Nick Agule
Twitter: @NickAgule
Email: nick.agule@yahoo.co.uk
Facebook: Nick Agule, FCA
01.08.2023
Introduction
President Bola Tinubu addressed the nation yesterday, Monday, 31st July 2023 on the state of the economy which is great and a refreshing departure from the previous government where we hardly heard directly from the President. It is not clear though if the speech was instigated by the impending strike called by the labour unions but either way, we want to be hearing from our President more often. I however score the speech 90% on issues identification but 20% on solutions.
President Bola Ahmed Tinubu
The President displayed a deep understanding of the issues, but his solutions were cosmetics and superficial, failing to touch on the fundamental factors responsible for the ailing economy. Here is how I arrived at my assessment:
- Petrol Subsidy
Issue identification: The president was right to recognise that petrol subsidies was a conduit for a handful of people to loot trillions of our commonwealth at the expense of the common good like public transportation, healthcare, education, housing and national security.
The President’s Solution: The President did not mention any specific solution to petrol subsidy removal.
Fundamental Solution: The more fundamental solution to the fuel subsidy saga is the REFINERIES. Even if the President is yet to articulate a solution to the refineries, he should have told the nation he is working on a solution to give Nigerians hope that the subsidy matter will be buried in due course. Just as he has done for the CBN, the President needs to immediately take action by a sell-off of the refineries or lease them out to global refining business operators to revamp them and begin to produce petroleum products in plentiful for both domestic and export markets at far cheaper prices than the currently forced N617 per litre. In the short term the President also needs to totally liberalise/deregulate the downstream sector of the petroleum industry to pave way to any importer to bring in products, pass quality checks and sell at a price that gives them a profit. That all petrol stations in Nigeria are still selling at the same price detected by the NNPC shows the market is not perfect! President Tinubu must take immediate steps to bring true competition to the downstream sector so that Nigerians will be relieved from paying high prices for petrol resultant from the inefficiencies of a behemoth NNPC!
- Multiple Exchange Rates
Issue Identification: The President was right to identify the multiple exchange rates regime as a highway of currency speculation where our commonwealth was dolled out to a handful of people to become filthily rich at the expense of job creation, factories and businesses.
The President’s Solution: The President was not specific on measures his government has taken or plans to take to shore up the value of the Naira to bring sanity to the forex market.
Fundamental Solution: There are only 2 ways to strengthen the value of the Naira – reduce imports and/or increase exports! Both measures require our economy to be more productive. But Nigeria’s economy can never be more productive than it is now with 3,000MW of electricity! If President Tinubu takes a look at Brazil with a similar population like ours and sees 150,000MW supply of electricity to their economy daily, he will understand why 3,000MW can never deliver the type of economy that he is hoping for. South Africa with a population of 60 million is delivering 50,000MW while India is doing 400,000MW. Nigeria power supply at 3,000MW is too infinitesimal and too abysmal such that no matter President Tinubu’s good wishes for Nigeria, unfortunately it will all be vain as this awfully low power supply simply can’t lift up the economy. President Tinubu needs to unbundle the power sector from generation to transmission to distribution. The President must immediately sell-off or lease the transmission company to global power operators to come in with the capital, technology and expertise to expand the sector. The President must also either terminate the DISCO contracts or force their hands into technical partnerships that will inject the necessary funding into the sector. Once Nigeria’s power supply shifts to even 10,000MW, local production will be re-energised and forex problem will inevitably disappear!
- Manufacturing Sector
Issue Identification: the President accurately identified that our manufacturing sector holds the key to job creation.
The President’s Solution: The President’s solution to strengthen the manufacturing sector is a buffet of cash incentives to enterprises. But Cash incentives to enterprises have been tried by previous government with little success.
Fundamental Solution: The major issue for manufacturing in Nigeria is low power supply as earlier discussed. 3,000MW is electricity for some industrial parks elsewhere, it is grossly insufficient to power an economy of 200 million people. Qatar with a population of 3 million people supplies nearly 9,000MW (3 times Nigeria’s power) to their economy daily! If the President increases power output to 40,000MW at the end of his 4-year tenure, he would have solved 70% of the problems of the manufacturing sector. Other issues faced by the manufacturing sector are porous borders which result in dumping of goods in Nigeria. Manufacturers are also faced with all sorts of multiple taxes by all the tiers of government. Infrastructure including roads is also hampering the movement of raw materials and goods across the nation. Lack of raw materials arising from low productivity and insecurity is another. These are the issues the President must tackle before manufacturing is strengthened. The President totally missed out on digital economy which today is even bigger than manufacturing globally! The next big issue facing manufacturing is high interest rates! 30% or more interest rates can never support manufacturing. The president indicated he wanted to drive down interest rates to single digits and he better gets on this job very quickly to save the manufacturing sector
- Food Prices
Issue Identification: The President is again right to identify high cost of food as a real issue as families are progressively facing food insecurity and finding it difficult to feed their children!
The President’s Solution: The President offers to make food more available and affordable by the release 200MT of grains from strategic reserves to households and to provide fertiliser, seedlings and other inputs to farmers. Also, to support the cultivation of 500k hectares of farmlands and all year-round farming plus 200bn to cultivate 150k hectares of rice and maize, and 100k hectares wheat and cassava.
Fundamental Solution: The President’s solutions to tackle food insecurity by all means are commendable and applauded but they are not far reaching enough and miss some fundamentals. First of all, the biggest threat to farming in Nigeria today is insecurity. Large swatches of farm lands in Nigeria have been taken over by all sorts of bandits, terrorists and marauders both indigenous and foreign and millions of farmers driven into IDP camps. The President did not address insecurity and one wonders where he is going to have these hundreds of thousands of hectares of lands he plans to cultivate! The next biggest problem for farmers is manual labour! Our farmers are still mostly tilling the soil with their bare hands using their physical energy! This makes farming very unattractive to our young generation! The President needs to tackle mechanisation by supporting agro-ventures where farmers lease farm machines on credit to cultivate and harvest and pay back from their farm proceeds. With mechanisation, a farmer who is currently harvesting say 5 bags of rice per year (which is inadequate to lift him out of poverty) can harvest 500 bags and is economically and financially made! Another problem militating against farmers is lack of processing leading to huge post-harvest losses and low incomes from harvests that are literally thrown away for cheap with no value addition. This will be resolved with power supply and infrastructure.
- Infrastructure
Issue Identification: The President judges very correctly that infrastructure is key to national development.
The President’s Solution: The President offers infrastructure support to states to build healthcare, education, rural access roads for market access for farm produce. But the President seems to forget that these same states have been getting trillions in Naira of allocation from the federation account, VAT, excess crude oil, stamp duty, 13% derivation etc plus their own IGRs and yet nothing has been done to boost infrastructure. One therefore wonders how the President hopes that this infrastructure fund will not be similarly mismanaged! What the President needs to do immediately is to open up infrastructural development to the private sector! one of the best roads in Nigeria today is the Keffi-Makurdi road newly built by the Chinese. Imagine if this money was given to the federal ministry of works, of course there will be no road today, but we will only be hearing big grammar from government officials!
- Transportation
Issue Identification: The President again identifies and correctly so that transportation is a major issue for Nigerians.
The President’s Solution: The President offers 3,000 CNG-fuelled 20-seater mass transit buses to be bought with 100bn in the next 9 months to be shared to major transportation companies in the states. This solution has been tried previously with all sorts of mass transit schemes with minimal success.
Fundamental Solution: The President needs to focus on RAIL as the better, more effective and more efficient mass transit system that is affordable and does no damage to our roads and environment. There are low-hanging fruits in the rail sector the President needs to exploit through the revamping of the existing rail tracks around the nation and dropping of wagons on them to begin moving Nigerians about. It will take about the same time to revamp the existing rail infrastructure than to order buses, have them built and imported! But more fundamentally, the President needs to handover the rail sector to the private sector to build both intercity and intracity railway networks to connect all the cities, towns and village in Nigeria to facilitate movement of goods and people and job creation!
- Minimum Wage: The President recognises and correctly so that a 30k minimum wage can no longer take workers home!
The President’s Solution: The President offers a new national minimum wage which is commendable. However, increasing wages in a low productivity economy like Nigeria’s only fuels more inflation!
Fundamental Solution: The President needs to tackle the low productivity of Nigeria’s economy by ensuring adequate power supply through harnessing of the abundance of energy sources (both fossil and renewable) in Nigeria. It was reported recently that Nigeria made N44bn from oil companies who were allowed to waste (flare) our produced gas! President Tinubu must end gas flaring! Why should we be satisficed with N44bn when the gas would have been used to generate electricity to grow our economy in trillions-fold! High productivity will drive down the cost of goods and services and will make the wages of workers fetch them far more value! Wage increases eaten up by inflation will do the workers no good!
Conclusion
I hope that the above assessment is taken in good light as genuine efforts by a citizen to contribute to the quest by the President to better Nigeria’s economy and hence the wellbeing of Nigerians. The argument can be made that the President’s speech dwelt on only short-term palliatives but that will be a missed golden opportunity for the President to have shared with Nigerians and the world his economic agenda! It’s also a lesson for the President’s speech writers to always ensure they give a glimpse of the President’s medium and long-term agenda to avoid a misjudgement of the President’s mind on issues. A better Nigeria is what we all want and will do us all good!
Nick Agule is an oil and gas expert and a public affairs analyst.
DISCLAIMER
The OPINION / COLUMN is authored by independent contributors to the National Accord Newspaper. While contributors adhere to our editorial guidelines, they are not employed by the National Accord Newspaper. The perspectives and opinions expressed herein are solely those of the author and do not represent the views of the National Accord Newspaper or its staff.
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