REASON WHY NIGERIA WAS RECCESED SANUSI SAYS-NAIJ NEWS
- Muhammadu Sanusi
has blamed the
government for
current economic
problem
- The Emir of Kano
advised the country to
stop the blame game
and look towards
success
- He cited borrowing
as one of the reasons
Nigeria is having
financial crises and
suggested ways the
country can be back to
normal
The Emir of Kano,
Muhammadu Sanusi has
blamed the Nigerian
government for the
current economic
situation.
Sanusi who served as the
governor of the Central
Bank of Nigeria during the
administration of
Goodluck Jonathan said
this during the15th
meeting of the joint
planning board and
national council on
development planning.
Sanusi warned President
Muhammadu Buhari not
to make the same error
made during Jonathan’s
administration and also
cautioned against focusing
on blaming others.
He urged that the most
important thing is to look
forward for development
rather than focusing on
the past.
The Emir of Kano
compared Nigeria to other
countries and showed
how Nigeria faltered in the
path of development.
Part of his lecture read:
You can’t have improving
terms of trade when you
are exporting
commodities over short
periods of a cycle. But, we
know as far back as the
1950s, from the Latin
American structure
economics, that over the
long term, any economy
that specialises in
exporting primary
products and importing
manufactures would end
up having terms of trade
shifting against it. You can
have a temporary boost,
but If you don’t use that
boost to have a structural
adjustment that would
make for prudent
management of the
economy, you would be
courting trouble.
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By 2008, one barrel of oil
would buy you one
Sanyo flip telephone as
against 19 barrels of oil to
buy the same phone
earlier. That gives an idea
how well the terms of
trade have shifted.
Emir Sanusi served as
governor of CBN during
Goodluck Jonathan's
administration
We had an oil price of $10
a barrel in the time of
Babangida. At one point
under Obasanjo, it rose to
$140 a barrel. This was a
time of rapidly improving
technology, cheaper
manufactured products
and therefore our oil could
technically import us
much more.
This process was not
common across all of
Africa, because we are
aware of other African
economies that grew, and
certainly it was not just
one pillar. Let’s go to the
second pillar of growth in
Africa in that decade,
which was debt.
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Between 2002 and 2008,
the levels of debt to GDP
(gross domestic product)
in African countries and
what they became after
the Paris Club, HIPC debt
reliefs and so on. Nigeria
was at 50 per cent debt to
GDP and came down to
literally 5 per cent or so.
This happened across all
Africa in the form of debt
forgiveness, debt relief,
debt restructuring and so
on. What this did was that
it freed up government
balance sheets and in that
decade of Africa rising, the
countries went back on a
borrowing binge.
Nigeria kept borrowing,
not externally, but
internally. I think our
external debt was just
about $8 billion on the
balance sheet. But, the
Naira indebtedness of the
Nigerian government, we
were spending over 30
per cent (maybe 40 per
cent now) of every Naira
earned just servicing
debts.
That’s what you have.
Nobody was noticing it.
We have written off the
debts, and then we kept
building it up bit by bit.
And when you look at
where that debt was
going into, you will see
why, or part of the
answer to the problem
we are having.
So, we have these two
pillars – rising
commodities prices, and
we monetise oil revenue,
we will be able spend
money. We were able to
borrow because the
balance sheets could
accommodate more
debts.
Where did all these debts
go? Did it go to roads,
power, refineries, or
infrastructure? No. The
new borrowings were
simply recycled into
much higher recurrent
expenditures. What that
did was that it helped
sustain a consumption
boom. And GDP was
growing, largely driven
by consumption
spending.
President Buhari & Sanusu
Lamido Sanusi at Aso
Rock. Photo: @
TheGreenVilla
If you look at public sector
wage bills in real terms,
Nigeria, Ghana, Ethiopia
and Kenya, you will see it
was rising significantly
from 2005 to 2014.
In Nigeria, for example,
our public sector wage bill
went up from N443 billion
in 2005 to N1.7 trillion in
2012.
In 2010, the government
increased minimum wage
to N18,000. I was at the
Central Bank, I protested
and protested. They had
an election coming, they
increased the minimum
wage N18,000 and
basically borrowed
money to pay.
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Fayose tells Buhari
In 2012, as governor of
Central Bank, I said this
was an unsustainable
wage bill. We needed to
reduce the size of the
public service. My own
government minister
came out to say that was
the (CBN) governor’s
personal opinion. In fact,
she said the government
wanted to employ more
people. And this is the
result.
I am serious. Sometimes I
don’t bother. I’m never
going to change. I’m
never going to be political.
I’m never going to stand
here and tell people what
they want to hear.
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The problem is that there
is nothing that we are
facing today that we did
not know would happen.
That is the truth. We
made mistakes. Many of
them deliberate. We
ignored every single word
that pointed otherwise.
Economics is a science. It
is not a perfect science.
But, over decades and
decades and centuries,
people have seen that
there are certain things
that, when you do, will
lead to certain
consequences.”
Sanusi however said the
future of the country
looks bright the mistake of
saying the government
was always right should
be discontinued.
We have started retracing
our steps. But, we have to
retrace those steps. And if
we fall into the same hole
that we fell into the last
time, where the
government is always
right.
When the minister is
there, you tell them, “You
know, Hon. Minister,
Nigeria is very lucky to
have you in office.” No!
You tell the minister that
you are doing well, but,
you know there are these
areas that you must
change. If a policy is
wrong, it is wrong.
Nothing will make it right.
And it has to be changed.
So, this is what we did.
Look at real sector wages.
It was not just Nigeria, it
was all over Africa. Look
at sovereign debt fuelling
growth.
If you take the example of
an individual. You happen
to know bank MDs and
you can make a few
phone calls and get loans.
You borrow N1 billion
here today and build a
very nice mansion in
Abuja. You borrow
another N1 billion and let
your family go out on first
class ticket as you are
travelling all over the
world. You borrow
another N5 to N6 billion
and buy a private jet.
We have very many
people in Nigeria who you
think are very rich. But,
who are really bankrupt,
because everything about
them are being financed
by bank debts. When one
debt matures, they have
enough connections to
call another bank, borrow
and refinance that debt.
They are not earning
anything. They have
private jets. They have
yachts. Their families
travel first class. They go
abroad and stay in the
most expensive hotels. It
happens. And it is
happening today.
What do you think of
those people? When you
think about such people,
do you think they are
foolish people? Or do you
think they are wise
people? So, what would
you say of a country that
does this?
So, you feel growth by
borrowing money, pay
salaries, people spend
money on pure
consumption spending,
nothing is produced. It’s
fine. It’s short term. But, it
is not sustainable. How
much can you continue to
borrow and consume
without producing?
And the funny thing is,
you did not have to stop
borrowing. All you had to
do was borrow the right
amount and apply them
to the right purposes. It
doesn’t matter whether
they were consumption
spending or investment
demand, GDP will grow.
So, make a choice.
As a country, we made a
choice. We wanted votes,
popularity or palliatives,
so long as people are
getting high minimum
wage, we keep quiet
about all other things that
were happening in the
economy that we should
be talking about.
That was the relationship
between public debts and
GDP growth.
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Today, we are in a new
reality. This is what they
call the new normal in
Africa. And we have a
two speed Africa. If we
look at the new IMF World
outlook, you will see
something interesting.
Non-commodity Africa
will be the fastest growing
part of the world, even
higher than emerging
Asia, whereas
commodities Africa
(countries like Nigeria and
Angola) are among the
lowest growing parts of
the world, at the rate of
Europe and Latin America.
And we can’t explain why.
But, think of a country like
Ethiopia and then Meles
Zenawi, the late Prime
Minister. Ethiopia keeps
growing year after year at
11-12 per cent. And what
did Meles do? The simple
things we have been
saying for decades and
decades and decades.
This is a country that
came out of a war,
remember?
It’s facing insecurities; got
Eritrea and other countries
that do not like it around
it. I’ll give two examples.
Coffee. It originated from
Ethiopia in the world. But,
Ethiopian farmers, before
Meles, would get 10 per
cent of the value of coffee
from their crops.
They would just produce
the coffee and sell to
companies, and the
companies will take their
coffee into Latin America
and have it improved and
dried and and packaged.
And Zenawi just asked:
“Why can’t we produce
coffee in Ethiopia that
would go straight from
Ethiopia to the coffee
shops in Europe?”
And all sorts of responses
came. “Well, you know
your weather is good for
growing coffee. You
coffee is very good, but
your farmers have bad
farming practices.”
So he said: “Why don’t
you teach them?” So, he
got in touch with the IFC
(International Finance
Corporation), got a loan,
organised Ethiopian coffee
farmers into cooperatives,
taught them how to grow
the coffee, how to dry,
prepare and package it.
Today, if you go to coffee
shops in Europe and take
a cup of coffee that came
straight from Ethiopian
farm. And Ethiopian
farmers are now getting
70 per cent of the value of
the coffee, from the
former 10 per cent.
So, he tells Aliko Dangote,
come and build a cement
manufacturing plant here.
I am going to give you
electricity at three cent per
kilowatt hour. For a
cement manufacturer,
that is all the incentive that
you need.
So, Dangote goes, builds
the most sophisticated
cement plant in Ethiopia,
gets electricity almost for
nothing and cost of
cement drops by 60 per
cent.
The construction
industries gets boosted.
Roads are being built with
cement. Jobs are created.
And new industry has
taken off.
He said to the Chinese, “I
don’t like this your idea of
coming to buy hides and
skin and leather from
Ethiopia and sell us shoes.
Set up the factory here.”
Nigeria imports 3 million
pairs of shoes per annum
from China. Nobody
knows how much duty
they pay. I am not talking
about expensive shoes. I
am not talking about what
you buy from Pierre
Cardin, or Gucci. I am
talking about shoes people
wear on the streets.
Shoes that can be bought
here in Kano.
We can produce all the
shoes, and school bags
we want for primary and
secondary schools
children, millions and
millions of pairs. No, we
don’t. You know what we
do, we export the wet
blue and we import from
shoes from China, and we
have Chinese people
coming here to take wet
blue to China and bring
back shoes.
Created at 2016-12-24 04:53:03
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