Few weeks back, I wrote an article, “Obi is not going to be a miracle worker”. The opinion I expressed in that article did not go down well with some persons who felt I was against Obi’s candidacy. In as much as I am not a political enthusiast, and doesn’t get easily carried away by political rhetorics, I still feel that an Obi’s Nigeria maybe better than an Atiku or Tinubu’s Nigeria. Mark my word, “maybe”. Obi is not going to work miracles. Nigeria may even get worse under him. But, that is not what this reflection is about. It is almost becoming certain that Obi will become Nigeria’s next president and I want to talk about the basic challenges he will be dealing with by March next year. There are at least three knotty issues Mr. Peter Obi will have to tackle as president:
Debts
The Buhari administration is going to leave behind debts running into billions of dollars abroad and trillions of naira at home. In simple English, Nigeria is broke. Not just broke but heavily indebted. At this rate, Mr. Peter Obi is going to inherit about N50 trillion in local debts alone, including the “ways and means” provided by the Central Bank of Nigeria (CBN) to sustain the government over the years. If the CBN had not provided those funds, chances are we would be owing salary arrears of between 12 and 24 months. More so, the MDAs would probably have been completely crippled by now.
But there is a price to pay — as we can see clearly in the key economic rates. Every single note of naira the CBN prints that is not a product of economic productivity invariably devalues every other naira note in circulation. It is that straightforward. That is partly why inflation is untamable. The CBN support has prevented the crippling of government but the consequences on the value of the naira are evident for all to see. The major questions that will be facing Mr. Peter Obi are: how do I manage these debts? How am I going to finance my government and fund my projects? Do I take more loans and face the consequences or do I keep running to CBN every month for ways and means?
Several experts argue that the problem with public finance in Nigeria is revenue — insufficient revenue, that is. Some Nigerians insist that the country is rich and the only problem is corruption and waste. Government officials, on their part, say debts are not the problem but generating the revenue to service them. On a serious note, all may be right. However, even if not one kobo is stolen or wasted, our revenues are grossly inadequate for the needs of 200 million Nigerians.Sanisu, the former CBN Governor has said this on many occasions. And since life must go on, we will have to borrow to make up for the shortfall and keep government running. Mr. Peter Obidefinitely has to handle the tricky issue of revenue, debts and expenditure expertly.
Forex management
Despite all efforts to reduce our import dependency, the monthly demand for forex is in several billions of dollars while the supply is less than $1 billion. The simple law of demand and supply means the naira will continue to fall. The magic solution is for us to have an inflow of multiple billions of dollars every month. It cannot be done by decree. To start with, our oil exports are miserably low and we are not enjoying the benefits of the current oil boom. Getting our production and exports up will be helpful, but we will only be postponing the evil day: we cannot continue to rely heavily on petrodollars to meet our forex needs. We need multiple sources.
There are ways to improve the inflow of forex. The next President of Nigeria, Mr. Peter Obi has said he would discourage multiple exchange rates. Will that solve the problem? I am not an economist and my answer may not be very useful on this but let’s look at it: the “official” exchange rate is N436/$, which is not readily available. In the open market, it is N740/$. That is a difference of over N300/$. No investor would gladly bring $1 billion to Nigeria in exchange for N436 billion when it is worth N740 billion on the streets. Some experts want us to close the gap to a single digit to allow a realistic intercourse between market forces. That way, we may get forex inflow from multiple sources, ease the stress on the naira and cage the arbitrage.
But as with every policy decision, there are trade-offs. Some things are still imported or paid for at N436/$, including vital medications. Some of those schooling or receiving medical treatments abroad are lucky to buy at N436/$. Petrol importation is still calculated at roughly N436/$. When we move to a single rate, it will be closer to N740/$ than N436/$, and the implications will be there for some prices and costs. But, in reality, we are already buying imported products at N740/$ while pretending the real value of the naira is N436/$. The federating units (the states)are also losing — forex revenue is calculated and shared at N436/$ when they can get far more than that in the open market.
Mr. Peter Obi, when he is sworn in next year will decide what sort of forex policy to encourage. Will he continue to insist the real value of the naira is N436/$ and continue to encourage forex speculation that is pushing our currency closer to N1,000/$? Or will he allow the official rate to move closer to the open market rate and possibly attract more forex inflow into the system while the prices of goods and services go completely haywire, at least in the short run? Again, there is no shortcut or easy fix. Any choice the president makes will have consequences. There will be plenty beautiful rhetoric during electioneering but the inescapable reality is that something will have to give way after the swearing-in.
Petrol Subsidy
If anything has done extensive damage to public finance in the last three years, the subsidy bill is it. The oil we should be exporting to earn dollars during this boom period is being used to pay for the importation of petrol and sold at N165/litre, roughly a third of the actual pump price. The good side is that Nigerians are getting cheap petrol and are not thinking of taking to the streets to protest. It buys the Buhari administration some peace, especially after the devastating End SARS uprising of 2020. The other side is not just the smuggling and corruption that subsidy fosters but also the lost opportunities. The scarce trillions could be better spent elsewhere.
The Buhari administration will not remove or reduce the subsidy bill, so we are going to spend more trillions before Mr. Obi is sworn-in by May 2023. It then that the new president will have to decide if to keep spending trillions so that we will keep buying petrol at N165/litre and keep short-changing education, healthcare and infrastructure or to let go of the subsidy and face an outcry and possible protests from Nigerians about rising costs of transportation, goods and services. Whatever policy option Mr. Obi, pursues there will be consequences. Forget whatever comparisons and sweet talks that taking place during this electioneering. We’ve seen all this before.
I have listed only three issues, all directly related to the management of the economy. There are other knotty issues: the insecurity — which will require more than wishful thinking to resolve; the ASUU conundrum — we have to decide if to grant universities autonomy and allow them charge tuition fees or continue like this and face the yearly strikes over inadequate funding; etcetera. By the way, I love election rhetoric– all writers do. The poetry is sweet. Many voters will be hopeful that Mr. Peter Gregory Obi will bring the economy better the life of Nigerians. I am happy for the enthusiasts. But, as a humourist said, “Love is ideal. Marriage is real. Any confusion of the two will never go unpunished.” You have been warned!
