NigeriansTalk http://nigerianstalk.org Are we listening? Mon, 26 Jun 2017 07:43:48 +0000 en-US hourly 1 https://wordpress.org/?v=4.7.5 18788531 Does It Matter If We Are All In One Party? http://nigerianstalk.org/2017/06/26/does-it-matter-if-we-are-all-in-one-party/ http://nigerianstalk.org/2017/06/26/does-it-matter-if-we-are-all-in-one-party/#respond Mon, 26 Jun 2017 07:43:48 +0000 http://nigerianstalk.org/?p=12095 Emmanuel Macron’s (France’s freshly-minted president) political ascent has been nothing, if not phenomenal. The many firsts now make for pleasant reading; and invariably have provided space for debate around their different meanings and significance — for French politics, and for politicians everywhere.

Granted that there will always be difficulties grafting experiences such as this on to other political environments, nonetheless, I have been intrigued, by the conversation around how the opposition in France will respond to Mr. Macron’s policies over the life of the current parliament. When the French parliament opens tomorrow, the centre-right Republicans (with 136 deputies to Mr. Macron’s La République en Marche!’s — LRM — 308) will play opposition.

Volumes would still be written about how France’s main 5th Republic parties (the Republicans and the centre-left Socialists) came a cropper in these elections. But of far more interest would be how France’s political ancient regime responds to LRM’s positioning at the centre of French politics. Mr. Macron, persuaded that much of the paralysis undergirding France’s sub-par economic performance thus far is the consequence of entrenched partisanship, has clothed his party in just about every political idea — irrespective of partisan provenance — that might be helpful in shifting the economy’s supply curve to the right.

Inevitably, both parties of the right and left will find themselves having to decide how to respond to the LRM’s implementation of ideas that they once held dear. Already, a contingent of 40 Republican parliamentarians have plighted their troth to providing “constructive” assistance to Mr. Macron’s party. Whether Emmanuel Macron can increase domestic economic productivity in France or not, it would be important that the French people were invited to weigh-in on the ideas that their country will be run by over the next few years.

Important, this, in a much narrower context. The tribalism which Mr. Macron abhors; the same narrow-minded partisanship that today has American politics so divided, is the one ingredient that appears to be missing in our space. When key politicians move from the People’s Democratic Party (PDP) to the All People’s Congress (APC) and back again, the way Danfo drivers switch lanes on the 3rd Mainland Bridge, it is obvious how bereft of ideas the domestic space is.

On the size of government, for example, how do our main political parties differ? How desirable is national ownership of the means of production? Is it the case that we concede such ownership only where natural monopolies are concerned? And for those who believe the private sector is a better driver of growth, how much of their resource conversion efficiency is a part of the argument, and how much of the remaining case results from their being less susceptible to corruption in a competitive market? Right-of-centre, is there clarity on what we would have to do to improve the public sector’s regulatory competencies, giving that transparent and competent governance in the public sector are as important to dealing with corrupt practices in the public sector as they are for addressing market-fixing practices in the private sector?

The chatter over the weekend around a “Price Control Bill” (allegedly sponsored by Senator Dino Melaye), brought much of the dilemma around domestic policy objectives home to me. Apparently, the bill seeks to “provide a legal framework to require the minister responsible for finance through the Utility Charges Commission to fix the maximum retail and wholesale prices for the essential goods – maize flour, wheat, wheat flour, rice, cooking oil, sugar, diesel, petrol”.

The incestuous nature of social media (followed by and following like-minded folk) meant that the consensus on my timeline around the price control bill was derisory. I guess the senator’s awful reputation did not quite help either. But in search of a sense of the preferences of our political class, it helps to remember that barely 2 weeks ago, the government of Akwa Ibom ordered shopkeepers to bring down the cost of food items in the markets across the state. Otherwise, the government promised to “dissolve the leadership of any union that does not comply with the order within 31 days”.

Arguably, then, it might be wrong to argue that the fluid nature of our politics speaks to the absence of ideas. Instead, it would seem that we are agreed on one such idea: there is nothing like the “market”, nor of the forces of demand and supply. Rather, as the panjandrums of domestic monetary policy have argued, when prices are misaligned we ought to look to the activities of saboteurs and the like. Conversely, we might not be averse to private property. We are only concerned that access to this must be through the instrument of the state.

Alas, therefore, the challenge of domestic economic management is not to “move the nation’s supply curve to the right”, as an economist friend of mine is now minded to demand, but to make conditions in the market less conducive for saboteurs. Thus, ultimately, it really doesn’t matter what party we are all in.

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Renegotiating Nigeria http://nigerianstalk.org/2017/06/19/renegotiating-nigeria/ http://nigerianstalk.org/2017/06/19/renegotiating-nigeria/#comments Mon, 19 Jun 2017 07:21:02 +0000 http://nigerianstalk.org/?p=12089 You do not have to be sympathetic to the Biafran cause to conclude that Nigeria is not working. This is not the same, though as admitting that the country is failing. To “fail”, is to have once striven. Nigeria, as it arranged today, simply, can’t strive. Across the main measures of usefulness, this country has struggled since its founding to meet the expectations of its citizens. Economic and social data confirm this. As does political experience. The compact between leadership and its followers that is necessary for dimensioning (and implementing) the challenges of development and progress was never quite properly formed here.

You do not have to be Biafran to blame a significant part of this failure on the North. True, some actors from that section of the country make this blame game easy. But what does the North’s “natural leadership” of the country mean, if both social and economic indices show how much of a burden it is becoming on the rest of us? Extreme rates of unemployment and want are worsened by large numbers of children out of school and young working-age folk bereft of the wherewithal to usefully take part in a modern economy. In this sense, the North is the archetypal example of how the failure to properly design the social contract between the people and their leaders could be very costly to everything else.

The North matters because its large numbers make it an inviting place to start the process of the country’s redemption. But, across the country, evidence of decay is self-evident. Back out the fiscal support from being able to sell crude oil for dollars on the global markets, and you have an economy that has been prostrate since the 1970s. Look around for evidence of oil earnings, especially in those parts of the country where additional funds flowed in compensation for oil and gasexploration, and there’s absolutely nothing to show for it. In other parts of the country, signs of system failure are evident everywhere.

What to do about this?

You do not have to be Biafran to point to the example of Eastern and Central European countries as a useful template for Nigeria. As independent republics, most of these countries have fared better than they did when they were within the Soviet/communist sphere of influence. This proposition is as much about economic and social welfare as it is political. I am not too sure that one may easily proxy for the benefits of the freedoms that go with a people being able to express themselves freely without fear of censure by a nanny state. The same holds true of component parts of the former Yugoslavia. Across these spaces, we see newly free people building institutions that prioritise inclusiveness, and participation.

You do not also have to be opposed to Biafra to point out the counter-factual experience that Eritrea, Ethiopia, and South Sudan represent to these otherwise Elysian examples of accommodation in Central and Eastern Europe. In these latter places, evidence is abundant that the renegotiation of terms of association is not a cure-all. For the countries emerging off these African examples have simply gone ahead to replicate the excesses of the old arrangements.

How to account for this difference?

A very strong argument is the presence in Europe of the European Union, and how the promise of accession to the EU (if the new countries of Central and Eastern Europe structured themselves as liberal democracies) was instrumental to the eventual outcome. If the building of cross-border institutions in support of liberal and democratic regimes is a sufficient condition for success for new countries. Is the absence of such institutions in the spaces that newly-emerging countries are about to enter a necessary pointer to possible failure?

However this question is answered, you do not have to be sympathetic to Nigeria as currently organised to point out how fraught separation can be even in places that pride themselves with having functioning institutions. Negotiations between the United Kingdom and the European Union over the terms of the former’s exit from some of the institutions associated with the latter offer useful lessons in this regard. It is clearly not in the interest of the European Union to ease the departure of the U.K.

Ultimately, then, while we may, at least, agree that armed hostilities might not be an option on the table in any redesign of the Nigerian state including the ceding of territory to any of its component parts, the competence of negotiators on both sides will matter most. As would the assumption of good will in the different conversations, irrespective of the eventual outcomes.

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Nigerian Youths And Their Agenda For Change http://nigerianstalk.org/2017/06/12/nigerian-youths-and-their-agenda-for-change/ http://nigerianstalk.org/2017/06/12/nigerian-youths-and-their-agenda-for-change/#respond Mon, 12 Jun 2017 10:13:40 +0000 http://nigerianstalk.org/?p=12085 The one narrative that has dominated politics in recent times, is about how a new insurgency led by young people may be changing the face of politics. This conversation received a recent fillip from the outcome of the elections in the U.K. where a Labour Party that appeared ready to be consigned to oblivion when first Mrs. Theresa May called the snap elections ended up winning far more seats than most pollsters predicted. Before that, though, Emmanuel Macron, France’s youngest president, at 39 years old, had provided faggot for the debate. As had the build-up of youthful support behind the populist position of Bernie Sanders in the Democratic Party ahead of the presidential elections in the U.S. last year.

Part of the difficulty that this trend represents owes to the fact that in older democracies, younger folk have not always voted in numbers consistent with their share of their respective populations. And across so many other aspects of life in their countries, including criminal activities, their participation rates are on the decline as new forms of (online) engagement have arisen. So, there is a case for wondering how much of the emergence of young voters as decisive variables in election results in recent times is the consequence of psephologists needing to re-write their models as the latter have consistently called voting outcomes wrong in recent times.

Beyond this possibility, however, there are strong arguments for increased involvement by young people in politics worldwide. As communities in the OECD economies grow older, younger people find that their economic contributions increasingly support a larger share of pensioners. Most of these older people left work relatively early, and retired on defined benefits pension schemes. These pension schemes, few of which are fully funded, have subsequently blown holes in both public and private finances, forcing most employers of labour to force new (and younger) employees into defined contribution schemes.

The 2008-2009 global economic and financial crisis, and the resulting deceleration of most economies mean that the latter schemes are unlikely to guarantee to participants the comforts that today’s younger workers are invited to guarantee their predecessors. In addition, a quirk of the new economy has seen the return to capital rise much higher than that to labour — making it that much difficult for younger employees to find the additional funds needed to beef up their savings if they are to ensure a decent old age.

In a sense, then, the structure of mature economies around the world today makes a very strong case for 18 – 24 year olds to take a more active interest in political outcomes. That they have often opted for radical approaches is easily explained by a sentiment so readily captured by Lloyd George: “A young man who isn’t a socialist hasn’t got a heart; an old man who is a socialist hasn’t got a head”. At bottom, this speaks to a changeability of perspective on economic and social issues that is not exactly absent even today.

In less developed economies, the dilemma youth’s face is of a different vintage. High birth rates and improvements in basic health care means that these are invariably young populations. Low levels of economic growth confines most of these people to uncomfortable levels of poverty. In between, levels of inept and invariably corrupt stewardship of domestic resources make the design of possible solutions that much difficult. However, if youths in the West have been apathetic, their colleagues in the South have had fewer opportunities for making their opinion felt. Until recently that is. An affliction of new democratic practices across the South, especially in Africa, but including places like Myanmar, now hold out the prospect of a change to this dynamic.

Because of these new trends, a large part of the discussion around how establishment politicians and their pollsters have floundered in most recent elections globally has focused on the changing dynamics of the voter. The average voter is less brand loyal, and more likely to browse for and pick policy mixes a la carte. If this sounds a bit like the discourse around online retailing, it clearly isn’t accidental. For much of the political dialogue has moved online, with politicians now able to directly target their pitches at individual voters. Is it surprising then that voter intentions are as consistent and predictable as are an online shopper’s?

From this conceptual miasma to conversations about the trajectory of politics locally is a distant haul. Yet, much of the local discourse has had what passes for millennials in Nigeria bemoaning how they have failed to replicate the dynamics that we have seen elsewhere. Very easily, this dialogue has pointed to the health concerns of our septuagenarian president in the face of France’s spring chicken. And there has been a sizeable contingent that would blame the incompetent organisation of the Nigerian state on the profusion of doddery old men in our politics.

A lot of this argument, however, misses the point. Invariably, all conversations around the age of our politicians today start from the image of the country’s politics that we see when we contemplate the mirror, today. But this way of imagining forgets that most key players in our political space today have been around for like forever. Our president may be in his dotage, to take but one example, but he’s been part of every non-democratic change of government since he was a very young man. So, the Nigerian youth has not been without his/her opportunity to redesign this space.

S/he may, however, be especially unqualified for the job. The percentage of our population with a higher education qualification is far lower than in these other places where the fortunes of the youths have moved to the fore and centre of conversation.

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Will Nigeria Survive The Death Of Big Oil? http://nigerianstalk.org/2017/06/05/will-nigeria-survive-the-death-of-big-oil/ http://nigerianstalk.org/2017/06/05/will-nigeria-survive-the-death-of-big-oil/#respond Mon, 05 Jun 2017 06:00:38 +0000 http://nigerianstalk.org/?p=12075 For the second time in 7 months, OPEC and its non-member collaborators agreed last month, to continue to “do everything necessary” to drive an increase in global oil prices. As with their agreement late last year, members are expected to maintain a 1.8 million barrels a day reduction in output levels up to March next year.

As an oil producing economy who’s near-total dependence on earnings from the stuff meant that we went through the last crisis in the market on life-support, this is great news. It helps too that OPEC’s decision to exclude both Libya and Nigeria from the production-cutting arrangements conflates with our pacification of militancy in the oil-rich Niger Delta region to hold out the prospects of improved oil production and ancillary increase in foreign earnings.

Still, despite its best efforts, the new oil producers’ arrangement has not moved the price of oil pass the US$50 per barrel (pb) mark. In part, this was because the cutbacks in production which was agreed were not enough to dent the pre-existing glut in the oil market that had helped push prices down in the first place. Now, giving that most OPEC members need for oil to sell at about US$100pb if their respective budgets are to break-even, US$50pb oil simply won’t do. On the other hand, further production cuts will hurt most members, especially Saudi Arabia, and so are unlikely.

Nonetheless, by far the biggest source of downward pressure on global oil prices over the last 3 years, is the result of oil exploration and production in the US. In turn, much of this owes to hydraulic fracking of shale oil deposits. Not too long ago, this new technology was considered too expensive to be anything but a sideline to the global oil market. Yet, supply of U.S. shale oil ultimately played a crucial part in ending the global commodity super-cycle. Today, shale oil production in the US is nothing of the marginal play that it was supposed to be, and the U.S. has ridden on the back of exploration activities to become one of the world’s leading producers of the stuff.

Only last week, drillers in the U.S. were reported to have added 11 new rigs to their operations. According to data from Baker Hughes, an energy services company, this then makes last week’s addition the 20th week in which U.S. drillers have added additional capacity back-to-back. With production in the U.S. adding another 500,000 barrels per day (bpd) last week, the U.S. Energy Information Administration now expects output in the country to reach 10 million bpd in 2018.

If OPEC underestimated the production threat from shale the first time, it has done so consistently thereafter. First, the sense was that below US$70pb, the shale industry will go bust. And go bust a lot of them did. But the market then adjusted, and producers have continued to leverage financial engineering opportunities to continue financing their operations, while deploying an assortment of hedging instruments, to help manage price fluctuations.

If shale is the oil industry’s worst near-term bugbear, sundry other gremlins loom over the longer-term. Demand for instance for fossil fuels will be undermined by the increasing roles played by renewables (wind, solar, waves, etc.) in the global energy mix. Considerable efficiencies in these technologies have seen them account for a larger share of generation in both the OECD countries and China. True, intermittency is still a worry — electricity generated by renewables, is by definition unpredictable (solar, for instance tapers off at night), even as most grids were originally structured to deliver steady output to their consumers. But then bigger and more efficient batteries and snazzy engineering fixes mean that even this might not remain a problem for long.

Bigger and more efficient batteries also support the threat to big oil from another new sector. Electric vehicles (Tesla’s market capitalisation only recently overtook Ford’s, despite the former producing far fewer cars than the latter) would eat out of this pie too. As would expectations of improvements in the energy efficiency of the Chinese and Indian economies. It would seem on current trends, that these biggish rapidly- developing economies would start using up far less energy in producing more goods at an earlier stage in their development than most industrialised economies did.

Big oil, therefore might be witnessing its last hurrah. Oil-dependent economies like ours should worry. For while oil may have warped our internal workings, its abundance has helped hold together social organisations devoted solely to rent-seeking. Without a pivot towards saner husbandry of the economy, and away from oil, the demise of big oil might presage the unravelling of this space.

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Q1 2017 GDP Numbers And Our Hopes For The Year http://nigerianstalk.org/2017/05/29/q1-2017-gdp-numbers-and-our-hopes-for-the-year/ http://nigerianstalk.org/2017/05/29/q1-2017-gdp-numbers-and-our-hopes-for-the-year/#respond Mon, 29 May 2017 10:14:03 +0000 http://nigerianstalk.org/?p=12069 The output numbers for the January-March 2017 period released last week had something in it for everyone.

Is the Nigerian economy on its way out of recession, as most key functionaries of the Buhari administration insist? According to the Nigerian Bureau of Statistics (NBS), the economy shrank by 0.52% in the first quarter of this year. This is not just down on the 1.73% by which the economy shrank in the fourth quarter of last year; but confirms a southward trend in negative output growth that has been in place, since the economy shrank by 2.34% in the July-September 2016 period. Additionally, the NBS’ release shows that in the first quarter of this year, more activity sectors (we have 46 of these) grew than has been the case over the last one year. Extrapolate off these numbers, and suggestions that the economy may exit the recession it was in all of last year do not look like a stretch anymore.

And for those who think the economy has been so lousily managed by the incumbent administration? Well, it is enough that with the release of Q1, 2017’s output numbers, we have had five back-to-back quarters of falling growth in the gross domestic product (GDP) under its watch. And with both consumer and business confidence down, it is doubtful how strong any recovery this year will be. In all likelihood, having undergone the welfare losses which were the hallmarks of last year, most consumers would save this year rather than spend. Even then, the naira’s continuing loss of value will make saving a difficult proposition — except for those with a larger pool of discretionary income, who may more easily convert such savings into dollars. The poor and vulnerable may, thus, spend all they have for fear that inflation may leave them with even less, but their combined spend might not do it for the economy.

The well-paid may also parlay their savings into treasury bills. These at least guarantee a return about 100 basis points above inflation. But then, the central government’s appetite for domestic borrowing — which is driving TB yields up — is not exactly without cost to the economy. Indeed, the central bank’s policy committee noted last week that as at April this year, “credit to government continued to outpace the programmed target of 33.12% for fiscal 2017, while credit to the private sector declined far below the programmed target of 14.88%”.

As predicted by the literature, we are thus seeing government borrowing crowd out the private sector. No chance then of the private sector being able to invest in new capacity over the current plan cycle. In addition to which, most businesses will have difficulty running down current inventory. Demand at the premium end of businesses’ respective markets will continue to soften, following a build-up of savings by more affluent customers. If the clientele at the bottom of the pyramid are not overly weighed down by the need to pay off their debts, then businesses that can make the transition to value brands, should see profit hold up since margins here are fatter.

What these mean, however, is that much of the expectations of a recovery in the last three quarters of this year will be riding on government spending its way out of the recession. Thankfully, OPEC and its non-member collaborators have extended till March next year, their arrangement for stitching up global oil production in support of higher prices. This should translate into additional funds into government’s coffers. Hopefully, that should mean far fewer cases of sub-national governments not paying salaries — helping hold up consumer spending.

An improvement in government’s fiscal position ought also to mean some money with which to support the structural changes that the economy needs, especially through improving the ease of doing business in the economy, and making the public expenditure management system more efficient across the three tiers of government.

The greater likelihood, is that as we near the end of the current electoral cycle, “business as usual” would be the safer choice; as is evident in the monetary authority’s management of the foreign exchange market. This would be an unfortunate choice, however, for as the NBS’ revisions to last year’s output numbers indicate, the recession was slightly deeper than we all thought. And by extension, what we must do to get out of it will take far more introspection than is on the table, thus far.

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Reforming Central Banking in Nigeria http://nigerianstalk.org/2017/05/22/reforming-central-banking-in-nigeria/ Mon, 22 May 2017 04:58:58 +0000 http://nigerianstalk.org/?p=12061 Today, the Central Bank of Nigeria’s (CBN) policy committee meets to reflect on the state of the economy and agree the direction of monetary policy over the next two months. Despite the recent focus on the vicissitudes of the foreign exchange markets, the CBN’s main policy objective is to “ensure monetary and price stability”. So, it would matter how the Monetary Policy Committee (MPC) interprets the likely direction of domestic prices.

The National Bureau of Statistics (NBS) reports the headline consumer price index as rising by 17.24% (year-on-year) in April. This measure of domestic inflation rose (on a year-on-year basis) by 17.26%, 17.78%, and 18.72% respectively in March, February, and January this year. In terms, then, of the official numbers, domestic prices may, indeed, be softening this year, rendering the CBN’s policy task that much easier. If inflation is headed south, the MPC may legitimately hold off tinkering with any of its monetary policy levers.

But is inflation southward bound?

Anecdotal experience would argue in the negative. Prices of basic items appear to be rising daily. And one official measure of inflation supports this sentiment: the NBS’ measure of headline inflation has domestic prices rising by 1.60% between April and March. Between March and February, it was also up 1.72%. Thus, whatever the explanation for the subdued price movement on a year-on-year basis, month-on-month, domestic inflation remains a major policy worry. And this is before one includes the fact that at 17.26%, the headline inflation count might simply be too high, anyway.

Beyond inflation worries, though, there is the question of the fortunes of the larger economy. Indeed, one of the more powerful arguments against putting up the central bank’s benchmark rate to fight inflation is that in an economy that shrank over the four quarters to the end of December 2016, the consequences of putting up domestic interest rates might be worse than any benefits from lowering the rate at which prices rise. Policy makers ought therefore to be interested in how the economy performed over the January-March period: did gross domestic product (GDP) shrinking again? Or did the economy somehow find a forward gear?

Incidentally, the NBS has scheduled the release of output numbers for the first quarter of the year, for tomorrow — a couple of hours before the MPC meeting ends. Given that the Statistician-General of the federation sits in an advisory role on the MPC, it is fair to hope that he would have given members insights into how the economy performed in the first quarter of this year in order that they may properly structure their policy responses.

Whatever the respective outcomes are, this tension between the economy’s need for growth, and the monetary authority’s responsibility for holding prices down, points to a major central banking reform requirement. Without question, my vote is for central bank independence. This way, we ensure that monetary policy is not in hock to the fiscal side and the latter’s religious focus on the four-yearly electoral cycle. However, this independence ought not to interfere with the fiscal authority’s responsibility for driving domestic growth and development — as it now appears to, each time the conversation around the options for the economy is riven between the seemingly irreconcilable desires for economic growth and low inflation.

A simple solution is to split the goal of lower inflation rates from the tools with which this goal is realised. Thus separated, it should be possible for a government to indicate the levels of inflation consistent with the output growth rates it would be aiming for while in office. After which, the whole point around the independence of the central bank will be about the instruments with which it intends to pursue this goal. This definition of central bank independence — especially the separation of “goal” and “instrument” independence — was pioneered in 1988 by New Zealand.

The U.K. adopted this model in May 1997, including a provision for the governor of the Bank of England to report to parliament any time inflation overshoots or undershoots the target set by the government. What this model does, is remove a key political variable from the policy mix that central banks must constantly consider. This way, central bankers are better able to address the design of a tool kit with which to address movements in domestic prices. Whatever the output numbers for the first quarter of this year turns out to be, this political choice would be the most burdensome of the decision mix that the members of the MPC would be saddled with in the next two days.

It should be the least of our worries though. For irrespective of where responsibilities for monetary goals and instruments lie, independence of a central bank has meaning only within the general context of its competence.

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A Shrinking Economy, Thinning Middle Class, And A Growing Underclass http://nigerianstalk.org/2017/05/15/a-shrinking-economy-thinning-middle-class-and-a-growing-underclass/ Mon, 15 May 2017 05:15:48 +0000 http://nigerianstalk.org/?p=12051 Out on housekeeping chores Saturday, I’d barely gotten out of my vehicle at the dry cleaner’s when I was accosted by this bedraggled middle-aged female importuning me for N200 with which to eat. According to her, she’d had nothing to eat since the night before. She walked me to the dry cleaner’s, waiting till I found enough loose change to make her thank me profusely and go on her way.

Increasingly, episodes like this are a daily staple of conversations at the different watering holes I frequent. Along with another phenomenon they speak to aspects of our economy that the numbers from our bean counters simply paper over. Returning from work, most workday evenings, the riot of mendicants on major roads in Lagos now worries me to no end. Yes, the numbers of this class of our compatriots appear to be on the increase daily. But the sheer variety of ailments on parade (cause to be less parsimonious with the giving) has turned mind-numbing.

“There, but for the grace of God, go I”. True.

However, increasingly these days, the “grace of God” is felt in its absence in access to schools (and jobs thereafter), as is attested to by the horde of pre-teen emergency windshield cleaners swapping extended palms with the begging class. The thing is, an underclass this young, left unattended as we are wont to, does pose a much bigger threat. Because the alms that we give may not support for long their eleemosynary life style, we would soon near that point where a more vigorous ask will replace the extended palm.

How much of this development is the consequence of a failed society, and how much the result of indolence, is a question that will remain moot for some time. (Especially when well-meaning interest in helping those beggars supposedly with health challenges have unearthed scams.) Easier instead to understand the provenance of a much-related phenomenon. Same Saturday, I get this message from a close friend: “Kai, more and more folks are reaching out for financial help — cousins classmates etc.”. In this instance, given the medium through which the plea for assistance came my friend was minded to establish the plea’s bona fides — “his account could have been hacked” was one risk. Then, she was unsure how much to part with; although at this point she had no doubt that the cause was a deserving one. The basic problem? How big an intervention is enough? And how many small regular interventions may the charitable-minded make — giving that one hasn’t abandoned other obligations? And for how long this latter?

Irrespective of the answers to these queries, the one fact that is not in doubt any more is the increasing number of our nationals battling different levels of privation. Significantly, a large number of this new eleemosynary class went to school, and once had jobs that allowed them to meet most of their obligations. So, the charge of indolence that one could easily lay before the roadside cohort may not sit easily here. These, instead, are anecdotal evidence of how bad our economy has turned of late. They are the corporeal manifestation of four successive quarters of shrinking domestic output growth. They are, in a much broader sense, the weightiest reproach to the incumbent administration. The one argument against its competence that does not easily permit of being swept under the carpet.

Yet, the sense of shame and circumscribed self-respect that hunger imposes mean that (for a while) this cohort is not likely to be heard or be as visible as the other underclass. But that they are a real and present threat to our social cohesion, not even the most benighted supporters of this administration can deny. On one hand, the administration’s policies are destroying jobs. On the other, by supporting inflation, monetary policy regularly deeps its hands into the people’s pockets, apparently using the ill-gotten proceeds to support its exchange rate policy.

As more Nigerians lose their jobs, and the social safety net that is the extended family is weakened by weak disposable incomes, we can only expect the rank of the needy to grow. This will mean more requests like my friend got on Saturday. It will also mean more beggars and windshield washers on the streets. Worse, though, is that it will, just as well mean less money in the hands of the charitable, both for alms volunteered to the needy in traffic, and for interventions in the lives of those close enough to us to demand more.

That these phenomena will worsen as management of the economy remains sub-par is no longer moot. Still open to debate, though, is what will come after; and what we may still be able to do to forestall whatever the latter (safe to assume from this vantage that whatever it is, it won’t be welfare-positive) is.

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Snap — Unedited Ramble – Feyi Fawehinmi http://nigerianstalk.org/2017/05/08/snap%e2%80%8a-%e2%80%8aunedited-ramble-feyi-fawehinmi/ Mon, 08 May 2017 09:56:11 +0000 http://nigerianstalk.org/?p=12042

It’s normal for there to be a lot of hand wringing among young people in Nigeria when something like Emmanuel Macron happens. A 39 year old guy sets up a political movement and is swept to the Presidency of his country in roughly a year. If you live in a country that is seemingly trapped under bad leadership (with the promise of more when you scope out the horizon), this reads like magic.

 

But what exactly is the problem? Is it that Macron is young and at his age, it is constitutionally impossible to be President in Nigeria? I’m not convinced. I’ve often posited that it is possible a distrust of young people in Nigeria is because of the experience — still within summonable memory of many Nigerians — the country had the last time young people were in charge. When you take the trio of Gowon, Murtala and Obasanjo, none of them was as old as Macron when they led Nigeria for the first time. Yes, I know, they took office with their guns. Still, what do people remember from that time? What did they then tell their children about the way these men led Nigeria?

Let’s park the age thing to one side — you can be stupid at any age.

There are many problems afflicting Nigeria. The education system is awful — it does not even teach people how to think, how to solve problems or how to look for answers. As Nigeria cannot import competence en masse, you are going to have to make do with what is available. Then there’s the atmosphere that just makes it bad to have rational debates about anything. A large part of the ignorance is wilful. People cannot then conceive of better and what better looks like. And as I often say, it is possible for a nation to be trapped in this kind of cycle for centuries.

But there’s another massive anti-Macron problem. But it is not an impossible one and the payoffs to it will be huge if it can be cracked. The problem is the problem of the system we try to solve our problems with — the political system.

To be clear, Macron is an establishment kid albeit one with incredibly good political instincts. He went to the École nationale d’administration where they teach them words and numbers to the highest possible level. He must be fiercely intelligent given the way he managed to navigate the system in such a short time to the point where he was able to see where the weaknesses were and exploit them.

Nevertheless, it is possible to use the same set of Nigerians in a different way that does not lead to outcomes that increase poverty and wastes lives. The question is how? Remember that if Nigeria reduces its corruption to the level of Ghana’s, this will translate to tens of billions of dollars extra in GDP. There is no need for perfection in policy making — just getting the first basic step right will yield better outcomes.

The Nigerian political system as it is guarantees certain types of outcomes. It is like those giant crushing machines that turns any kind of metal into scrap — whether you feed in a red or blue car into it, by the time the result comes out at the other end, it’s just metal and no one can really tell what it looked like when it entered. The political system does not accentuate or enhance talent. What it does, ruthlessly, is to ensure conformity. No matter the question, the answer is known.

As such, Nigerian politics is incapable of rising up to the hard challenges the country is faced with. Its answers are often feeble, half-hearted or just kicking the can down the road. The tools that help you rise to the top are often woefully inadequate for the actual job.

We should view these things as structural problems. Start from this question — if you were to design a political party from scratch in Nigeria today, how will you solve for the structural problems that you see in PDP and APC right now? How will you solve the problem of money? I’m talking about hard practical ideas now. How will you tackle the structural problems that make it practically impossible to win over people based on ideas or even rhetoric? Reading Ayisha Osori’s forthcoming book, I tried to make a mental note of the amount of time she spent speaking to people about her plans, answering their questions and making her pitch. At most, 10–15% of her campaign time was spent on this. The rest of the time was spent meeting or trying to meet people and listening to ‘advice’. It is possible to pass through the system as it is today without a single idea in your head that you have spent time thinking through and fine-tuning. The system does not demand that from you.

After reading her book, a friend of mine here (succesfully) went through a party primary. Before the primary day, she said she had to go offline so she could prepare (study, research, fine-tune her pitch etc). This made me pause and reflect. Flip it to Nigeria and what she would have had to spend her time doing instead is running around trying to meet the people voting in the primary (or some other big people) so as to guarantee the final outcome. The idea of winning because, on the day you met the people to decide your fate, your pitch was simply the best is completely non-existent in Nigerian politics today. If it was, then people who have ideas and have spent time thinking through their plans will automatically be at an advantage.

And that’s the point. In your putative political party or movement, how will you raise the status of this type of skill while reducing the status of envelope sharing and running around? Please note that you will need to do this in a way that still allows you win elections. It is difficult for both of them to co-exist — if money sharing is allowed to determine outcomes, ideas and political persuasion automatically become a waste of time. We are back to that metal crushing machine that guarantees a particular answer no matter the question that is asked.

This problem is worth solving because it can allow us make much better use of whatever human resource is available in Nigeria today. It might even be the same set of people in the National Assembly who can deliver much better outcomes if you have a better process. Who knows, some of them may even have useful ideas but there is currently no value in putting them out there. Changing the way we select people for office, in a deliberate way, to ensure that those who come out of the system have the kind of skills that are required to get Nigeria moving in the right direction is the holy grail here.

Ideally, the best way to do this will be to somehow get the current political parties to change their ways and reform themselves. But no one sat down to design the current system that is damaging Nigeria. These are the hardest types to change. The insiders may not even know there’s something wrong and I’ve seen a few people enter the system and then begin to ‘extol the virtue’ of the current dysfunction and the ‘skills’ needed to navigate it.

Here’s what I’m saying in a nutshell — how do you begin to design a political system where Macron can enter at one end and still come out as Macron at the other end? Maybe the French system even made it too hard for him hence why he had to form his own party. Perhaps that is the lesson to be learnt. Whatever it is, keep an open mind.

Because as things stand, if you put Macron in the Nigerian political system, he’s going to come out as Dimeji Bankole.

FF

P.S Before Macron, there was Ciudadanos and Albert Rivera in Spain that offered a brand of liberal politics as an antidote to populism and nationalism. Spain is a parliamentary democracy so it is a lot harder (if not impossible) for a Macron to emerge there. Still, that party managed an impressive number of seats in parliament and was then able to influence government policy as kingmakers. Start from here

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Buharinomics, a study in cynicism http://nigerianstalk.org/2017/05/08/buharinomics-a-study-in-cynicism/ Mon, 08 May 2017 09:30:56 +0000 http://nigerianstalk.org/?p=12040 That Nigerian politicians are venal, and may be easily suborned, isn’t as serious a charge as it appears when, first, one encounters it. Emerging markets and developing economies are replete with news reports that often make stories of corruption here look abecedarian. Brazil’s “lava jato (car wash)” scandal, and the daily details of Odebrecht’s misdemeanours in Latin America and parts of Africa, are prime examples. Indeed, some instances of corrupt practices elsewhere would suggest that ours is but a matter of degree.

For every naira budgeted for public spend, how much kobos would it be okay for our politicians to appropriate without burdening the economy? Ideally, none. The dearth of public and social infrastructure in the country (in part, the result of so much defalcation) is such that if we were to devote all that we earned as an economy to fixing the problem, we would still be at the basic level of this task one generation from now. Still, such is the nature of domestic politics today that the key players have no qualms expropriating the state and then borrowing some more to fill private coffers.

But this isn’t the biggest burden that our polity bears. By far more troubling is a lack of clarity on what path of development we should be on. Take the conversation around agriculture, for one. Should we be pushing agriculture because we believe it has tremendous potential for earning foreign exchange? I have heard of plans for substituting palm oil exports for crude oil exports. And why should foreign exchange earnings matter so much? In order that the central bank may have enough to support a national sense of the naira’s virility?

If we have half as many people as we claim to do, and an economy as big as the numbers say, ought we not to focus on a development strategy that seeks to boost domestic economic activity by driving productivity growth across all sectors? Would we not be better off strengthening domestic demand by improving both the curriculum and instruction methods in our schools (why for instance are we not teaching coding/programming skills in our secondary schools), boosting our health care delivery systems, maintaining and investing in infrastructure, and making business conditions friendlier? The absence of debate around these key questions was, arguably one of the main failings of the Jonathan administration.

To its credit, the Obasanjo administration had a sense of these issues. And its legislative signature (the fiscal stability act, the central bank act, the due process office, etc.) did point in a certain direction. Much of the campaign rhetoric, then, that the opposition marshalled against the Jonathan administration was full of moral indignation not just because it was corrupt, but because it did not appear to have a sense of where the economy ought to be headed.

It was a bigger let to be “clueless” than to be “corrupt”.

The Buhari administration has had nearly two years to press the “reset” button on both these issues. Yet, not only has it failed to improve the efficiency of the public expenditure management framework, it has not furthered debate around the development path that the country ought to be on if it is to fast-track the process of moving the larger number of our people out of poverty in one generation. Why one generation? That’s about how long it took China, a much bigger economy to get things right.

The Buhari administration has, however, got one thing spot on. It is one of the more cynical governments to have ruled the country in a long time. This is not because it has continued to insist almost two years into government that the problems with the country are the result of the incompetence of its predecessor. Nor is it about its readiness to disavow prescriptions (such as demanding the resignation of an ailing president when it was in opposition, while insisting as a government that the health of the president is no business of the electoral) that helped it win at the ballots, once safely ensconced in office.

Neither is the charge of cynicism about the not unimportant matter of how long it took to put together an economic recovery and growth plan. At what point was the government persuaded that it needed a roadmap of this sort? Whatever became of the output from the Transition Committee comprising the great and good that worked so hard to put a roadmap together for the administration as it was coming to office? And by how much does that former document differ from this new one?

There is a case to be made that these posturing may have served only to shoehorn the incumbent administration into office. But that only reinforces the charge of cynicism. A charge that is very easily worn in a period of post-truth politicking. Yet, governments have often preferred office to credibility. However, beyond the sinister manipulation, there is a niggling worry.

How much of what looks like cynical manipulation by this government is the result of it simply not knowing what to do? Important this question is, when you consider that its economic roadmap has neither specific timelines, not a clear estimate of the financing that its specific deliverables will need.

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Waltzing out of Recession through lower consumer prices http://nigerianstalk.org/2017/05/01/waltzing-out-of-recession-through-lower-consumer-prices/ Mon, 01 May 2017 07:08:03 +0000 http://nigerianstalk.org/?p=12036 Information and culture minister, Lai Mohammed’s address to the biennial convention of the Nigerian Guild of Editors was the latest installment in a series of comments by government officials on the trajectory of the domestic economy. In the address (delivered on his behalf on Saturday) by the Managing Director of the News Agency of Nigeria (NAN), Bayo Onanuga, the minister is reported to have described the economy as “clawing out of the woods of recession in weeks from now”.

The preceding Tuesday, speaking to journalists at the end of a closed-door meeting with the leadership of the senate, the governor of the central bank, Godwin Emefiele was optimistic “that by the end of the second quarter, or latest the third quarter, we should be out of recession that we are in right now”. Given that the statistician-general of the federation sits ring-side at meetings of the central bank’s policy committee, it was tempting to imagine that the governor, having had a peek at the output numbers (from the bean counters) for the first quarter of 2017, was giving us a heads-up.

Tempting. But not true. All the central bank governor had going by way of evidence for his optimism was that we had started to witness a falloff in the prices of commodities, and that as a result inflation was on its way down. In the end, the information minister was simply parroting his central bank governor’s sentiments.

Upon further reflection, it is far easier to see how both functionaries of state may have played fast-and-loose with the concepts that they included in their descriptions of the economy. For starters, an “economic recession” is nothing more than “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters”. Last year, Nigeria’s GDP fell in four consecutive quarters. Consequently, when it is bruited about that we would soon be out of recession, all it means is that in the quarter that this happens, the domestic economy would have grown by some. Arithmetically, it could also be out of recession simply by not growing, so long as it doesn’t shrink.

Inflation may worsen a recession. As would falling prices. But ultimately, what matters for getting out of a recession is that (1) government can spend its way out of it; (2) our exports rise much faster than our imports (growth in trade); (3) consumer confidence increases, and they start to spend; and (4) on the back of a resumption in consumer spend, business investment and the industrial activity associated with it recover.

None of this is happening yet. Indeed, anecdotal evidence would suggest that industrial activity may contract further. Banks have shut branches and laid off staff; while manufacturing concerns have pared the number of shifts they run further, while reducing staff. Indeed, it was reported only recently that 11 state governments continue to owe their staff salaries; and these wage arrears range from two to fifteen months. Not surprisingly, the IMF’s growth estimates for the year rely on improved exports (of crude oil, largely), growth in government spending (from earning more petrodollars), and improved activity in the agriculture sector alone. Without serious changes to how we run the economy, both consumer spending and business investment might continue to drag output down this year.

At 0.8%, the IMF’s growth outlook leaves little margin for error. Which is sad, because the IMF has called growth wrongly across the globe in just about every year since the 2007/2008 global financial and economic crisis began. And when one contemplates the agriculture sector, it is obvious how slim this year’s margins are. The problem is not that our agriculture is still largely subsistence and rain-fed. It is instead that the rains do not fall on schedule any longer, and when they do, they tend to fall too much in short bursts.

All of which means that the bulk of the effort for a recovery in domestic output this year will come from restoring the stipend for militants in the Niger Delta (so that the country may export larger crude oil cargoes), and the stitching up by OPEC and its collaborators of the oil market (pushing up the prices for the cargoes that we can sell). Government hasn’t done much to improve domestic employment, make investment easier, or improve productivity across sectors.

In a sense, these downsides might explain the central bank governor’s reticence in being more precise about when we should see a reversal of the economy’s shrinkage. But, still, as an exercise in talking up the economy, both functionaries of state may have been less than responsible in raising hopes prematurely. This is especially so, because even their reading of their preferred index, inflation, is tendentious. A perfunctory reading of the National Bureau of Statistics’ numbers for inflation would show that the outlook for domestic prices are nowhere near as rosy as both the central bank governor and the minister for information and culture describe them.

Indeed, on a year-on-year basis inflation has trended down since February. But this is only because (as I have pointed out elsewhere) inflation this time last year rose by so much, year-on-year. Look at the month-on-month change in domestic prices, however, and a different picture emerges. According to this measure, since November last year, domestic prices have been going up. On a month-on-month basis, the food sub-index of the NBS’s consumer price inflation was up 2.21% in March (from 1.99% in February). The core sub-index rose 1.32% (1.10% in February). The urban index was up 1.76% (1.52% in February). And the rural index rose 1.69% (1.45% in February).

Thus, while the economy may well emerge from recession later this year, it definitely isn’t on the mend yet.

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