NESG’s head in the sand ostrich posture with regard to the realities of the Nigerian economy was not only insincere,

but also self serving at the expense of further deprivation of the masses.

Indeed, prior and subsequent to the publication of above article, copies of a well-considered paper: “A Liberalised Foreign Exchange Market: a proposal for a liberalised foreign exchange market in Nigeria and its economic benefits”_ Boyo/Ojomaikre, which was first submitted to the National Economic Intelligence Committee in August 2002 had been made available to successive Chairmen and D.Gs. of NESG.

Indeed, earlier this year, 2009, copies of the same paper with explanatory cover notes were once again mailed by both courier and hand delivery to the current NESG Chairman and D.G. Any regular reader of Rational Perspectives will be already familiar with its unassailable analysis and economic truths and observations on the Nigerian economy, and which, in fact, form the nucleus of our paper under reference.

In spite of the NESG’s denial of reality, copies of the same paper were also provided to the current helmsmen of the Economic Group well before the recently concluded 15th Summit. Again, our overture to the NESG was rebuffed, and we did not even get the honour of a reply!! On a chance meeting with the current NESG Chairman at a media organised forum, I made bold to obtain a comment on the inexplicable silence of the Group to our observations. Surprisingly, the incumbent Chairman acknowledged receipt of our paper, but could not explain why there was no feedback even after he arranged for our paper to be forwarded to the NESG Secretariat!

In any event, Mazi Ohunbunwa confessed that he personally saw nothing wrong with our proposal! Anyhow, the 2009 edition of NESG Summit is now over; but without a doubt, the impact of the Group will remain ephemeral so long as self interest remains the abiding motivator.

The following is the text of an article titled “NESG, Insincerity & the Economy” first published in this column on 27/10/2008. I trust you will enjoy reading it.

By the time you read this article, the Economic summit Group would have ended its annual ritual of ‘jaw jaw’ with a terminal communiqué that bears much resemblance to previous years’ observations and recommendations but, as usual, would lack any depth or insight that would galvanise the Nigerian economy and mitigate the oppressive poverty of our people!

The NESG, as we know, comprises selected technocrats from both the public and private sectors and together with the government’s visionless economic team remain the arrowhead for the direction and operation of our monetary and economic policies! The series of failures of past vision statements of the NESG maybe the result of the reluctance of its membership to upset the status quo and endanger their own self interest. It is not always obvious that our skewed monetary and economic policy framework have favoured a small handful of Nigerians at the expense of deepening poverty in the midst of increasing plenty for the rest.

The annual convention is generally blessed by the sitting President with a promise to implement the recommendations of the August summit thereafter; that, is usually the end of the story for another 12 months, but media propaganda ensures that the proceedings are described as progressive and successful! The only real success, of course, is the preservation of the same economic and monetary frameworks that have ensured continuous bleeding of our economy.

The question is for how long must we allow propaganda to becloud this annual deceit of our people? I do not ever recall that the NESG has at any time expressed any serious concern about the various glaring contradictions in our economy; for example, how the banks continue to declare such abnormally high profits when the real sector, their systemic
workhorse is collapsing?

The truth is that any attempt to correct this anomaly would reduce the easy sources of the immense wealth of our noveau riche! I do not also recall that a thought is given to why our national currency exchanged for N80 = $1 when we had only $4bn reserves (that could cover the cost of our imports for just 4 months) in 1996 under despotic leadership, but today exchanges for about N120 = $1 with over $60bn in reserves (i.e. imports demand for approximately 30 months), and vastly improved international goodwill in a democratic dispensation! Serious analysts are of the view that with reserves increasing by up to 15 times with 32 months demand cover instead of 4 months in 1996, our Naira should exchange at worst for about N10 = $1, i.e. one eight of the rate in 1996!

However if this is the reality, how would our entrenched rent seekers express their vast superiority over us peasants with their reduced nominal Naira bank balances?

Any serious observer of the Nigerian monetary framework will wonder why interest rates rise and Naira rates fall with increasing export dollar revenue! Logically, the more you have of something, the less you are prepared to pay for that object! This anomaly has obviously not attracted the attention of the NESG. The reality that our potential for industrial capacity building and concomitant increase in employment and security can be jeopardized by high interest rates which are induced by the availability of too much money or excess liquidity is confounding; yet every time the Central Bank captures our dollar earnings and substitute Naira allocations, the system suffers a Naira liquidity surplus.

Any hope that the ‘excess’ Naira in the system would bring down the cost of borrowing is inexplicably misplaced as the same monetary authorities embark on direct competition with the real sector to crowd it from accessing the cheap funds by instigating a rising interest rate regime that would restrain even the most optimistic industrial venture in an environment of decaying infrastructure.

The NESG don’t have to worry about proposals that would bring down commercial lending rates to a beneficent level of single digit so that the industrial landscape can come alive and put more of our people to work. The current interest rate structure suits them just fine, after all, their membership comprises the prime beneficiaries of this anomaly!

To be fair, the NESG may claim to have made recommendations to diversify our economy from a monocultural economy, but serious analysts may see this as lip service! Such observers would wonder how our economy can ever diversify with interest rate regime of over 20% per annum and also question how interest rates will ever be single digit when government is happy to borrow back its own funds at almost 10% and subsequently warehouse these same funds or sterilize them in CBN vaults or simply document them as book credits? (we recall that following unceasing criticism from some concerned Nigerians (including this column) on this folly, the CBN and debt management office grudgingly reduced the cost of such mindless borrowing from between 14 – 17% about three years back).

It was refreshing to note that the CBN has lately finally bowed to superior judgment by accepting to suspend its economically crippling liquidity mop up operations in the wake of the global financial crisis and the huge losses in the market capitalization in our stock market.

We have consistently decried the folly of naira substitution for
export dollar earnings especially with regard to its impact on the domestic pump price of petrol and the collateral of increasing subsidy, a veritable paradox if there was one. Today the burden of subsidy has approached N1500bn (over 50% of total federal budget for 2008).

The excessive burden of this subsidy is of little concern to the gurus of the NESG and the fact that petrol prices could actually be drastically reduced with an opportunity for an additional sales tax component (instead of subsidy), with proceeds dedicated to infrastructural enhancement is anathema to the vision of the NESG. We must not of course forget that amongst their members are the fat cats who also double as bankers and oil importers who benefit from the subsistence of increasing fuel imports and subsidies.

Again, our hopes will be misplaced if we expect the depreciating value of incomes of the ordinary Nigerian to attract the attention of the NESG as cheap labour is necessary for bigger profits! Maybe they also need to be reminded that it would be impossible to enjoy their vast fortunes in peace with their elaborate personal security apparatus so long as the vast majority of our people remain hungry and desperate!

It is easy to apportion blames, but certainly more difficult to make useful structured contributions to National discourse! However, I will quickly add that in addition to several analyses on the economy in this column and in various media over the last 7 years, our paper titled “A LIBERALIZED FOREIGN EXCHANGE MARKET” _ ‘A Proposal for a Liberalized Foreign Exchange Market in Nigeria and its Economic Benefits’ have been made available to at least 3 sets of the leadership of NESG, but inspite of the practicality and its reconciliation of obvious contradictions in our economy, the NESG has adamantly stuck its head in the sand and pretended that our economic problems are insurmountable! This is not surprising; the content of our paper does not condone the prosperity of rent seekers at the expense of the rest of us!

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