Political party

Cosmetic manifestos of political parties, By Uddin Ifeanyi

What about the party’s desire for “a stronger and more stable naira based on a dynamic and productive real economy”? Pretty wacky stuff, right? At what level is the naira “weak” or “strong”? For the national currency to be backed by a functioning economy, isn’t it enough that the naira exchange rate reflects the needs and strengths of the economy? If the Buhari administration has taught us anything, it is that these are not administratively determined categories.

The eight years of Buhari’s administration served as a useful lesson in elementary economics. As a people, we are the main witnesses to the government’s failed struggle against the relationship between its spending and rising domestic prices. We have seen key state officials struggle as they seek to balance the demands of government spending needs with those of an inexorably rising sovereign debt profile. On another level, government supporters have invariably found themselves getting ahead of common sense in trying to justify the country’s debt service needs against less government revenue.

We have also seen the dangers to the public treasury of the central bank’s monetization of the federal government’s deficit. There are now plans to convert the equivalent of $47 billion that the Central Bank of Nigeria lent to the Buhari administration into a 40-year bond, with a 9% coupon. Hopefully rising domestic prices will make this burden (debt is in naira) easier to bear. After eight years of this blind policymaking, we also have confirmation that there is no free lunch. And that there are second-round effects (often unintended and detrimental to vulnerable sections of the country) even for the best mice-and-men policies. These are two of the lessons of the masterclass on monetary policy taught by the Buhari government. Interestingly, no lessons were necessary. The ability of the central bank to fund the federal government in extremis and the adverse consequences of this on the economy were known to the drafters and anticipated in the central bank’s enabling legislation. What is instructive is that the Buhari government chose to ignore this established body of knowledge.

Consequently, we are the victims, in terms of the health of the national economy, of the mixture of these many tendencies. Unfortunately, the operating environment of the economy, whether during the pandemic or immediately after the war that Russia felt it had to wage against Ukraine, did not help in the proper management of the economy by the government. It is therefore understandable that many of us have looked to the next election cycle in search of a solution to the current crisis. “What are the candidates of the respective parties likely to offer us next year?” became the basis of conversations in bukkas and various watering holes.

…isn’t the Central Bank’s insistence that exporters convert their dollar earnings into naira at the much lower official rate one of the reasons why exporters are reluctant to repatriate export earnings? This is obviously one of the reasons why most personal remittances enter the country through the pockets of travellers. In other words, significant parts of the difficulties of the domestic foreign exchange market are endogenous, despite the lofty assertions of the APC.

Without a doubt, in all of these conversations, the consensus is that we cannot continue to descend Shit Creek, as we have done for the past eight years without paddling. and in this leaky boat. Unfortunately, the economy boards that the leading contenders have offered as part of their solutions to the problem have all evaded the issue. Take, for example, the prescriptions of the All Progressives Congress (APC) on infrastructure, public finances and the exchange rate.

From the APC recognizing that “the recent decline in our exchange rate is primarily due to global supply and production shortfalls caused by global factors far beyond our control”, we stumble over the first hurdle. Hasn’t the lowering of interest rates by the Central Bank pushed money from fixed deposits, treasury bills, etc. in a reckless urge to protect wealth from inflation, notably through dollarization and then purchases of bitcoins? And isn’t the Central Bank’s insistence that exporters convert their dollar earnings into naira at the much lower official rate one of the reasons why exporters are reluctant to repatriate export earnings? This is obviously one of the reasons why most personal remittances enter the country through the pockets of travellers. In other words, significant parts of the difficulties of the domestic foreign exchange market are endogenous, despite the lofty assertions of the APC.

As was the case with the Buhari administration, the APC also plans, once elected next year, “…to suspend public spending limits during this protracted time of global economic turmoil exacerbated by domestic challenges. in matters of security, economy and demography”. If it looks like a page from Kwasi Kwarteng’s recently splashed notebook, then there’s only one answer.

What about the party’s desire for “a stronger and more stable naira based on a dynamic and productive real economy”? Pretty wacky stuff, right? At what level is the naira “weak” or “strong”? For the national currency to be backed by a functioning economy, isn’t it enough that the naira exchange rate reflects the needs and strengths of the economy? If the Buhari administration has taught us anything, it is that these are not administratively determined categories. As was the case with the Buhari administration, the APC also plans, once elected next year, “…to suspend public spending limits during this protracted time of global economic turmoil exacerbated by domestic challenges. in matters of security, economy and demography”. If it looks like a page from Kwasi Kwarteng’s recently splashed notebook, then there’s only one answer.

This answer, alas, does not lie in the use of fiscal surpluses to fund the infrastructure needs of the economy. We beat the head of the country against this particular wall with no real effect for eight years. It is far better to remove the risks that currently make private investment unattractive, while strengthening the public sector’s regulatory set of skills. If you understand that poor government finances are arguably the biggest risk to private sector investment growth, then you understand why the main lesson of the last eight years is that Nigerians need an economy whose finances are not not short of Bedlam.

Uddin Ifeanyi, missed journalist and retired civil servant, can be reached @IfeanyiUddin.

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