By Pace Olaparodi
Anyone that is informed knows that these are not the best of times for our economy. The external reserves have fallen to an all-time low of $29bn. The naira exchange rate has also tumbled to a low of about N300 to a dollar at the parallel market. The price of crude oil is further heading south. The last time oil traded below $30 was April 2004. Its price is today dancing around that April 2004 price. The economy is in troubled waters.
Luckily, we can still do something about the economy. Or, put differently, we can mitigate the effects of the troubles facing the crude oil price on the economy. But time is running out. The economy’s noose on Nigeria’s neck is tightening. Fast. We must do something urgent very speedily.
The Central Bank of Nigeria has been grappling for solutions. The apex bank has been rolling out circulars back to back. Yet, we are still in a tailspin in terms of the naira value and dollar availability. Manufacturers are groaning. Importers are lamenting. Jobs are being threatened. Clearly, the CBN monetary policies alone cannot solve the problem. In fact, it is like using Paracetamol to treat typhoid fever.
We must do things differently. There are many things we can do. Things like ferociously cutting costs in the short term to developing manufacturing and agricultural resources in the long term. But, for now, let us focus on only three that are perhaps medium term and also foundational. Things that will reduce the demand for foreign exchange. And also increase the supply of foreign exchange. Have we not been told by economists that the demand for and supply of foreign exchange determine our naira value?
First, we must do whatever it takes to make refineries work. Yes, whatever it takes. Zap all the primitive rules drawing us back. Set a definite timeline and work frenetically towards it. Focus on meeting the local demand for petroleum products. Sell the finished products to other countries especially in Africa to earn foreign exchange. It was reported recently that petroleum products imports gulp over 30 per cent of the country’s foreign exchange. This is too high. This double attack would have an instant positive effect on the naira value. And also create jobs. Mini-refineries can be delivered in nine to 12 months. Sixty five of such licences were granted in August 2015. What is happening to them?
In September 2015, the Group Managing Director of the Nigerian National Petroleum Corporation said that Nigeria’s four refineries must become fully functional within 90 days. They have not. Even if they had, their combined installed capacity is about 10.5 million litres of petrol per day. This falls short of the national daily consumption of about 40 million litres. The gap is too wide. The effect on the foreign reserves is crushing.
The second thing is power. To achieve import substitution and export promotion, we need a stable power. It is also a sine qua non to make locally produced goods competitive to imported ones. Get the privatised generation and distribution companies to adopt a different strategy. Tear down obsolete rules. There is no time to wait for the power plants being built. We cannot afford to wait anymore.
They can import power plants and install in various cities and towns. Let cities or states stand alone or yank some off the national grid. The distribution companies should flood everywhere with pre-paid meters. Ditch estimated bills. Consider using powerships. Power barges are another option. They are fast-track, standalone solutions for power generating needs. Powerships have worked in Lebanon, Iraq, Pakistan, and Ghana. Forty of them can generate over 7,000MW. Power barges can be achieved in six months.
There is yet another option, even better, if you do not fancy the floating power on ships or barges. You can buy a mobile power plant off the factory. Get it installed in 11 days after delivery. The “plug and play” approach is not limited to ICT. There is even a finance option if you do not have the funds to make an outright purchase. You can lease and make rental payments from collection of electricity bills from users. In less than a year, we would have stable power in nearly all the critical places.
With stable electricity, many of our factories would roar back to life. Small businesses would spring up. We would have a renewed ability to lure back companies that left us for other West African countries. And also invite more. These things are achievable.
The third thing is true federalism. Unleash the potential of the states. The states are the federating units. States should stop the monthly revenue trips to Abuja. The Federal Government is not designed to solve most of the problems directly affecting citizens. The central government should focus only on common issues. The Federal Government is not positioned to solve “local” issues. We must encourage creativity. Let states compete and have healthy rivalry, and see every part of Nigeria flourish. Our states are the primary centres of development. Not the Federal Government. Every part of Nigeria is rich, potentially. But we must bring the potential to reality. It has worked before. It can work again. It is working in other places. It can work here.
There is no time. We should not wait until oil price falls to $25. Or falls to such a price at which production will no longer be feasible. We are greater than the troubles facing the trio of our crude oil, naira, and external reserves. True federalism is the key to unlock our potential.
Yesterday, the strongest reason for true federalism was perhaps political. Today, it is certainly economic. There may be no tomorrow without it.
– Olaparodi, a financial analyst based in Lagos, wrote in via [email protected]