Rauf Aregbesola

By Rauf Aregbesola

I will like to thank the management of Right Dev Limited for the kind invitation to the public presentation of their publication, The Point, and first annual independence lecture on the economy.

The Point is coming out at the time the prospect of the newspaper in the traditional sense of the printed word is increasingly becoming bleak. A time it was when the Sunday Times alone sells about a million copy. Though the circulation figures of newspapers are closely guarded like news sources, it is doubtful if all the newspapers combined now sell up to 500,000 copies in a day, even when we have more newspapers than before. The Times titles have since disappeared altogether.

This regression is not due to dwindling purchasing power of Nigerians or the emergence of cable television and the new media alone. Increasingly, public trust in newspapers for accuracy and relevance has equally waned. Atrocious grammar, self-contradiction, superstition and rumour mongering, outright falsehood and brazen attempt to incite the public into a particular political direction or action, among others, have eroded the credibility of newspapers.

It is my sincere hope that this new entrant will beat a new path and carve a niche for itself in accuracy, fairness, truth and relevance. Humans will always buy any item they consider to be valuable. Even as things stand, newspapers will continue to rise and some, no matter how successful they might think they are, are going to fall, once they overplay their cards and take the reading public for granted.

Our subject of discussion is actually a question – ‘What is the economics of change?’ This is a play on word that indirectly put to task the campaign mantra of our party, the All Progressives Congress (APC) that promised Nigerians a change for the better during last year’s election campaign. It is being subtly challenged in light of the declaration by the minders of the Nigerian economy that it has lapsed into recession.

This is on the heels of steep inflation and rising cost of all items; the continued fall in the value of the naira against other currencies; retrenchment of workers in the private sector and the challenges faced by 27 states of the federation in paying workers salaries.

There has also been an unusual interest of the media to report human angle stories of domestic violence, divorce, suicide and petty theft, all blamed on the economic situation in the country. A man that battered his wife to death; a civil servant that reportedly stole his neighbour’s pot of soup; a woman that chopped off her husband’s manhood; and depressed individuals that took their own lives are regular and prominent daily news items, all blamed directly on the recession.

So, therefore, the question is rhetorical because it is cast in a self-evident form with the answer so obvious and tellingly screaming ‘No, this is not change or, at least, not the change we asked for’.

But quite honestly, while we may not deny the obvious, these developments do not actually reflect the whole truth. The freefall of the Nigerian economy had begun long before the coming to power of APC. It has come to the nadir now and we can only be thankful that it is not worse than it actually is, because, indeed, it could have been worse.

The fundamental problem is that we can no longer fund our imports because our foreign earnings have progressively declined while our taste for and dependence on foreign goods have continued to increase. This is what put pressure on the naira, makes imported goods to become very expensive and the economy in a tailspin.

Let me add at this point that this recession is not new. It is a cycle that we have experienced several times in the past. We had one in the post crude oil dependency era, circa 1981-82, when Chief Obafemi Awolowo warned that the ship of state was headed for the rocks. He was dubbed then as ‘prophet of doom’ by the ruling National Party of Nigeria (NPN). His prognosis was simple. At the time, just like now, the price of oil fell. By 1983, we could hardly finance our imports and many states were distressed. The reaction then, as it is now, was to blame it on the profligacy of state governors, forgetting that revenue is recurrent – you only spend what you have and profligacy will no longer be possible when the tap runs dry since you cannot spend what you don’t have.

Again, oil price fell under the General Sani Abacha regime, bringing economic downturns and stress to the states. We had this again during the brief spell of General Abdulsalam Abubakar. The difference then was that salaries and emoluments of workers were a reasonable fraction of expenditure and the military government of the time was not under any obligation of development. The military was more like an occupation force whose primary responsibility was to maintain law and order and keep the peace.

Former President Olusegun Obasanjo’s administration also had the same problem twice while his successor, Umaru Yar’Adua, also had a depression on account of falling oil price.

The difference with these previous situations was that they never lasted. However, this is the first time that there will be a decline in oil price which has been sustained for more than two years running. Sooner or later, it is bound to knock the bottom off any economy.

Don’t let us kid ourselves; we are dependent on imports, for everything. We import food, automobiles, petroleum products, drugs, clothing, building materials, machineries, electronics and household products.

You are aware that up to the middle of 2013, crude oil was selling well above $120. The federation account disbursed in excess of N1 trillion every month and our foreign reserve was rising. At a point in 2008, it stood at $62 billion. We were not saving, or better put, we were not using this huge earnings to develop our economy. According to the CBN, the Federal Government funded the operations of Bureau de Change for 11 years with $66 billion before it was stopped in January this year. During this period, Nigerians were encouraged to obtain credit or debit card with which to shop abroad or buy goods online.

Our foreign earnings have since dropped because of the fall in oil price. Late last year and early this year, oil sold for as low as $22 before hovering now around $50. But we have double whammy in that not only has price dropped, our daily production fell as well. From all accounts, we are losing not less than one million barrels of crude oil per day, out of our 2.3 million official allocation, due to sabotage by militants in the Niger Delta.

In the absence of other serious foreign exchange earners, we are bound to have problems financing our imports, which are huge and humongous. Just take a sample:

At official level, according to NNPC, we spend $20 million daily or $1.8 billion quarterly which translates to $7.2 billion annually to import fuel. We also spend $20 billion every year to import food. This will include $700 million on fish. There are conflicting figures but the highest, from a former minister of commerce and industry, Engr. Charles Ugwuh, claims that we spend $2.6 billion annually to import rice while the CBN claims that our rice import bill for three years cost $2.4 billion. It will also include wheat, biscuits, noodles, dairy products, pastas, wines and other food items.

By importing, we are simply developing the economies of the nations we buy from through job creation, value chain maintenance, capacity for product development and other spin off effects of production.

You can imagine that there are seven million vehicles on our roads and we do not produce a single tyre for them. If the average lifespan of a tyre is three years, then every three years, we need 28 million tyres, working on the assumption that an average car has four wheels. We must then find a way to import 28 million new or used tyres. We can imagine what effect it would have on our economy if we produce just half of these tyres at home.

Then of course, we import textiles and clothing items, including handkerchiefs, underwear and footwear to the tune of $4 billion in a year. Apart from traditional wears, virtually all formal wears are now imported. For a very long time now, I have stopped wearing non-traditional dresses. If half of the country had been like me, it mean that at least 80 million people will engage our local tailors and retain that whole transaction within our economy.

This problem did not begin last year. It has been the orientation of our economy since the oil boom of the 1970s. It must therefore be sensitive to the shocks of oil price crash.