There is no doubting that Nigeria’s economy is in crisis. The country may have barely exited recession, but its economy is still wobbling and yet to regain its strength and stability. Naira, the country’s currency, has fallen in value from N199 to USD1 over many months to a low of N305 to USD1. Although oil revenues, the mainstay of Nigeria’s foreign earnings went down to it’s lowest in two decades, it has increased in the last few months when oil price moved up to about $60 per barrel. President Muhammadu Buhari did not create the decline in the oil price but as the president of Nigeria the buck stops on his table. So, it is his responsibility to fix the economy.
Nigeria has an estimated population of 180 million people. According to the African Development Bank (AfDB), out of this 180 million 152 million Nigerians live on less than $2 per day. This is sad, pathetic and unacceptable. The country has a myriad of problems which seem to simply overwhelm the government and its economic planners. Its governance is poor as reflected in its annual budget which allocates every year an average of 70 to 75 percent to salaries and emoluments of civil servants, leaving a paltry 25 percent for capital vote, and sometimes it borrows in dollars to repay domestic loans which were used to pay salaries.
Also, the country has shortages of foreign exchange, it perpetually has shortage of electric power, its Value Added Tax (VAT) is low, revenue administration is inefficient and low, except for Lagos State and probably River State, the Internally Generated Revenue (IGR) of the states are too low and very unsustainable. So, they have to rely very heavily on the centre for monthly allocations and occasional bailouts to survive, unemployment is still very high and little is being done to address it. Also, food security stares the country in the face and the government is for once taking aggressive steps to address it by diversifying its economy away from the volatile oil and gas sector to agriculture where the country also has comparative advantage in the sub-region.
All these deficiencies call for deep thinking within the governing class and among the country’s planners and in government. Those who make up the government should therefore put on their thinking caps to see how they can quickly turn the country around and better the lot of Nigerians.
What can the country do within the short to medium and long terms to change the face of the country for the better? In a world where the amount of foreign reserves a country has determines the degree of respect it can garner in the international arena, Nigeria will need to rapidly increase its foreign reserves to not less than $100 billion within the next three years. This can be achieved through good governance and changing the government’s current approach to budgeting. It also calls for radical change in governance and in the selection of those that surround government as special advisers and advisers.
Going forward, Nigeria must never devalue its currency again. Instead, it must revalue the naira to maintain a dollar – Naira exchange rate of about N100 to the USD1 as a means of controlling inflation, it must vigorously promote import substitution to reduce inflationary and devaluation pressures on the naira, it must aggressively pursue its diversification of the economy to promote exports and massively grow jobs at home and increase capital investment in the economy through the fiscal budgetary process to drive growth. All these measures can be achieved. Concomitantly, the country should also follow these measures up with a rapid increase its external reserves and then revalue the naira to an appropriate value that will serve the interest of the country.
Also, in taking these steps Nigeria must be wary of IMF and World Bank recommendations that tend to put Nigeria and other developing countries down. The two institutions were not set up to protect the economies of the developing countries but to protect and buoy up the economies of US and Europe. Nigeria must henceforth learn how to turn deaf ears to IMF and the World Bank.
With their bogus recommendations they brought Nigeria’s economy down to what it is today. The country’s monetary planners sheepishly followed their recommendations even when those recommendations were not in the interest of the country.
Next, all Nigerians must produce for the export market. Everybody must be producing something that would earn him or her foreign exchange in the export market. When in the early 1970’s India was faced with similar problems and it became a laughing stock among nations on account of the large percentage of poverty in its economy against the backdrop of its potential, India adopted a slogan which literally means “Produce for Export or Die.” The slogan worked like magic as it opened the eyes of millions of Indians to hundreds of thousands of opportunities for export to the outside world. They took the opportunities.
Those who could migrate to other countries did so just for the sake of earning dollars. Some went to other countries to set up businesses that have today become oak trees and they are sending foreign exchange back to India. In 2017, India received $65 billion in foreign remittances home from Indians living abroad, followed by China which received $63billion, while Nigeria received $22billion. This is a veritable example which Nigeria can copy from the Indians. The Indians did it right and nothing stops Nigeria from copying and perfecting what the Indians did especially in today’s world where globalisation has literally broken down countries’ boundaries and made every company to look around the globe for the best to work with it.
