“Behind the facts of economics are the facts of psychology…The emotions of fear and confidence, the judgments of doubt and certainty, constitute a very important
medium through which we see economic values.” — Arthur Stone Dewing, Harvard Business Review, October 1923. (Vanguard Book of Quotations, P 45).
By DELE SOBOWALE
Arthur Dewing’s observations, written a little over ninety one years ago, remains evergreen — for the simple reason that it illuminates the predicament in which Nigeria finds itself today with regard to the economy.
All the elements of doubt and fear stare us in the face every second now. Certainly, nobody, except Okonjo-Iweala, now needs to be told that the nation is in deep trouble — as the price of our brand of crude oil has dropped below the budgeted benchmark price of $73 per barrel.
JONATHAN
The first budget the Minister of Finance sent to the National Assembly, NASS, provided for $78 per barrel benchmark — which was pronounced as unrealistic by us atVanguard Newspapers.The Federal Minister of Finance, while defending that benchmark, had made the point that the Federal Government (meaning her office) was “on top of the situation”; whatever that was supposed to mean. Just over two weeks ago, she withdrew the former budget and replaced it with another – which reduced the benchmark to $73 per barrel. Again, we advised Nigerians to ignore her; for the simple reason that we were sure that even $73 per barrel was still unrealistic. We were not alone. Even the Central bank of Nigeria, CBN, which had stretched itself to breaking point in order to accommodate the Ministry of Finance, had agreed that $73 was not correct.
The truth is the Ministry of Finance, under Okonjo-Iweala, had failed to discharge its responsibilities, defined as introducing appropriate fiscal policy measures. Instead, she had allowed politics to over-ride its professional judgment right from the start. Nigerians can remember how she accepted that there was N1.3 trillion fuel subsidy without asking for proof. On the basis of that spurious report she prepared the SURE-P document — until it was made clear that corruption, not subsidy accounted for the bulk of the N1.3 trillion. Now with crude selling for less than $73 per barrel; the SURE-P office should have been closed down. There is no more subsidy; only robbery of consumers. But, Jonathan, not being an economist might not realize that another scandal is waiting for his government – thanks to the Minister of Finance. Don’t blame Jonathan.
On Friday, November, 28, 2014, the global price of crude oil went down to under $72 per barrel. That the second budget presented by the Federal Minister of Finance in as many months is now heading for the waste paper basket, despite the millions of naira spent in its preparation and dissemination, is only the most obvious consequence of the drop in crude oil price — whose downward trend Dr Okonjo-Iweala had failed to predict correctly. Instead, either inadvertently or deliberately, she had been leading the President and the Federal Government to live with the illusion that she, and Nigeria are in control. If President Jonathan must know, nothing could be further from the truth. Dr Okonjo-Iweala and her consultants and advisers have failed the complex, but highly desirable, test of forecasting based on trend analysis.
If they had succeeded, they would have been able to inform the President, long before now, as we had done repeatedly atVanguard, that crude oil prices were heading for a catastrophic crash. Even at under $70, the end is not yet in sight for several reasons which cannot be discussed now.
Unfortunately, President Jonathan cannot control and is not responsible for the global downturn in the price of crude and the inevitable devaluation of the currency which was recently announced. The politicization of a calamity, which was inevitable, and holding the President responsible, was brought about by the failure of the Minister of Finance to advise Jonathan to address the nation, much earlier, regarding the inevitability of decline in the price of crude oil, devaluation, hyper-inflation and the measures necessary to limit the damages — direct and collateral.
Decline in crude prices is a global phenomenon, not limited to Nigeria, and the economic contraction which will follow will also be universal. It ordinarily should not matter who is President or Prime Minister. Nigeria’s economy is facing, at least, three to five gruesome years — irrespective of who becomes President next year. The difference will occur depending on the policies and programmes of the leader; his instincts and his will to drive the economy back on the path of growth. Nobody should expect Nigerian crude to sell for $100 any time soon.
Much as that would bother President Jonathan, he should take comfort in the fact that the price of crude oil, after going down as low as $9.90 per barrel, under Babangida, had steadily gone up until last year. So, a rebound will occur sooner or later. It might not be during his tenure of office. Our collective complacency, in believing that the price will continue to ride an upward escalator, as it has done since 1994, had been responsible for the failure to diversify the base of the economy — since 1992. This is the second time we are learning the same lesson as a nation. Hopefully this is the last. Diversification, which is now being offered as a panacea, had been on the national agenda since 1980s. It will not occur overnight; and our efforts will face challenges from China, India, Japan, South Africa, Brazil, Europe, Thailand, etc – in short, all the nations which have used us as dumping ground for products we don’t need (toothpick, rubber slippers, handkerchiefs, underwear, bed sheets, combs, dolls and toys etc) but which, like prodigals, we import anyway.
To be quite candid, the Minister of Finance and the Economic Management Team, ECA, by shielding the President from the unavoidable consequences of the trends in global oil supply and demand, had personalized for him a problem which should have been a national issue – calling for total mobilization of all Nigerians to tackle the matter; irrespective of political, ethnic, religious or other affiliation.
The best advice one can give to the President now is to consider the following. First, he needs a few days break from politicking to prepare an address to the nation – in which he acknowledges that with crude heading for the basement, Nigeria’s economy is in trouble. He can, simultaneously, challenge any of his opponents to state what he can do to reverse the trend. Certainly, none can. Second, he should very quickly organize a National Economic Summit – aimed at finding solutions around which a consensus can be built – regardless of who becomes President in 2015. Third, and this would be the most difficult, he should appoint a new set of members of the Economic Management Team, EMT. The current members have failed to tell him the truth while the economy was heading for a recession. More than ever, he needs people who will tell him the truth – for instance, that crude price could fall as low as $55 per barrel. Dr Okonjo-Iweala will not do that. Indeed, she had been wrong, so often, she cannot possibly help Jonathan. She has lost the most important element which any economic policy leader must possess – credibility; or, its synonym, confidence.
Like any President, Jonathan should remember that the buck stops at his table. Harry Truman (1884-1972), also succeeded a President who died in office and he inherited a war in Korea. American troops were led by General Douglas MacArthur (1881-1964), a much decorated World War II hero. Yet, when Truman felt that he was not getting the results he wanted, he replaced the general – even with an election coming up. The worst mistake any President can make is to assume that anybody is indispensable. “The graveyards are full of indispensable people.” General Charles De Gaulle (1890-1970).
by ROTMANLUV 2023-07-08, 17:34
