The only game in town

Early this week, two simultaneous meetings were held in Abuja, just about 5 kilometres from each other. In the National economic council (NEC) meeting, the President, his Vice, met with 36 state governors in the second meeting of its kind this year to discuss “multi- centres of prosperity”. In the other meeting, the Central Bank’s Monetary Policy Committee (MPC), chaired by the Governor, met for the second time this year also. In both meetings, the issues are related – sluggish growth, rising unemployment, declining fiscal revenues, and rising inflation.

Since the turn of the century, Nigerians have not faced this level of economic uncertainty, and growing financial insecurity. To reiterate where we are, the National Bureau of Statistics (NBS) has now released a trinity of disappointing data in a row. The first in the series showed that growth fell to 2.11 percent in Q4 2015, the lowest growth in 17 years. It followed up with a report showing the first double-digit inflation in almost 3 ½ years, at 11.4 percent for February. The final piece of the trinity came on Monday, just as the two above meetings were taking place, showing unemployment has reached 10.4 percent for the last quarter of 2015, compared to 6.4 percent in 2014.

What is the response? I will not be surprised if many Nigerians actually expect more from the MPC meeting than the NEC. On its part, since the middle of last year, the CBN has responded to continued uncertainty, the implementation of the treasury single account, and poor growth numbers by taking measures to expand liquidity and reduce uncertainty in the banking system. Credit to the economy expanded by 8.5 percent between November 2015 and January this year. Nonetheless, it does not have the power, nor the tools to make the required changes in the economy that will deliver real growth overtime. This responsibility is elsewhere.

So, the economic policy scenario we face in Nigeria today is reminiscent of that portrayed by Mohammed El-Erian, described as one of the greatest economic thinkers of our generation, in his just released book – The only game in town. He argued that the global growth path that started after the economic crisis of 2008, driven by prolonged monetary policy experimentation in quantitative easing, near zero and sometimes negative interest rates, has reached its limit. He then posited that we need a new growth strategy that will help solve the current economic problems that we face.

Where is Nigeria’s growth strategy? First, let us look at how we have been growing. The economic growth of the last fifteen years was fuelled by high oil prices, economic reforms, and some semblance of innovation, especially in the arts and entertainment. But many, of course, realised that growth trajectory was not sustainable because of some critical features. The first is that the reforms and innovations combined were not at the scale required for it to be sustainable. Second, Nigeria’s economic policies, programmes and the outcomes have been driven from the top – a critical part of my argument last week. Third, the revenue from an exhaustible resource has largely been used on social protection – paying salaries. Fourth, it is urban in nature. Besides agricultural products, there is no semblance of growth and changes in our rural areas. Fifth, the growth was not driven by any substance of growth in innovation, quality of education, nor technology.

The NEC is a forum where we can have real discussions about the structure and framework of our economic growth, but they are more concerned with the immediate problems of paying salaries. But the truth is that it is dumb if all a governor has to do is receive federal allocation and pass it on to a minority in the state as social benefits… oh sorry, salaries.

Meanwhile, the federal government is betting on mining and solid minerals to lead the next wave of growth. I have my reservations for two reasons. First, as every economic policy before it, the federal government is also driving this. The minerals are in the states, but I do not know of any clear strategy by any state to fully harness mining for its own growth and prosperity. The reason is simple, and it is backbone of our underdevelopment, no state wants to invest where it does not have control nor sure the resources (revenues) thereof belong it. The structural foundations of our growth are faulty and until we deal with that, we will continue to dance around in circles. Second, and related to the first point made, the success of the mining and solid minerals experiment will have implications for the manner in which oil revenues are shared. That is the elephant in the room that nobody wants to talk about until they see an alternative adequate source of revenues.

Each state, as a minimum, should be able to contribute to Nigeria’s present and future growth in three main ways – broad scale agricultural and/or mining programmes, infrastructure development, especially roads, and the provision of quality and sound public education. But I don’t know of any state where this is happening on a critical scale. I have no doubt that we will revisit some of these issues, and I hope it’s not when the oil wells have finally dried up. At the moment, our personal, political, sectional, regional greed and selfishness are barriers to these thoughts. So, for our States to be centres of prosperity as envisaged by the Presidency, the President must realise that, as of today, the federal government keeps too much, does too much, and controls too much. It is therefore not a coincidence that what we have are 36 leprous states waiting for handouts every month to pay social benefits. Sustainable growth is not going from this arrangement.

Ogho Okiti