The Morning after Devaluation

What kind of country do we want?

“The wealth and poverty of nations inexorably depend on their domestic productivity and relative competitiveness. Hence, the economic welfare of every citizen can only be guaranteed by nation-states that are governed by people who understand this very basic economic thought.” — Obiageli Ezekwesili

In a recent interrogation of officials of the US Federal Reserve Bank, the key enquiry lawmakers posed to Janet Yellen, Chair of the Federal Reserve Bank, focused on alarming unemployment among Black Americans.

At first blush, one would think: what is sense in asking the US version of our “Central Bank Governor” about unemployment? Is that not a subject for the Minister for Youth Development, Minister of Labour & Productivity or something? However, when you note that the US Federal Reserve Bank states its objective as “conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates,” then the pivotal phrase in their mission — Maximum Employment — puts paid to any doubts.

This is the same line of questioning we should adopt, as “austerity” measures kick in; are monetary policies made for the success of Nigeria or are Nigerians made for the success of monetary policies? What is the single objective of Nigeria’s monetary policy? Are we also seeking maximum employment when we think of Nigeria? Or are we just about to devalue the currency, without considering the inherent and possible emerging defects of this economy?

Let me state clearly that I have listened to all the arguments on the “to devalue and not devalue” debate. It has really been an interesting discourse and quite a good show but a fundamental issue exists. This is the same question I have already asked: what is the single objective of our monetary policy? I repeat this at the risk of sounding like a broken record because I am a fan of Atiku Abubakar’s single campaign point during the electioneering period: JOBS. Sustainable jobs in this local economy is what I consider in these heated discussions.

That we have undermined this country by perpetuating a repulsive business environment is why the system has carved itself into one dependent on crude rent collection. Nigeria has maintained the inimical habit of mainly seeking foreign direct investment (FDI), thinking this will provide the needed amount of jobs but it is time to ask and appraise what monetary policies have done to lift domestic productivity of this country.

All or nothing often results in nothing

Those who worship the concept of free markets in absolutism won’t tell you about tax credits to Germany business, or that Chinese firms don’t borrow at 24%, and that such economies are supported with power subsidies and cheap export support schemes. Let us get it clear that FDI; can always help us in spaces where we have no competence but what have we done to stimulate domestic productivity in spaces we have such capacity or we are few steps away to make it happen?

We do not have simplified export processes, registration plans, land acquisition procedures or tax-filing systems etc. We are also not promoting a skilled economy but want to really be more productive? How we do we do that? For naysayers, let us know that all our fruits will not bloom at once. We cannot wait till we get 10,000MW before we start to act but on basic things as stated above that make life easier for entrepreneurs,we need to act in haste.

We have not made life easier for the Nigerian entrepreneur and the government (including this one) remains guilty of perpetuating this trend. I am not up for protectionist ideas that mask incompetence but we need to, and can do more to support those honest, hardworking Nigerians who try and are trying to grow the Nigerian economy.

Therefore, the spirit of #MadeinNigeria is a campaign that must be matched with tangible monetary policies — access to credit, export promotion, standardization — that make a diversified export economy a reality. People cannot buy what is not available, and production will never remain viable if the current operating conditions persist, including the currency woes Nigerians business-owners are facing.

We need to support Nigerian goods with the might of government to make them competitive. Developing economies have achieved this through deliberate, key investments in policies that put them at an advantage and maintain this advantage. With research funding , attainment of standardization levels and access to markets and finance, they support their own. The US has a hugely agriculture subsidized system, credits to small businesses and China has boldly taken on its “six pillars” programme, which proves that it wants to be a leader in the next decade, and is not resting on its oars.

Conversations on devaluation will remain a flop without the prop of pundits and decision-makers forging a common front to discuss and demonstrate how we intend to build a country that works. This escapist approach is why we don’t use our hospitals (the President has been receiving medical treatment outside for nearly 40 years), why we are running outside our border to get the best education (even to the Philippines) and why large chunks of our population continue to leave Nigeria in droves.

My position is this: “Devaluation” — shifting the goal post to another price — should not happen. This dilly-dallying is only dragging further a situation that is solely the speculators’ gain. We should take a free float approach and make an open-ended market if we plan to abandon the current uncertainty, which is clearly disastrous for growth and the ordinary citizen.

However, if we float this currency, in absolute market dynamics, it does not resolve the innate crisis of our economy. We may need a sharper blend of both monetary and fiscal policies, as well as decide where we think with minor tweaks, we can leverage the Nigerian business terrain and create an advantage which results in economic growth. Let us float this currency and focus on the bigger issues — domestic productivity & competitiveness.

What is the sense in importing, rice, fish, tomato paste, when we have an obvious advantage already — with over 70% of arable land? As oil plumbs lower depths, cocoa has inversely experienced a 100% price increase; we need policies that immediately increase incentives for selling cocoa and taking advantage of the $150bn chocolate industry. What is the sense in exporting timber and importing paper? Those who developed their industries did so with direct government assistance to prop up new engines of growth with favourable policies. All we need to liberalize such access so that we don’t end with another cement cabal.

Most of the advice proffered on devaluation, which I have seen, does not consider the consequences on Nigerians, who do not deserve a return to harsh times due to a decimation of the economy by the thieving antics of less than 1% of the population.

These are the structural issues that we are not even considering, neither are we sweating out enough empirical thought and debate on the fact that there needs to be a humane part to the devaluation discussion.

My questions remain: what happens, the morning after devaluation?

Will we assuredly take advantage of the benefits that come with a cheaper currency? Or will we continue adrift on the tide of rhetoric, without seizing the moment to solidly lift this country out of its economic woes to lasting prosperity? Can we go back to the question of domestic productivity & competitiveness and let this devaluation talk be trash for LAWMA?

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