By Olisa Akukwe<\/p>\n
In 2006, a song that was part salsa, part hip-hop hit the airwaves with
\nresounding resonance, globally. “Hips don’t lie” by Shakira, the Colombian
\nsinger went on to sale 16 million copies over the last 10 years.
\nI borrowed the title of this week’s epistle from Shakira’s song. Facts,
\nlike Hips, are evidence based. They don’t lie.<\/p>\n
Nigeria has been for far too long a society where opinion trumps facts;
\nquota trumps merit; nepotism trumps justice and many times tribes trump
\ntruth. This has to change. It is important for Nigerians to deepen their
\nunderstanding of economics because it affects us all. Nigerian youths need
\nto ask more penetrating questions in the run-up to the next elections.
\nIndeed they need to start asking those questions today. That is the only
\nchange we can achieve.<\/p>\n
ON THE ECONOMY: Babatunde Fashola, a super-minister in the APC government
\nand a former, rather competent, governor of Lagos state told pension
\nexperts on 22nd Jan 2016, that this Govt is working to diversify the
\neconomy. They clapped. He blamed lack of diversification as the main cause
\nof current malaise. The facts does not support Fashola’s assertion.<\/p>\n
The data collected by National Bureau of Statistics show that Nigeria’s
\neconomy is already diversified. The almighty oil contributes barely 10% of
\nour GDP. In fact the often maligned Trade contributes more than oil to our
\nGDP.
\nLet’s examine them. At the end of 2014, the year of the so-called peak oil
\nprice, crude oil and natural gas contributed about 9.616 trillion Naira to
\nthe GDP, 10.67% of the total. Meanwhile at the same period, Agriculture
\ncontributed 15.812_trillion Naira (17.5% of GDP) and Trade contributed
\n15.704 trillion Naira (17.42% of the GDP). The Telecom sector’s
\ncontribution at 7.424 trillion Naira (8.23%) was very close to the oil
\ncontribution. So the constant assertion that the economy is undiversified
\nis hogwash. We may simply be talking of deepening the private sector or
\nexpanding the diversification.<\/p>\n
One of the greatest mistakes repeated by successive Govts in Nigeria is
\nnot understanding the greatest asset within any govt agency. They think
\nit’s money. Its not. The greatest government asset is data. From births to
\ndeaths, and every other thing in between. Data is the core asset of
\ngovernment agencies and parastatatals. If only they knew.<\/p>\n
It is a general belief that the last PDP government ruined Nigeria via
\ncorruption. In fact, the last PDP government may have wrecked our public
\nfinance because of corruption, but they left the economy vastly better
\nthan they met it.<\/p>\n
The PDP governments from 1999-2014, have been the only government(s) in
\nNigeria to consistently increase per-capita income. Data that goes back to
\n1960 show that our per-capita income in 1969 was 1000 dollars. In 1999
\n(after 39 years), it was 1200 dollars. In other words it increased by 10
\ndollars per annum!
\nFrom 1999 to 2014, PDP governments tripled per capita income to about
\n3500_dollars. That is about 143 dollars per annum. Even if we exclude
\nchanges from GDP rebasing, it comes to about 2500_dollars by 2013 (before
\nGDP rebasing). Data!!<\/p>\n
This brings me to an important differentiation. There is a huge difference
\nbetween public sector and the economy as a whole. Even though public
\nsector is part of the overall economy and affects it; in Nigeria public
\nsector is less than 8% of GDP. What the NBS data is telling us is that
\neven though past PDP governments enshrined public sector corruption, and
\nthe GEJ government may have wrecked public finance, they grew the economy
\nmore than ANY government in the history of Nigeria. Facts don’t lie!<\/p>\n
The fixation of Buhari and APC on chasing Dasuki et al, while shutting
\ndown the economy, is fundamentally flawed. The public sector contribution
\nto GDP was 7.36% at the beginning of 2015. It makes no sense to stifle the
\nrest 92% of the economy just to put public finance in order. If the
\nemerging trends are anything to go by, the public finance may even be in
\nworse tatters by end of 2017. If the government had deployed technology to
\nprevent corruption, and astute diplomacy to recoup some stolen wealth;
\nwhile keeping the economy open without capital and import controls,
\nNigerians would have already been reaping the democracy dividends promised
\nthem.<\/p>\n
The much ridiculed GEJ had incredibly successful Agriculture policies. The
\nbillionaire middle men in fertiliser distribution, were put out of
\nbusiness by simple but smart deployment of technology by the
\nsmooth-talking past Agriculture minister. Our national food import bill
\ndropped from 6.3 billion dollars to 4.3_billion dollars, between 2009 and
\n2013.<\/p>\n
It is also good to remember that the high oil price under the last
\ngovernment also necessitated high subsidy payment. About 10 billion
\ndollars was spent on subsidy. Some people believe about a fifth of that
\nwas lost to corruption.
\nNow that oil price have come down by 2\/3, the current government does not
\nspend any money on subsidy. Or rather should not. The landing cost of a
\nlitre of PMS today 30 Jan 2016 is N67.69k.\u00a0 The pump price is N86.50k. In
\nfact the cost of landing is increased by N5 due to storage, NPA and Jetty
\ndepot levies etc. Otherwise it would have been N62.71k. The extra N5
\nbetween freight+cost and landing price is essentially monopoly cost.<\/p>\n
From Landing to dispensing at the filling stations, in this current
\nno-subsidy regime, N19 is added to the cost per litre. This is a 22% added
\nto the cost of gasoline between landing and retail sale. About 40 million
\nbarrels of PMS is consumed daily. About 10,000 trucks, owned by about 30
\nindividuals control the transportation of PMS. less those moving through
\npipelines. A N3.05 margin is assured on each litre of PMS moved by this
\ntransporters. Plus N4 per litre bridging fund. That can easily come to
\nabout N280 million Naira margin daily, for truck owners.<\/p>\n
The downstream petroleum sector needs comprehensive liberalisation. From
\nStorage, to transportations, jetties, filling station operating
\nrequirements etc. Currently it is oligopolic.<\/p>\n
Bridging funds need to be abolished. We can’t both eliminate subsidy and
\nhave subsidy at the same time. PMS should not sale the same price in Warri
\nand in Tangaza. Beef does not sale same price in Dutse and Enugu. The
\npetroleum ministers should take note. Adding 22% between landing cost in
\nApapa and dispensing at Ajah or Gwagada is pure baloney! Lagos citizens
\nand residents bear the cost of tankers blocking road, damaging the road,
\ncausing accidents and razing houses\/shops etc. Yet they are made to buy
\nthe gasoline same price as Folks in Damaturu.<\/p>\n
Some of these were reforms the past PDP governments failed to tackle.
\nEither due to vested interest or hysterical opposition.<\/p>\n
IMPORTS: Contrary to accepted wisdom, Nigeria is not over-dependent on
\nimports. Services constitute more than half of our GDP. We need imports,
\nlike any other country. Our imports consume about 12.45% of our GDP, one
\nof the lowest in the world!<\/p>\n
World Bank Data shows that import as GDP % in Australia is 21.4%; in
\nCanada 32.5%; in Benin republic 45.1%; in Botswana 43.3%; in China 18.9%;
\nin Ghana 48.9% and UK 30.3%. Just to mention a few countries. Nigeria has
\none of the least import to GDP ratio of all countries. Data!!<\/p>\n
Everybody repeats the mantra of import dependence, including CBN and
\nPresidency, without checking and comparing. No country survives for long
\nwithout imports. Our imports-to- GDP ratio is less than China’s
\nimport-to-GDP ratio.
\nAs a matter of fact, imports have helped us moderate inflation over the
\npast 16 years. Without the benefits of disinflationary trends in China,
\nUS, India etc our headline inflation would have been much higher. How
\ncould Nollywood have boomed without ever falling prices of VCD & DVD
\nplayers, as well as CD burning machines? How could the music industry
\ngenerate hundreds of billions of Naira without the massive penetration of
\ncheap music stereo and personal listening devices? Without cheap Chinese
\nfeature and smartphone, how would the surging mobile Internet thrive and
\nmake fabulous money for the likes of Linda Ikeji, Bella Naija etc? But CBN
\nfelt that a policy of import control targeted at small, hapless, traders
\nis proper.<\/p>\n
Let’s look at the import issue from another perspective. How come the
\nfalling commodity prices is not bringing down prices in our local markets?
\nPrice of gasoline has fallen 24.18% globally and only 1% in Nigeria. Rice
\nfell about 13% globally, but is up 30% in Nigeria. Beef fell by 27.98%
\nglobally, but it is going up in local markets here. The government is
\nalways screaming fall in oil price. Why is fall in commodity price not
\naffecting domestic markets, but fall in oil price is?!<\/p>\n
The real reason our domestic commodity prices are very high is government
\npolicies. Primarily tariff regime. If some of these imports were not
\nclamped down or tariff set very high, we will be able to ‘import’ the
\nfallen global prices, despite the drop in oil prices, helping to moderate
\ninflation. I am sure that domestic rice producers can produce rice at
\nglobal competitive prices, if they have access to single digit financing,
\nscale production, motorable access roads, no custom or police extortion on
\nthe road, predictable transport price etc. These are all within government
\nresponsibility. But the elites rather prefer using tariff to transfer
\nburden to the common man, rather than cut into their potential
\nembezzlement funds.<\/p>\n
Mrs Iweala increased domestic rice price by over 50% in her first tenure
\nunder Obasanjo, after she embarked on tariff-mandated import-substitution
\nof rice. Likewise Aliko Dangote had a 60% profit margin in his cement
\nventure, under Obasanjo, due to government high cement import tariff. We
\nbore the cost of his becoming a multi-billionaire, with high cement price
\nin those years.
\nInstead of using high tariff to keep out foreign products, government
\nneeds to apply transparent, targeted subsidies, especially in the Agric
\nsector. We are tired of bearing the cost of creating state-sanctioned
\nbillionaires.<\/p>\n
CAPITAL CONTROL: The current government adopted a policy of capital
\ncontrol, as soon as it came into office. It had the effect of effectively
\ndrying up foreign and domestic investment. It drove portfolio investors to
\nflee from the stock market, with consequent loss of near 2 trillion value.
\nIt distorted market signal<\/p>\n
After the damage has been done, and the Naira had collapsed in the real
\nmarket, CBN retreated partially. Revenue from Oil may have fallen to about
\n35 billion dollars, from about 88 billon dollars peak. But if the domestic
\nasset prices have adjusted in real time, foreign and domestic investors
\nwould have eagerly bought assets in Nigeria through FDI or portfolio
\ninvestment. The naira slide would have steadied at a much higher value
\nthan now. The markets were factoring in a price of 220-230 to the dollar,
\nas the maximum slide before capital control was imposed. The capital
\ncontrol sent the worst kind of message.<\/p>\n
The dollar in dorm accounts were reported to be about 30% of bank assets
\nin 2014. Under Sanusi, dollar accounts were treated as quasi-saving.
\nNigerian banks exposure to the oil industry\u00a0 in foreign currency is
\nestimated at about 11 billion dollars. Some of those loans are
\nnon-performing or in NPL territory.\u00a0 Capital control alarmed the foreign
\nlenders, with further downgrading of our credit rating.<\/p>\n
Even as our export prices lost over half its value, foreign transfers from
\nNigerians in diaspora was on track to surpass the 21 billion dollars
\nreported in 2013. But capital control effectively skewed this trend. UN
\nestimates that 1.2 million Nigerians live in developed economies. With
\nproper economic policies and legal frame work, transfers from Nigeria
\nemigrants can surpass 50 billion dollars; more than what was lost in
\ndeclining oli price.<\/p>\n
Unlike oil money though, those folks won’t allow monies earned in the
\nhardest of circumstances to be siphoned by greedy politicians. This may
\nexplain part of the reason the government keeps bemoaning the shrinking
\noil revenue, instead of opening the economy, removing government from the
\ncommanding heights of the economy and being transparent.<\/p>\n
I simply took time to puncture some reign of error subsisting as
\nconventional wisdom. In the coming days, I will pen a much shorter piece
\non government revenue.<\/p>\n
Olisa Akukwe
\nFollow me on Twitter: @FrankOlisa.<\/p>\n","protected":false},"excerpt":{"rendered":"
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