Strictly Personal

Rescuing President Tinubu from liberal economists, By Tope Fasua

Published

11 months ago

June 22, 2023

I must admit that the policies put into action by President Bola Tinubu these first few days are hard to explain. And indeed, it is not my duty to do so. But there are beginning to be some complaints and many – including myself – have cause to be wary because there are usually very powerful folks with international backing who move in whenever a new leader emerges in Africa and make leaders tread a different trajectory from their fundamental wiring.

In this particular instance, firstly, President Tinubu has shown himself to be a man of speed, resolve, grit, and a sense of urgency. Rather than go to sleep as President Buhari did for the first seven months, Tinubu has hit the ground running and is ticking all the right boxes with friends and foes alike. He briskly changed the headship of a few critical organisations like the central bank and the Economic and Financial Crimes Commission (EFCC), took some critical decisions where angels fear to tread, and then in one fell swoop, almost all the directors of Nigeria’s parastatals were relieved of their jobs, alongside all of Nigeria’s military and police leaders. People are aghast.

President Buhari, despite his fame and posture as a disciplinarian, couldn’t do a tenth of what Tinubu has done in two weeks, even though he inherited the government from the opposition. An article on Reuters was titled ‘Baba Go-Fast: President Tinubu Stuns Investors with Quick Reforms’, reminding us that the Babas that had come in the past moved at snail’s speed.

But there are a couple of overarching policies that have got me worried, and though investors and their scouts may applaud, I believe someone needs to speak up for groaning Nigerians. I have been watching for a while but have now decided to speak up. Perhaps I am paranoid. But experience tells me that administrations rise or fall with some of their first few policies. Tinubu though is a lucky man, perhaps as much as he is a strategist. Unlike Buhari, he hasn’t gone to sleep in his first moments. But he has also devalued the Naira – or rather floated it – like Osinbajo had to do when he was acting president and Buhari had been ambivalent without offering any alternatives.

Also, just like the Buhari administration, the Tinubu one has removed subsidies on fuel. We hope that this time it is final. My stated position has always been that fuel subsidy was due for removal under whatever circumstances but we ought to slow down on Naira devaluation or the now very confusing ‘floating’ of the currency. There is also the myth of a single exchange rate that liberal economists and bankers had pushed as a narrative to Nigerians but now Nigerians are wondering whether the rates will ever merge.

My next article will be reviewing and appraising the Abiru-committee economic blueprint, which is a departure from many of our, yes our, campaign document at least as far as the economy is concerned. For now, I will only say that I have found it important to do this and the next article, perhaps as a minority opinion given my all-out support for Asiwaju, and even though I am not (yet) in his de-facto team, even if I was, I could only be very junior to the persons running things for now and whose opinions are already running our lives. It is indeed harder – nay impossible – to get opinions across after one may have become part of the bureaucracy. Therefore, one may as well take advantage of the relative freedom of being part of the hoi polloi.

I will try and structure the rest of the article in a numerical manner, so as to cover some key points and make it as short as possible.

Fuel price deregulation. (Otherwise called the removal of fuel subsidy) – Whereas the NNPC Ltd was unable to explain to Nigerians how the huge subsidies came about – especially when some Nigerians challenged the organisation on the matter of the swap deals (direct sale/direct purchase) that it entered into – I have come to accept that subsidy (whatever it is), must go. By every means, we cannot continue holding down fuel prices at N195 to N220 (or barely 40 cents per litre using official rates) when everyone around us cherishes petrol like gold. I was in Kenya last month where petrol sold for an equivalent of N1,050 per litre! However, empirically, I could tell that people don’t smuggle as much as the books say they do. Whereas Nigeria uses over 400,000 barrels a day for fuel, Chad uses just 1,300, Niger 12,500, Cameroun 42,000 and Benin 44,000, and no, we don’t supply all the needs of these countries and beyond. Some of these countries are police states where you cannot just pass through any illegal cargo. So, we are down to book-cooking by those in charge. Major rip-off of taxpayers. There are other fuzzy issues around what they call subsidy, which the NNPC refused to clear. Some of them are:

a. Where does subsidy come from in a perfect in-and-out swap arrangement where we exchange $1 million worth of crude oil for $1 million worth of refined petrol? Let me help the NNPC. Could it be that it treats those transactions in the books as direct importation, given that $1 million worth of crude could translate to $50 million of products after refining? I never liked the whole idea of swaps anyway. It’s the lowest we can sink and have sunk.

b. Why did the NNPC promise Nigerians (as the sole importer) that we had a month’s supply of products one day and that we should stop panic-buying, only for them to jerk up prices 150% the next day and rip us off on the old stock. What did Nigerians do to deserve that?

c. What did the NNPC GMD mean when he said Dangote and other local refineries coming on stream with production will not lead to reduced prices when indeed as a matter of national strategy, Dangote and others should be able to get crude oil invoiced in Naira and their presence on Nigerian soil should lead to a marked reduction in prices. Are we being set up for more hard times when we are looking forward to better days?
I had written severally that Nigeria should allow the subsidy removal policy to settle down for a while (some months) before tinkering with naira devaluation. I observed that when the Buhari administration ‘deregulated’ the downstream sector in 2016 (and the price of fuel fell from N87 to N145, which translated then to 40 cents and 72 cents respectively), that programme was undone when the government devalued the naira from N199 to N360 to the US Dollar. The new fuel price of N145 in 2016 thus reverted from $0.72 to $0.40. Since all the talk about subsidy comes up because our fuel price is benchmarked to US dollar terms, the then-new price of N145 became untenable. NNPC thus started accumulating a new subsidy which it called under-recovery. The danger this time is that the current prices of N480 – N537 were introduced when Naira was officially N461=$1. But after the floating of the naira, we have official money at N763 as I type on June 21, 2023. Will we have another upward review of fuel prices? I warned back then that we may fall into a spiral whereby the deregulation and devaluation continue to feed on themselves like some Frankenstein monster. I hope not to be proven right.

This takes us to the Naira floating issue. Some call it unified exchange rates. Now, there is a magic that has been wrought by this government and that is the fact that despite all the trauma, the black market for foreign exchange – which is easier to access and is actually an open market in Nigeria, has not diverged at all. On that score, I have been proven wrong because I believed that if the central bank devalues the currency, especially by as much as it has currently, the black-market foreign exchange curve will also shift to the right. It will be great to know why this hasn’t happened…yet. It is either we have a leadership (Tinubu) effect, or Tinubu has done his homework ahead of all of us and found ways to tackle this black market somehow, or like a central banker friend suggested, there is always a lag between the black and official markets, and anything could happen in another couple of weeks.

The ‘devaluation’ or floating of the Naira is another conundrum. As I type, some guys are trying to drag me for calling out a website called Techcabal which tried to quickly amplify the ‘devaluation’ of the Naira, even before it happened about two weeks ago. Personally, I have watched the Naira fall over time, and the spectacle is not palatable to see. I have also seen what happened in other jurisdictions. As an economic historian, I see through the folly and even though some liberal economists have again whipped out the argument that a weak currency is good (just as they have since 1986), I take it personally trying to educate our public – and also inform the government. I also wrote to caution DailyTrust, one of the platforms I am closer to, not to lend itself to the negative propaganda for the devaluation of the Naira.

However, President Tinubu’s administration has effected a policy already, which is a leaf from the thesis by Abiru and co. Now, here’s the confusion. The team of experts projected the Naira to settle anywhere between N500 and N600 to the US dollar. No sooner had the policy made it out the door, we started hearing all sorts of projections. Mr Rewane suggested N640-N680. JPMorgan said upper 600s and so on. But as I type, in the first few days of effecting the policy, it has been bedlam. On Monday, June 19, 2023, the rate closed at the Investors and Exporters window at N770! The next day it closed at N702. On Wednesday, the markets closed at N763, touching an all-time high of N815 in intraday trade. Have we opened Pandora’s box? Does the intraday high not tell of where the Naira is heading in the short term, given what is called ‘price discovery’? The central bank rate is the weighted average of a few days’ trades and stands at N589. I am not sure anyone can access the CBN rate. It is down to struggling for yourself at the I&E window. Meanwhile, the government has released the hold on domiciliary accounts. You could pay in or withdraw up to $10,000 daily there and all hell has not let loose. But the runaway rate of the dollar is cause for concern. I can see jubilation in the quarters of economic liberals that “rate has unified”. I reckon it is fairly easy to devalue; just let the boys run riot. But how quickly can you rein in the animal spirit you have sent out to wreak havoc? How about keeping the rates at a reasonable level? What rates will be deemed ‘reasonable’? Or are we heading to Argentina or Zimbabwe?

I also saw in the Abiru report that the government should adopt a ‘crawling peg’ whereby the Naira is devalued yearly according to the difference in the inflation rate of the two countries. For example, today, the US inflation rate is back to 4% while Nigeria struggles at almost 23%. This means that we will devalue by 19% and continue to devalue as far as the eyes can see until we can somehow get inflation to be at par with the US! A developing–growing–country should target growth and not inflation, in my humble opinion. We cannot possibly be working down inflation at the expense of growth while devaluing our currency so rapidly. The naira will tend towards infinity compared with the dollar. Also, some chaps are pushing the idea of a weak currency, quoting China and Japan. Again, Japan’s Yen was weak (600Y = $1) after the Second World War, but it has gained strength to about 140Y to the dollar today. The Chinese currency is just 7.01 to the US dollar today. The South Korea Won that they also quote, which is at 1,204 to the USD, has no decimal. It’s like Naira with no Kobo. So, at 1,204, it is quite strong for now. To destroy a country, first debauch its currency, goes the saying. May we not push the Naira to the point of debauchery.

The myth of a single rate – And so, our people are wondering when we shall have a single rate for our exchange. The fact is, never. There is no single rate anywhere. In most developed countries, you have a space to negotiate your rates depending on the volume of your transaction, your awareness, your relationship with your bank, or your negotiating ability. Little miseducation like this can be very harmful. Some sort of fanaticism led our people to call for a single rate when they know it’s not plausible. Now, the ordinary people of Nigeria are asking for the single rate promised. And the confusion is making people hoard dollars with the view that the Naira will crash further. We need to let us all know, that the weaker the Naira, the higher the number of hungry, deprived, poor, angry, violent people we push out on the streets. Devaluation translates to not only a reduction in the value of our currency but a reduction in the value of our people. In a country so dependent on imports, devaluation means that more and more basic goods keep getting out of reach of our people. That is wickedness. People with huge reserves in foreign exchange, or the comfortable class with assets abroad may not see this. But the policy they are pushing may come back to bite them. We don’t need more poor folks. And too many smart, young Nigerians are leaving already. Sadly so. We need to stem the tide.

The 43 ‘banned items’: Well, it may be good to advise the government to go the whole hog since it has started on this trajectory. It may be high time to remove any FX ban on any item and use tariffs and other barriers instead. For as long as this banned list exists, for so long will a huge demand be created for the black market. Aside from this ‘banned’ list, there are many transactions that cannot fly through official means such as illegal transactions that cannot be documented, and the speed cannot be matched. These are ready candidates for the black market.

Well, I have vented my spleen. I will hope that President Tinubu adopts President Abe Lincoln’s idea of A Team of Rivals, fostering and encouraging debates the way he did as Lagos governor. For now, the ideas in play are one-sided, pro-market and liberal. It is understood that he does not want to be postured as an-anti business leader. But some of us have followed BAT for years and read everything he ever said or wrote in terms of economic development. These are not his fundamental ideas. We need to rescue our General from the war front.

Now, is the time to start balancing ideas, cutting through the fantasies of ideologues, thinking for our people and making the lives of millions of Nigerians easier as only Bola Tinubu can. Now is the time to start rolling out the incentives for our people’s productivity, and easing the pains of these hard knock, shock treatment reforms as promised. We should recall that electricity tariffs are going up by 40% by July 1, 2023, as a result of the new value of the Naira and compounded inflation! Even I have a drowning feeling. My staff complain that transport costs have doubled.

Every self-respecting entrepreneur must raise wages (but not to the stratospheric level that trade unions are demanding). Where will the money come from? We need to get some left-of-centre ideas in as well. Like a focus on job creation in the public and private sectors, and productivity enhancement to grow the economy. The struggle is on. Let them not tag Tinubu a name that is not his.

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Strictly Personal

If I were put in charge of a $15m African kitty, I’d first deworm children, By Charles Onyango-Obbo

Published

5 days ago

May 13, 2024

Ifeoluwa Dada

One of my favourite stories on pan-African action (or in this case inaction), one I will never tire of repeating, comes from 2002, when the discredited Organisation of African Unity, was rebranded into an ambitious, new African Union (AU).

There were many big hitters in African statehouses then. Talking of those who have had the grace to step down or leave honourably after electoral or political defeat, or have departed, in Nigeria we had Olusegun Obasanjo, a force of nature. Cerebral and studious Thabo Mbeki was chief in South Africa. In Ethiopia, the brass-knuckled and searingly intellectual Meles Zenawi ruled the roost.

In Tanzania, there was the personable and thoughtful Ben Mkapa. In Botswana, there was Festus Mogae, a leader who had a way of bringing out the best in people. In Senegal, we had Abdoulaye Wade, fresh in office, and years before he went rogue.

And those are just a few.

This club of men (there were no women at the high table) brought forth the AU. At that time, there was a lot of frustration about the portrayal of Africa in international media, we decided we must “tell our own story” to the world. The AU, therefore, decided to boost the struggling Pan-African New Agency (Pana) network.

The members were asked to write cheques or pledges for it. There were millions of dollars offered by the South Africans and Nigerians of our continent. Then, as at every party, a disruptive guest made a play. Rwanda, then still roiled by the genocide against the Tutsi of 1994, offered the least money; a few tens of thousand dollars.

There were embarrassed looks all around. Some probably thought it should just have kept is mouth shut, and not made a fool of itself with its ka-money. Kigali sat unflustered. Maybe it knew something the rest didn’t.

The meeting ended, and everyone went their merry way. Pana sat and waited for the cheques to come. The big talkers didn’t walk the talk. Hardly any came, and in the sums that were pledged. Except one. The cheque from Rwanda came in the exact amount it was promised. The smallest pledge became Pana’s biggest payday.

The joke is that it was used to pay terminal benefits for Pana staff. They would have gone home empty-pocketed.

We revive this peculiarly African moment (many a deep-pocketed African will happily contribute $300 to your wedding but not 50 cents to build a school or set up a scholarship fund), to campaign for the creation of small and beautiful African things.

It was brought on by the announcement by South Korea that it had joined the African Summit bandwagon, and is shortly hosting a South Korea-Africa Summit — like the US, China, the UK, the European Union, Japan, India, Russia, Italy, Saudi Arabia, and Turkey do.

Apart from the AU, whose summits are in danger of turning into dubious talk shops, outside of limited regional bloc events, there is no Pan-African platform that brings the continent’s leaders together.

The AU summits are not a solutions enterprise, partly because over 60 percent of its budget is funded by non-African development partners. You can’t seriously say you are going to set up a $500 million African climate crisis fund in the hope that some Europeans will put up the money.

It’s possible to reprise the Rwanda-Pana pledge episode; a convention of African leaders and important institutions on the continent for a “Small Initiatives, Big Impact Compact”. It would be a barebones summit. In the first one, leaders would come to kickstart it by investing seed money.

The rule would be that no country would be allowed to put up more than $100,000 — far, far less than it costs some presidents and their delegations to attend one day of an AU summit.

There would also be no pledges. Everyone would come with a certified cheque that cannot bounce, or hard cash in a bag. After all, some of our leaders are no strangers to travelling around with sacks from which they hand out cash like they were sweets.

If 54 states (we will exempt the Sahrawi Arab Democratic Republic for special circumstances) contribute $75,000 each, that is a good $4.05 million.

If just 200 of the bigger pan-African institutions such as the African Development Bank, Afrexim Bank, the giant companies such as MTN, Safaricom, East African Breweries, Nedbank, De Beers, Dangote, Orascom in Egypt, Attijariwafa Bank in Morocco, to name a few, each ponied up $75,000 each, that’s a cool $15 million just for the first year alone.

There will be a lot of imagination necessary to create magic out of it all, no doubt, but if I were asked to manage the project, I would immediately offer one small, beautiful thing to do.

After putting aside money for reasonable expenses to be paid at the end (a man has to eat) — which would be posted on a public website like all other expenditures — I would set out on a programme to get the most needy African children a dose of deworming tablets. Would do it all over for a couple of years.

Impact? Big. I read that people who received two to three additional years of childhood deworming experience an increase of 14 percent in consumption expenditure, 13 percent in hourly earnings, and nine percent in non-agricultural work hours.

At the next convention, I would report back, and possibly dazzle with the names, and photographs, of all the children who got the treatment. Other than the shopping opportunity, the US-Africa Summit would have nothing on that.

Charles Onyango-Obbo is a journalist, writer, and curator of the “Wall of Great Africans”. X@cobbo3

Strictly Personal

AU shouldn’t look on as outsiders treat Africa like a widow’s house, By Joachim Buwembo

Published

1 week ago

May 9, 2024

Ifeoluwa Dada

There is no shortage of news from the UK, a major former colonial master in Africa, over whose former empire the sun reputedly never set. We hope and pray that besides watching the Premier League, the managers of our economies are also monitoring the re-nationalisation of British Railways (BR).

Three decades after BR was privatised in the early to mid-nineties — around the season when Africa was hit by the privatisation fashion — there is emerging consensus by both conservative and liberal parties that it is time the major public transport system reverts to state management.

Yes, there are major services that should be rendered by the state, and the public must not be abandoned to the vagaries of purely profit-motivated capitalism. It is not enough to only argue that government is not good at doing business, because some business is government business.

Since we copied many of our systems from the British — including wigs for judges — we may as well copy the humility to accept if certain fashions don’t work.

Another piece of news from the UK, besides football, was of this conservative MP Tim Loughton, who caused a stir by getting summarily deported from Djibouti and claiming the small African country was just doing China’s bidding because he recently rubbed Beijing the wrong way.

China has dismissed the accusation as baseless, and Africa still respects China for not meddling in its politics, even as it negotiates economic partnerships. China generously co-funded the construction of Djibouti’s super modern multipurpose port.

What can African leaders learn from the Loughton Djibouti kerfuffle? The race to think for and manage Africa by outsiders is still on and attracting new players.

While China has described the Loughton accusation as lies, it shows that the accusing (and presumably informed) Britons suspect other powerful countries to be on a quest to influence African thinking and actions.

And while the new bidders for Africa’s resources are on the increase including Russia, the US, Middle Eastern newly rich states, and India, even declining powers like France, which is losing ground in West Africa, could be looking for weaker states to gain a new foothold.

My Ugandan people describe such a situation as treating a community like “like a widow’s house,” because the poor, defenceless woman is susceptible to having her door kicked open by any local bully. Yes, these small and weak countries are not insignificant and offer fertile ground for the indirect re-colonisation of the continent.

Djibouti, for example, may be small —at only 23,000square kilometres, with a population of one million doing hardly any farming, thus relying on imports for most of its food — but it is so strategically located that the African Union should look at it as precious territory that must be protected from external political influences.

It commands the southern entrance into the Red Sea, thus linking Africa to the Middle East. So if several foreign powers have military bases in Djibouti, why shouldn’t the AU, with its growing “peace kitty,” now be worth some hundreds of millions of dollars?

At a bilateral level, Ethiopia and Djibouti are doing impressively well in developing infrastructure such as the railway link, a whole 750 kilometres of it electrified. The AU should be looking at more such projects linking up the whole continent to increase internal trade with the continental market, the fastest growing in the world.

And, while at it, the AU should be resolutely pushing out fossil-fuel-based transportation the way Ethiopia is doing, without even making much noise about it. Ethiopia can be quite resolute in conceiving and implementing projects, and surely the AU, being headquartered in Addis Ababa, should be taking a leaf rather than looking on as external interests treat the continent like a Ugandan widow’s house.

Buwembo is a Kampala-based journalist. E-mail:buwembo@gmail.com