Okonjo-Iweala and the economy

Coordinating Minister for the economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala

BUOYED by mild improvements in economic indices, Finance Minister, Ngozi Okonjo-Iweala, sees the Nigerian economy as “strong” and its performance “robust.” As Coordinating Minister for the Economy, she gladly welcomes the reported lower inflation rate, the fairly stable exchange rate, modest growth in Gross Domestic Product and higher external reserves of $44.5 billion and Excess Crude Account of $9.6 billion. But the minister’s enthusiasm is cold comfort to businesses beset by high costs, the mass of unemployed youths and every Nigerian confronted by poverty and decrepit infrastructure.

Nigerians earnestly expect more from President Goodluck Jonathan and Okonjo-Iweala, whose appointment had raised high hopes of accelerated economic progress. For the minister, the benchmark for real progress should be what the eminent economist, Jeffery Sachs, calls jobs-led growth.

Deep and prolonged unemployment among the young is especially worrisome. Our policymakers should stop celebrating growth without jobs. Striking a good balance between GDP growth and productivity demands a more hands-on policy. An economy where 23.9 per cent of working age people and over 50 per cent of products of its tertiary institutions cannot find jobs years after graduating does not call for back-slapping. If the right economic policy that focuses mainly on job creation and infrastructure is put in place, a new generation of young workers can dramatically fuel economic expansion.

The minister was perhaps right to publicly debunk fears in some quarters that the economy is on the brink of collapse.  The International Monetary Fund reported that our GDP growth of 6.5 per cent was one of the highest worldwide in 2012 amid a global average of 3.5 per cent. The 6.75 per cent growth projected for 2013 also indicates better prospects than most other countries, while the government prides itself on keeping the fiscal deficit at two per cent at a time the world’s richest nations are groaning under debilitating fiscal deficits and debts.  She also repeated the government’s line that our rising foreign and domestic debts pose no cause for worry. She said, “Our national debt is at a sustainable level at about 19.4 per cent of GDP.”

Her views reflect the government’s celebratory mood over the little progress recorded. Jonathan himself was on the Cable News Network recently where he gleefully repeated that electricity power had improved. Informed opinion has however since pointed out that the 4,845 megawatts generating capacity the government is rhapsodising about is hardly enough to raise industrial capacity utilisation from less than 45 per cent on the average. A report on Wednesday said even this modest power output had dropped. Nor do the continued crises in the downstream petroleum sector and insecurity, especially in the northern states, lend room for much optimism. As the Lagos Chamber of Commerce and Industry noted in its Business Environment Report 2012: “…for most investors, the downside was more overwhelming.” It cited the high cost of borrowing exacerbated by government’s own borrowing at 14-16 per cent, one of the world’s highest; failure to pass the Petroleum Industry Bill, thereby holding back investment in the oil and gas sector as well as poor infrastructure to support agriculture.

Okonjo-Iweala should match her concern over unemployment with more concrete initiatives than she has demonstrated so far. It is her responsibility to drive home the point that our GDP growth is still not nearly enough to create jobs on a scale needed to absorb the legion of the unemployed.

While acknowledging recent favourable ratings by international rating agencies – Fitch, Standard & Poor’s and Moody’s – the impetus these provide as well as the recent inclusion of Nigeria’s sovereign bonds in Barclays Bank’s and JP Morgan Emerging Market Indices should be translated into pivotal game-changing measures.

Instead, the government continues to waste resources on hopeless commercial ventures in the critical sectors of power, steel, downstream petroleum and aviation, among others. Billions of naira that should be channelled into health care, education, environment, highways and water supply are being frittered away as the government holds on tenaciously to its loss-making refineries, steel plants, airports, coal facilities and river basin development facilities. It is bungling the ongoing power sector privatisation, has borrowing to import rice mills and the aviation minister is bent on entangling the government once more in running an airline despite the disastrous ventures of the past.

Okonjo-Iweala should lead the way to insist on leaving these sectors to the private sector to pave the way for massive investment as the liberalisation of the telecommunications sector did. Nigerians expect her to be at the forefront of reformers calling for immediate state divestment from businesses. Many are disappointed that she has been curiously silent on the government’s retention of the four money-guzzling refineries, while we continue to spend trillions on subsidising refined petroleum products despite producing 2.4 million barrels of crude per day. This explains why the Jonathan government is reeling from corruption allegations.

It does no credit to the administration that ministries, departments and agencies are still dogged by swinging graft allegations because of what experts refer to as “contract transactions” system.  Okonjo-Iweala should live up to her initial billing and give firm, courageous and coherent direction to the economy by leading the crusade against profligate public expenditure and graft. There is need for transparency and full disclosure of all oil revenues and their utilisation. Nigeria cannot continue to be a by-word for the paradox of plenty: rich in resources but with 60.9 per cent of the people living in poverty. This newspaper has consistently called for a drastic reduction in the cost of government and continues to do so.

The Jonathan government is wasting time: it will lay a solid foundation for the economy if it repeals the 1955 Railways Act; rein in extravagant spending, privatise the refineries, steel mills, airports, RBDAs and pass the PIB. The President and Okonjo-Iweala should know that policy formulation in these areas will, along with rapid development of solid minerals and agriculture, stimulate massive growth and create millions of jobs and greatly diversify our export earnings.