"Market Forces Can't Stabilize the Naira the State Must Intervene." Senator Adam Oshiomhole - September 26, 2023, on the floor of the Nigerian Senate.
Before Senator Adam Oshiomhole, there was Mr. Alex Ehi Aidaghese on the same issue. Please, read "POLITICAL ECONOMY 101 - Purposeful Investment and Wealth Building: A Unique Model for the Nigerian Economy," published July 29, 2023. It is reproduced verbatim.
POLITICAL ECONOMY 101 - Purposeful Investment and Wealth Building: A Unique Model for the Nigerian Economy. By Barr Alex Ehi Aidaghese
On the other hand, in Nigeria and throughout the developing world, the World Bank and IMF are unrelenting in pushing and propagating a regime of disinvestment in the public sector, austerity measures, imposition of levies, fines, and hiking of school fees. And that's another term for stagnation. How can you revamp a crawling economy without spending?
What did President Obama do when the American economy was cascading precariously toward recession? He pumped money massively into Wall Street and bailed out the Mortgage industry. And in less than two years, the American economy expanded beyond human expectations. However, in Nigeria, they will tell us not to spend, but to levy.
By the way, no one is addressing or interested in discussing with the banks the importance of reducing astronomical increases in interest rates in Nigeria. How can you borrow to invest or grow the economy when investors can't approach the banks to source for loans?
The current interest rate in Nigeria is 18.75%. On the other hand, as of July 26, 2023, the current American Federal Reserve interest rate was 5.50%, the highest level in 22 years. Thus, making it easier for the American private sector and investors to borrow and spend massively, building manufacturing plants at an unprecedented scale.
And Washington is not left out. The Biden Administration is spending and revamping some of its archaic infrastructural facilities and, at the same time, fighting stridently to lessen the burden associated with financing college education by American families.
There is an unresolved contradiction here. The international financial institutions are pushing for privatization. How can you make sense of the privatization option when the banking industry is unwilling to jettison the theory of usury? And as always, Nigerian customers bear the cost, because the borrowers or investors must mitigate potential loss. (Please, the ills of privatization in Nigeria are left out of this discussion).
So, when you complain about how cheaper it is to make phone calls in Egypt and Ghana compared to Nigeria or how less expensive it is to fly to Turkey from Togo relative to flying from Nigeria, there are some underlying costs Nigerians are not seeing.
And only the Federal Government can manage those costs through its monetary policy. Don't be deceived; our inflationary epidemic or the value of the Naira has nothing to do with market forces. It is man-made. Regulate it and fix it. Period.
On the flip side, the strength of the British Pound has nothing to do with market forces, it is regulated by the Government. That, of course, is a socially objectionable (forbidden) discussion to be had in the global financial market. In other words, Aso Rock can intervene via the apex bank fix our interest rates, and regulate the Naira. Our banks cannot continue to go rogue.
Crude oil aside, we are predominantly an agrarian economy. Therefore, to fight inflation, strengthen the value of the Naira, and lower the interest rate, we must embrace diversification of the agricultural and service sectors, given that the banking industry is continuously dwelling on the existing hyperinflation that they created.
Can you name one CEO or MD of a Commercial or Investment Bank in Nigeria who is not a Billionaire? I am not against capitalism. I am vehemently and unequivocally against usury. It should be treated as a crime, because it is a sin and a crime against humanity.
We should focus on solutions and do away with the culture of rationalization. This government should develop a measure of gumption, rein in the bankers, and lower the interest rate drastically if we must amplify private investment and grow our economy.
Above all, if we stabilize our educational system and regularize the academic calendar to be in accord with global standards, we should ultimately checkmate the massive exodus of capital flight from Nigeria - capital needed for investment at home.
The wealthy middle-class Nigerians are no longer dreaming of investment at home, but how to save and send their children overseas for further education. And that comes with a massive repercussion. The money that should be going to the construction of new manufacturing plants and manufacturing endeavors, thus expanding the labor market is now in-flight mode - running overseas for payment of school fees.
In summary, growing the economy is not mechanical or rocket science. It requires lowering the interest rate drastically, making funds available for investment (manufacturing and provision of goods and services), and hiring more workers to run the plants and offices, thus creating further wealth and labor surge in the ancillary industries.
And with the expansion in the labor market and robustness in the buying power of the employed workers, you are creating new wealth and markets for more goods and services. It is cyclical. Right now, everybody is chasing money, not to invest, but to spend on school fees abroad and meet the runaway cost of goods and services on the domestic front.
It's only the Federal Government that can reverse the trend - stabilize our academic calendar by keeping students and lecturers on campus and intervene in the financial market by lowering the interest rate, to increase consumer spending, investment, and economic growth.
I write this essay, with a firm belief or conviction that the Federal Government of Nigeria is going to enforce zero tolerance for corruption and embezzlement of public funds and hold the management of the NNPC accountable for every drop of crude oil lifted from our soil and, above all, ethnic, religious, and geographical factors will cease to play a dominant role in our economic policy and recruitment exercises.
Barr Alex Ehi Aidaghese
