By Achilleus-Chud Uchegbu
A new thing is happening to our country. Gradually, the monetary policies being pursued by government, painful as they are, are beginning to yield fruit. They are also raising confidence level of international investors in our country. As I pen this down, I am looking at the indices from the finance ministry on our country’s foreign reserve. And I recall that the last time we had such a robust foreign reserve was more than two years ago.
At the last count, Nigeria’s foreign reserve has hit $39,848,103.938.1. This was as at September 7. Logical reasoning suggests that without any known withdrawals, the reserve would only have increased with attendant benefits. As it is, the foreign reserve is able to finance imports over an eight month period. But that is not the main gain.
A robust foreign reserve is sine qua non for foreign investment into an economy. This is why countries strive to increase their reserves so as to boost investor confidence. The layman would argue that it is excess money which enters the savings account but for a country therefore, growing a reserve fund is primarily a function of improved fiscal regime.
Over time, Nigeria has been known to squander all its earnings on goodies. I recall that at her Senate confirmation hearing, Dr. Ngozi Okonjo-Iweala warned against the habit of ‘eating away our future’. Her argument then was that Nigeria cannot afford to jeopardise its future by frittering away all its earnings for the now good life. Indeed, what constitutes good life here may just lie in a future firmly secured with a robust foreign reserve. But the regime of careless and reckless fiscal management let Nigeria into a system where its leaders believe that the country has no need to save for the next day. It is said that it is the firewood you fetch in dry season; you warm yourself with in the wet and cold season.
It was part of this waste-it culture that created the situation where our foreign reserve was mercilessly drawn down and emptied in the period leading to the 2011 transition. Then, players in the financial sector repeatedly warned against the dangers of running a country without a robust foreign reserve. While most people saw some sense in increasing the country’s reserve, some believed we need not save anything because in their argument then, what would be the need to save money when there is gapping need for such. This is irrespective of the demand on managers of the economy to create the needed impetus for investment in infrastructure.
I recall too that one of the issues canvassed by international fund managers, who participated at the 17th Nigerian Economic Summit in 2011, was the need for Nigeria to build a fulcrum necessary to support import and boost investor confidence. Simply, those experts were telling us to increase our foreign reserve. This, to my mind, has been greatly achieved by the Okonjo-Iweala team. What I think is left to be done is to build on the success thus far achieved. Such building would necessarily come by way of enhancing fiscal discipline already in place.
No doubt, the new regime of fiscal discipline is painful. Painful to the ordinary Nigerian as it is to the money-bag. But if the end justifies the mean, why not pursue it with vigour. I do not subscribe to the idea of enjoying all the goodies the world can offer now. Living for the moment is hedonistic. It does not preserve the future for the yet-unborn. This is one aspect of nation building that development planners in our country, seem not to have given deep consideration. We seem to plan only for the convenience of the moment. This may account for reason some state governors would rather demand that the Sovereign Wealth Fund or what used to be the excess crude fund be graciously shared even when they offer no platform for accountability on the use of such funds. I am an advocate for the discontinuation of the monthly sharing of money to states. I do think, and argue, that the continued sharing of fund, either as ecological fund, excess crude account, VAT, statutory allocation from the federation account etc, has made our governors lazy, unproductive and uncreative. It also fuelled the level of desperation in wining political office such as the governors’ or even the legislative. The feeling is that there is too much free money to share and waste. And indeed, there is. I tend to argue that our politics could be cleaned up easily if a strict regime of fiscal discipline in introduced. Then, the creativity of our governors and local government chairmen, in raising fund to run their states and councils, would be tasked.
I may be wrong in my assumption, and would like to be told I am. But again, I insist that it is the flow of free money that fuels corruption. Our leaders would not have as much to misappropriate or launder if such money is not available. Even my grandmother knows, with her little understanding of the economics of want, that you can’t steal what is not available. Therefore, for us to continue in this forward progression, I think that Nigeria’s Economic Team needs to be encouraged, and supported, to also create the necessary leverage for better infrastructural development. Such can only be supported if our external reserve is firmly built up.
I recall Mazi Sam Ohuabunwa, a onetime chairman of NESG lauding the rise in our foreign reserve by reminding us that “if we are able to control our appetite for foreign goods and further build our reserves, then our economy will be better for it.” Of course, there is no telling a telling a housewife that she is better secured when she makes little saving from the feeding allowance she gets every month. That is at the basic level of money management for the family. For a country as large as Nigeria, the macro indications are that we must save, like it or not.
But we have a challenge: to control our appetite for imported goods. We can do same by building capacity of our industries to manufacture such good we import. I am happy that our furniture industry has risen to the task and is giving us what we look out for in imported furniture. The Aba shoe and clothing industry are capable of satisfying our appetite for quality if properly funded. Gradually, other sectors will pick up. But the good news is that the growth in our foreign reserve will make it possible for the federal government to focus on infrastructure development, especially in the areas of power distribution. This will probably be an answer to the yearning of businesses in our country. This may also be the turnaround point. But it all begins with cutting down our appetite and supporting government to build the support base for inflow of investment in our economy and import support. The only way countries like China, Japan, United States, Germany, South Korea etc had achieved robust economic growth is by way of upping their foreign reserve holding. Nigeria is on track to achieving same.