The contradictions in our failed economy are probably best captured by the stark reality of deepening poverty and unbridled unemployment despite the celebrated recent increase in our Gross Domestic Product, with increasing revenue and bountiful external reserves to boot for almost two decades!
We may recall that despite the paltry $4bn national reserves during the Gen. Sani Abacha years, when Nigeria also remained a pariah nation, our country and our people continued to enjoy credible ratings as a developing country with great promise with the naira exchanging for just N80=$1.
Ironically, Nigeria became a regular contender in the list of the world’s poorest nations only in recent years when our dollar reserves hardly fell below $30bn with the attendant more favourable, extended payments cover for our import bills.
Indeed, a closer examination of prevailing fiscal and monetary strategies may suggest that we are in denial of the deeply rooted causes of deepening poverty.
For example, it is inexplicable that a country with acute infrastructural deprivation will progressively tilt its annual budgets in favour of consumption, such that the 2015 Appropriation Bill presently allocates barely 20 per cent for supportive social infrastructure.
Similarly, despite UNESCO’s best practice recommendation for 26 per cent of budget allocation to education, we have barely attained half of this ratio in recent years!
Nonetheless, it is the area of monetary policy strategies that the contradictory impact of government’s decisions becomes more glaring. Regrettably, however, these same strategies that antagonise industrial growth and social welfare, have in the manner of steady propaganda, become accepted as best practice options by the public.
Hereafter, we will briefly discuss the difference between public perception and the actual reality of the impact of the Central Bank of Nigeria’s monetary strategies. Ardent media followers will already be familiar with the CBN’s unchanging response to what is generally branded as “excess liquidity”. Media reports generally describe the process in which the apex bank borrows hundreds of billions of naira monthly, by selling Treasury Bills to the banks, as a supportive strategy “that assists commercial banks to manage their surplus cash holdings profitably.”
Sadly, such a positive media undertone induces public perception of the CBN as a supportive, attentive and proactive agency, which is relentless in its efforts to empower banks to perform their roles as strategic mediators between investible funds and the real sector so as to rapidly grow the economy.
The media, both print and electronic, which re-echo such positive undertone of the CBN’s surplus cash management, are indeed inadvertent collaborators with the apex bank to mischievously misrepresent the economic and social utility of this monetary strategy.
Conversely, if the public and the media had carefully monitored the trend of the CBN’s borrowings with Treasury Bills, certainly, the regularity of alleged naira surplus, and the frequency of government borrowings to restrain bank lending would appear as bizarre strategies which required urgent interrogation. For example, it would be sensible to ask why the ever present burden of surplus naira exists alongside acute shortage of cheap funds required to ignite and sustain increasing productivity of the real sector of our economy.
Furthermore, it is inexplicable that in spite of eternally surplus naira in the system, the cost of funds should remain oppressively high and a deterrent to real sector growth and creation of more jobs. Certainly, there is probably nothing that rises in price when its supply is in excess; so, why does the CBN, wilfully, borrow allegedly surplus funds at exceedingly high rates of interest (between nine and 16 per cent) for what are clearly risk free sovereign loans! How much did it cost the CBN to service such oppressive loans in recent years? Besides, what is the origin of the unstoppable flood of
By Henry Boyo
By Henry Boyo
