By: Sir Henry Olujimi Boyo (Les Leba) first published in August 2015
Intro:
Last week, this column republished ‘Will Dollar Allocations Induce Capital Flight?’ It explains the direct relationship between faulty monetary policy and a struggling economy.
(See www.betternaijanow.com for this series and more articles by the Late Sir Henry Boyo)
This week’s republication brings Nigeria’s constitution to the forefront. It examines the law in regard to government responsibility which is meant to ensure that approved policies will improve Nigerians’ quality of life. The article highlights various sections of the constitution to portray a sharp contrast with the ghastly realities to date.
As you read through the below article taking note of previous events or rates, keep in mind its year of publication (2015), a clear indication that Nigeria’s economic situation is yet to improve even after all this time.
Chapter Two of the 1999 constitution, as amended, defines the “Fundamental Objectives and Directive Principles of State Policy”; thus, this chapter crystallizes the inalienable duty of government to promote policies that would improve the quality of life of all Nigerians who are bound in this social contract. These Objectives and Directive Principles are amplified in the following excerpts from the first four subsections of Chapter Two.
Section 13: It shall be the duty and responsibility of all organs of government, and of all authorities and persons, exercising legislative, executive or judicial powers, to conform to, observe and apply the provisions of this Chapter of this Constitution.
Section 14-2b: It is hereby, accordingly, declared that- the security and welfare of the people shall be the primary purpose of government.
Section 16-1: The State shall, within the context of the ideals and objectives for which provisions are made in this Constitution-
(a) Harness the resources of the nation and promote national prosperity and an efficient, a dynamic and self-reliant economy;
(b) Control the national economy in such manner as to secure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity;
Section 16-2: The State shall direct its policy towards ensuring-
(a) The promotion of a planned and balanced economic development;
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(b) That the material resources of the nation are harnessed and distributed as best as possible to serve the common good;
(c) That the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group; and
(d) That suitable and adequate shelter, suitable and adequate food, reasonable national minimum living wage, old age care and pensions, and unemployment, sick benefits and welfare of the disabled are provided for all citizens.
Clearly, any sincere observer of the current Nigerian predicament may rightly conclude that the promotion of the noble Objectives and Directive Principles enunciated above have been breached with impunity by successive administrations. It would be a hard sell to positively spin the reality that our resources have not been sensibly harnessed to promote national prosperity or an efficient, dynamic, or self-reliant economy. Ironically, despite our abundant natural resource endowment, Nigerians are now sadly listed amongst the world’s poorest nations. Clearly, the stress from severe poverty has therefore minimized our social welfare and happiness. The management of Nigeria’s economy has regrettably concentrated wealth in the hands of a few; thus, these serial constitutional breaches are probably weighty enough to warrant impeachment of all Presidents since 1999. Predictably, therefore, if the quality of governance is not urgently reformed, the accumulated failures of past administrations may just blow up in our face to further deepen poverty, and sustain social injustice and ultimately fuel the rate of insecurity in our country.
Yet, any sincere observer of the structure of the Nigerian economy will recognize that one of the primary drivers of poverty is clearly, the near double digit inflation rates which erode purchasing power and reduce consumer demand. Such a disenabling reality restrains industrial capacity utilization and new investments, and inevitably also worsens the level of employment. Furthermore, a vibrant real sector will certainly never emerge when cost of funds hover round 20 percent, while a private sector driven economic revival will never materialize if government continues to accumulate huge idle loans with oppressive interest rates which are deliberately intended to crowd out the real sector from cheap credit.
Indeed, any promise of a successfully diversified economy will remain a hype so long as inflation and CBN’s monetary policy rate remain untamed above 3 percent respectively. Furthermore, the Naira purchasing value will inevitably also contract and induce weaker exchange rates for as long as these strategic monetary policy indices remain out of gear.
In fact, power supply will also remain a challenge so long as the very low tariffs induced by a weak Naira exchange rate and prevailing high cost of funds challenge the survival of the privatized erstwhile PHCN subsidiaries. Similarly, corruption will be hard to restrain so long as the economy remains persistently suffocated with excess Naira supply which facilitates the stealing of public funds.
Incidentally, the CBN and the Monetary Policy Committee cannot hastily dismiss the above observations, as the application of strategic policy instruments have evidently failed to tame the ‘invisible’ demon of eternally surplus cash in the economy; clearly, high inflation and interest rates, as well as increasingly weaker Naira exchange rates are ravaging monsters unleashed by what is innocuously described as excess liquidity. Yet, the clearly plausible recommendation that would minimize the relentless debilitating scourge of excess cash supply and positively transform our economic fortunes is inexplicably overtly scorned by the CBN as unconstitutional.
Paradoxically, in August 2007, after over 5years denial, the CBN unexpectedly made a strategy somersault when it belatedly embraced the recommendation that allocations of crude export revenue should be made in the currency in which it was earned. The CBN belatedly recognized that this approach would successfully remove the poison of eternally surplus cash in the economy and rapidly bring down inflation and interest rates, while the Naira exchange rate would also improve to make fuel subsidy payment unnecessary.
For example, a Naira exchange rate of N100=$1 will save the Nation over N1Tn annually and provide an opportunity to levy a minimum of 10 percent sales tax on 40m litres of fuel sold daily. Thus, our economic and social welfare will become enhanced in consonance with the Objectives and Directive Principles enunciated in the constitution with this reform.
Unfortunately, despite the imminent transformation of our economy which dollar allocations will bring, Michael Aondoakaa, the incumbent Attorney General in 2007, inexplicably issued a directive which suspended such payment reform as unconstitutional. One may understand the fear that cash payments in dollars would facilitate the theft of our foreign exchange, but this would certainly not be so if dollar certificates were adopted for allocation of dollar denominated revenue; clearly, since dollar certificates are not legal tender, they can only be redeemed for Naira equivalent through commercial banks at prevailing market exchange rates, but the dollar values acquired will remain in domiciliary accounts with CBN until the Apex Bank receives instruction from each bank to make direct payments to designated overseas suppliers from their respective domiciliary accounts for specifically approved transactions!
This arrangement will certainly minimize round tripping and much of the malfeasance in the foreign exchange market and will also provide a transparent and accountable process for minutely tracking and conserving our forex reserves.
Furthermore, the adoption of dollar allocations for dollar denominated revenue will significantly reduce both inflation and cost of funds across the board and also stimulate rapid investment, which will in turn fast track the rate of employment. Similarly, a robust economic environment with sprouting business ventures would also provide a ready source for boosting government internally generated revenue, and also stem the rising tide of public debt and fuel subsidy.
Regrettably, this enabling reform which is clearly in consonance with the constitutional objectives enunciated in Chapter 2 of the constitution has ironically been rejected on the ground that it is “unconstitutional”. Surely, for crying out loud, no one is suggesting that we should spend dollars instead of Naira; by rejecting a payment reform that would facilitate the achievement of its core mandate for price stability as illegal clearly, CBN appears intent on cutting its nose to spite its face.
SAVE THE NAIRA, SAVE NIGERIANS
