oby ezekwesili: a holistic look at the nigerian economy and its potentials

THE HOLISTIC LOOK AT THE NIGERIAN ECONOMY AND ITS

POTENTIALS

BY OBIAGELI “OBY” EZEKWESILI

GOOD GOVERNANCE

ECONOMIC PHILOSOPHY

A CASE STUDY OF CHINA

The Rise of China & Embrace of Markets

• From 1981 to 2008, China’s poverty rate fell from 85% to 15.9%, or by over 600 million people

• China accounts for nearly all the world’s reduction in poverty

• Excluding China, poverty fell only by around 10%

globalissues.com

Singapore & NigeriaA tale of two countries

World Bank; Google Public Data

Monetary and Fiscal Policies are the instruments of response to changes in local and global economy.

Key highlights of our Relative Macroeconomic Stability through monetary and fiscal policies since 1999 to May 2015

FISCAL PRUDENCE/FISCAL DEFICIT NOT ABOVE 3%

DEBT MANAGEMENT

SINGLE DIGIT INFLATION

INTEREST RATE & POST 5% GDP GROWTH

PILLAGING AND MISUSE OF HUGE OIL REVENUE

OIL PRICE SHOCK & THE GLOBAL ECONOMY

EFFECT OF WRONG FOREIGN EXCHANGE POLICY

PRICING A NATIONAL CURRENCY

DIVERGENCE OF OBJECTIVES

$690bnNigeria’s Federally Collected Revenue from 1999 – 2014 stood at $690bn

WHERE IS THE MONEY?

CBN; Budget Office of the Federation

CURRENT ACCOUNT DEFICIT GAP

World Bank; Google Public Data

In era of low oil prices, what are petro-states doing?

THE VENEZUELA WAY

Venezuela has challenges with currency controls and state planned economies

NIGERIACapital ImportationDeclines

Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.

Source: NBS

NIGERIAGrowth is tanking

Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.

NIGERIAInflation rises to double digits

Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.

NIGERIAUnemployment RisesEvidence shows that as the Nigerian Government tries to “protect” the currency, fiscal and monetary indicators are blinking red.

NIGERIAExternal Reserves Sliding

Evidence shows that as the Nigerian Government tries to “protect” the currency, fiscal and monetary indicators are blinking red.

-$2.4bnNigeria foreign reserves from $29.59bn to $27.1bn has lost $2.5bn since this government took over in May 29, 2015. Is this currency inflexibility working?

We are stuck with $27bn as our reserves needs a six-month import cover.

• Non-Oil Exports Volume Declines Volume for non-crude exports declines from N4.4tn to N2.7tn in 2014

• Job losses & Industry Contraction Stagnancy at retail industry as e-commerce platforms and other agencies are downsizing

NIGERIAIt is time to rise up

Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.

• Currency Peg and Fuel ScarcityCurrent selective allocation of forex when price adjustment is needed stopped private marketers from importing thus creating an import logistics and availability crisis.

• Budget Crisis with fiscal stagnation Nigeria fiscal deficit rises to N2.2tn and government without price adjustment is starving itself of revenue, putting unnecessary strain on borrowing for capex.

• States Fiscal CrisisDespite a bailout of N1tn in salary assistance and loans, states are not out of the woods.

NIGERIAIt is time to rise up

Evidence shows that as the Nigerian Government tries to “protect” the Currency, fiscal and monetary indicators are blinking red.

DEVALUATION THINGS TO NOTE

• Flexibility ensures you do not run out of reserve, ensures manageable uncertainty and keeps policy responsiveness attractive to both citizens and business. More effective in combination with Tariffs in controlling import.• Defreeze Forex Supply-Side Barriers:

Agriculture productivity and export can respond and expand on the back of our weaker currency. Don’t say we have “nothing else but oil to export”. China, Vietnam, Indonesia, South Korea all once had “nothing to export”. Exchange rate policy was key to their global competitiveness and it was not just about “strong currency” .• Transparent market based allocation reduces

opportunities for misallocation of scarce exchange resources.• Sort out petroleum subsidy mal-governance

for it is strongly linked to Forex challenges. Be courageous . The Subsidy scheme has run its course .

THE DOWNSIDES OF DEVALUATION We are right to worry about the inflationary impact of Devaluation. It is real. Regrettably though, current indicators all point to the fact that under the extant forex policy stance we are already suffering that impact without getting the aforementioned benefits of a more deliberate approach at adjusting the Naira. THE POOR ARE WORST HIT.CURRENT SYSTEM PROMOTES DISCRETION, OPAQUENESS, CORRUPTION& PATRONAGE. INEFFICIENCY, DISTORTION, UNCERTAINTY AND DECLINE. WRONG SIGNALING.

Devaluation is part of a clear and comprehensive policy framework and NOT a Silver Bullet……Not a Panacea. We must complement with all the policy prescriptions under the medium to long term section.

DEVALUATION

THINGS TO NOTE

MEDIUM- LONG TERM ECONOMIC DEVELOPMENT

DISRUPTING THE STRUCTURE OF ECONOMIC STAGNATION.

PART 3

The biggest economy in Africa is one of the least diversified

Economic Diversification Index

Source: ACET research.

THE UNDERPERFORMANCE OF THE NIGERIAN ECONOMY IS SEEN IN ITS SHRINKING MIDDLE

CLASS

MY ADVICE FOR NIGERIA

LET’S FACE FORWARD NOW!

Mentally shift the mindset from moaning and groaning about what was done by the previous administration to a “THE-CHALLENGE-IS-DAUNTING-BUT- WE- SHALL- FIX IT-MINDSET."

Once new government was sworn in 29th May 2015 it inherited both the assets and liabilities of Governance: The Theory of Accountability!

RebuildOur SocialCapital

• Commence Rebuilding our social capital- inclusion, cohesion and justice. Hard work. Effort, healthy

competition. Creativity, Innovation.

• Our President cannot “dislike” any segment of his population.

Magnanimous in victory. • The Igbos &the Niger Deltans, expressed their own legitimate choice in an election.

• It must not lead to their becoming “ostracized” as a tacit policy of state.

#OfficeOfTheCitizen

Tackle Internal Insecurity of all Manifestations

INTELLIGENCE. INTELLIGENCE. INTELLIGENCE.

KNOWLEDGE MUST INFORM POLICIES:Evidence Based Choices: Analytics and

Empiricism

RAISING NIGERIA'S PRODUCTIVITY AND COMPETITIVENESS- HUMAN CAPITAL LED

ECONOMIC DEVELOPMENT STRATEGY

Defining our economic vision and strategy

JOBS, JOBS AND MORE JOBS: At least 3-4 million NEW JOBS needed

annually.WHERE WILL THE JOBS COME FROM?

EMBRACE THE PRIVATE SECTOR IN BOTH WORDS AND DEEDS.

Where Shall the Jobs Come From?

• Agric and Agri-business, Power, petroleum, gas, solid minerals, aviation, roads, ports, water and waterways, penetration of ICT, housing, tourism.

• Become an Investment Friendly Destination

• Critical Infrastructure: Industrial Clusters

• Build massive army of World class skills and talent for industry and enterprise

Where Shall the Jobs Come from?

• Increase the Role of Private sector in Economy:

• Reset the Incentive- Reward and Sanctions- regime

• Make Manufacturing Cornerstone of Growth strategy: Be Deliberate in targeting light manufacturing industries in Asia seeking lower labor cost destinations.

• Another look at the Economic Liberalization and Deregulation Agenda using a sources of growth identification process.

Equitable policies for young people, women and the most

vulnerable in the society

National Economic Governance Conference:  this must be fully

representative

Think in time scenarios of short, medium and

long term

Lay the foundation for a new political context for lasting legacy

Reform our politics and save it from a decadent elite class. End the nexus between politics and corruption money and other forms of illicit wealth.

The generation of our children are ready to take over the nation from us but we must not allow lack of campaign finance stop them.

UNCERTAINTY IS COSTLY AND PUNISHES NOT JUST AN ECONOMY BUT THE POOREST OF THE PEOPLE.END IT NOW!

ECONOMIC MANAGEMENT IS NOT ROCKET SCIENCEBUT IT MUST BE SCIENTIFIC

SOUND MARKET ECONOMY POLICIES HAVE THEIR RISKS (Inequalities) BUT THEY CAN BE WELL-MANAGED BY CAPABLE GOVERNMENTS THAT UNDERSTAND THEIR ROLE.

JUST DO IT!

Thank You.