Nigeria is at a juncture where it must redefine itself or forever forfeit the right of way to a better future. The primary challenge of our time is our political economy. The slump in oil prices exposed the weakness of our economy for even the blind to see. The truth be told, we always knew this weakness existed. Yet we did nothing to cure it when fixing the gap would have been less painful and less urgent. Through indifference, selfishness or ignorance we failed to forge a consensus on how to resolve the collective problem. This failure speaks to a problem of our politics because the decision on how to structure the economy is essentially political in nature. For all the energy invested in politics, the output has been minimal. In short, our politics has been directed at the wrong things. Because of this, Nigeria has too long travelled a self-defeating economic road.
Dare not think that we can afford to sit idly and outwait the low oil prices. We cannot fool ourselves into believing that the prices will rebound to prior levels and things will return to normal.
My friends, that normal many of us pine for was never good enough. It was simply the prelude to the troubles of today and the challenges of tomorrow. To merely wait as if waiting is all we can do is to be like the wishful man who does nothing although he knows a great storm approaches and he has a gaping hole in the roof of the house he just bought. He concludes the rain will not enter his house because such a thing would be unfair since the hole was caused by the mischief of the former owner and not by his own hand. Some might call this man’s belief one of undue optimism. Others might deem it foolhardy. Either way, it is costly, perhaps fatal. The impersonal forces of the economy owe us nothing that we do not doubly owe ourselves. We must break from the inertia that has characterised our approach to major national problems. We need to summon a greater love of our fellow Nigerians. Such empathy will compel us to embrace ideas to reform the political economy in a manner that lends greater justice and prosperity to all Nigerians. Then we must have the courage not only to envision the beautiful thing. We must have the bravery to embark on the hard work and progressive reforms needed to turn the fine dream into a living and material reality.
Our economy has been one where too many people and resources were left idle and thus made poor by virtue of this static predicament. Joblessness or poverty became the byword describing the lives of most people. The industrial base we were developing vanished under a torrent of imported goods. Agricultural production was insufficient to satisfy our needs. Even then, much local produce was allowed to rot on the vine or in transit due to poor farm-to-market physical and financial infrastructure. The harder a farmer worked, the poorer he became. The more a city resident looked for a job, the more frustration overlook him for not finding one. The businessman who wanted to invest in a factory to create jobs and goods found that interest rates and high production costs due to erratic power would turn his balance sheet crimson and were foes too strong for him to overcome. While the productive sectors of the economy floundered, the rentier and financial sector flourished. Those fortunate enough to have access to high finance, made windfall profits merely by virtue of being in the so-called right place at the right time. They did nothing of true economic value. They simply funneled money from one hand to the other. At the expense of the rest of the nation, they profited handsomely from this financial juggling act. The economy became an ungainly and unbalanced albatross. Any growth in the economy only compounded the distorting instead of curing them.
The fall in oil prices exposed this economic model for the lie that it was. Now we must fashion a new political economy. In due course, the present recession will end. This should come as some relief. In itself, however, it is not cause for celebration. Far from it. The end of recession does not mean the beginning of prosperity. If we conflate the two, we will shun the labor required to properly reform the political economy. Things will remain as they are. Repeated downdraft and contraction will chase us as surely as night chases day and day chases night. At this point, I want to offer a few suggestions on how to reshape our political economy in ways that respond to the needs and aspirations of those Nigerians who have been long neglected and made to suffer the bitter dividends of a mercenary system.
The Constitution declares Nigeria a federation of 36 states. However, we still grapple with the vestiges of our past under military rule. In many ways, we still function like a unitary state despite the constitution. More powers and resources need to devolve to the states. The Federal Government is taking on too much. We cannot flourish with over concentration of powers at the centre. Some of the 68 items on the Exclusive Federal List should be transferred to the Residual List, as it was in most federal constitutions.
A notable feature of even our own 1963 Constitution was the extensive powers granted to the regions which enabled them to carry out their immense responsibilities as they best saw fit. This was because the regions inherently had a better sense and feel for the needs of their populations simply by virtue of the fact that they were closer to the people than was the centre.
Some items which ordinarily should be state matters like police, prisons, stamp duties, taxation of incomes, profits and capital gains, regulation of tourist traffic, registration of business names, incorporation of companies, traffic on federal truck roads passing through states, trade, commerce and census among others were transferred from the Concurrent to the Exclusive List. I’m opposed to federalism operated as a unitary monster. As Lagos State governor, I challenged several Federal Government decisions for overreach and for violating the principles of federalism. We created additional local governments because the constitution empowers states to regulate local council affairs. Today, those 37 additional councils have helped Lagos significantly as development centres. We took the Federal Government to court on issues like the regulation of the hospitality industry, fiscal planning, and on who had the authority to issue Certificates of Occupancy. Regarding electrical power, we must move beyond limiting states to generate, transmit and distribute electricity to areas not covered by the national grid.
Our problem is a lack of power yet we preclude states from helping to resolve this chronic problem that stabs at the very heart of economic development. It is not right to say states can generate power but cannot sell it where they want. Without yielding any countervailing benefit, this policy suppresses the generation of needed power instead of enhancing.
Government correctly seeks fiscal stimulus to energize the limping economy. One can argue that efforts in this direction are perhaps too modest given the situation that confronts us.
Our monetary authorities have done better recently but they need to take additional steps to increase the fiscal space available to government and the private sector. I endorse analysis of Governor Ambode and others that current interest rate levels bridle growth by making borrowing for long-term investment too costly. Monetary authorities appear to be more concerned with battling inflation than in sparking growth. However, the nature of our inflation – mainly cost driven – is beyond the purview of interest rate policy to contain.
Instead of surrendering growth to curb inflation, current policy sacrifices both.
Also, the varying exchange rates distort economic and monetary signals. The vast rate differentials are fertile ground for currency arbitrage and speculation. This means that too much money will chase rentier opportunities in the financial sector instead being plowed into vital investment in the jobs and equipment needed for the production of actual goods. More fundamentally, we need to break from the self-imposed dollarization of our fiscal space. The intake of dollars determines our budgets. We operate under an implicit dollar standard. However, the global dollar standard was formally abandoned over 40 years ago. Instead of this outdated mechanism, we should base our budgetary calculations on the quantity of naira needed to foster the highest growth possible without pushing inflation too high.
Such a change in perspective will remove the ideological blinders that thus far have impeded our ability to define our political economy and its path to growth. It also will open the fiscal space so that government can undertake even greater steps to stimulate the real economy in ways that provides jobs and builds the infrastructure needed for sustained economic development.
No modern nation with a significant urban population has attained prosperity without an industrial base capable of employing larger numbers of people and of manufacturing goods for domestic consumption and export. To one degree or another, English, American and Chinese governments employed industrial planning to lift their economies during their earlier stages of development. These nations represent the past, present and immediate future of economic achievement. Their success justifies their policies. Yet we depart from what has proven the most effective avenue to prosperity for a large developing nation. We must press forward with a national industrial policy fostering strategic industries that create jobs and spur growth. Tax credits, subsidies and the insulation from the negative impact of imports for critical sectors should be integral to this plan.
We must remember a national economy cannot grow beyond the capacity of the infrastructural that serves it. Thus, we need a national infrastructure plan closely linked to the industrial plan. New infrastructure is needed where the new industrial work will take place. We must conquer the political and bureaucratic bottlenecks preventing affordable, reliable electrical power. This impediment places us literally and figuratively in the dark regarding our economic condition. The problems are not technical in nature as reliable electricity is a staple of economic life in nations less endowed than Nigeria.
We must persuade and convince those factors that currently impede our national quest for reliable power to move aside so that we can achieve this crucial precursor to economic vitality.
Our farmers need a reprieve. We need to increase farm productivity by taking a few critical steps. For example, commodity exchange boards and futures markets to ensure minimum farm incomes and encourage production must become part of our rural economies.
My friends, we stand at a moment where history will be made for better or worse. Other nations have faced tough times. Those which overcame their challenges did so by using creative insight to accurately assess their shortcomings and to identify solutions that would serve them into the future.
Nigeria must act in similar fashion. Nothing that any other nation has done is beyond our grasp if we commit ourselves to the task. We have much work to do to create the Nigeria we seek so that the Daily Times may continue to report on the progress of this nation for another 91 years or more. In doing so, let it chronicle the rebirth of Nigeria as a nation much more prosperous and great than when it was first conceived.
Tinubu, former governor of Lagos State and national leader of APC delivered this at the 91st anniversary of Daily Times.