Beyond the Election

Buhari vs Jonathan: Beyond the Election

BY CHUKWUMA CHARLES SOLUDO

JAN 25, 2015

I need to preface this article with a few clarifications. I have taken a long sabbatical leave from partisan politics, and it is real fun watching the drama from the balcony.  Having had my own share of public service (I do not need a job from government), I now devote my time and energy in pursuit of other passions, especially abroad. A few days ago, I read an article in Thisday entitled “Where is Charles Soludo?”, and my answer is that I am still there, only that I have been too busy with extensive international travels to participate in or comment on our national politics and economy.

But I occasionally follow events at home. Since the survival and prosperity of Nigeria are at stake, the least some of us (albeit, non-partisan) must do is to engage in public debate. As the elections approach, I owe a duty to share some of my concerns.

In September 2010, I wrote a piece entitled “2011 Elections: Let the Real Debate Begin” and published by Thisday. I understand the Federal Executive Council discussed it, and the Minister of Information rained personal attacks on me during the press briefing. I noted more than six newspaper editorials in support of the issues we raised. Beside other issues we raised, our main thesis was that the macro economy was dangerously adrift, with little self-insurance mechanisms (and a prediction that if oil prices fell below $40, many state governments would not be able to pay salaries). I gave a subtle hint at easy money and exchange rate depreciations because I did not want to panic the market with a strong statement. Sadly, on the eve of the next elections, literally everything we hinted at has happened.  Part of my motivation for this article is that five years after, the real debate is still not happening.

The presidential election next month will be won by either Buhari or Jonathan. For either, it is likely to be a pyrrhic victory. None of them will be able to deliver on the fantastic promises being made on the economy, and if oil prices remain below $60, I see very difficult months ahead, with possible heady collisions with labour, civil society, and indeed the citizenry. To be sure, the presidential election will not be decided by the quality of ‘issues’ or promises canvassed by the candidates. The debates won’t also change much (except if there is a major gaffe by either candidate like Tofa did in the debate with Abiola). My take is that more than 95% of the likely voters have pretty much made up their minds based largely on other considerations. A few of us remain undecided. During my brief visit to Nigeria, I watched some of the campaign rallies on television. The tragedy of the current electioneering campaigns is that both parties are missing the golden opportunity to sensitize the citizenry about the enormous challenges ahead and hence mobilize them for the inevitable sacrifices they would be called upon to make soon. Each is promising an El-Dorado.

Let me admit that the two main parties talk around the major development challenges—corruption, insecurity, economy (unemployment/poverty, power, infrastructure, etc) health, education, etc. However, it is my considered view that none of them has any credible agenda to deal with the issues, especially within the context of the evolving global economy and Nigeria’s broken public finance. The UK Conservative Party’s manifesto for the last election proudly announced that all its programmes were fully costed and were therefore implementable. Neither APC nor PDP can make a similar claim.  A plan without the dollar or Naira signs to it is nothing but a wish-list. They are not telling us how much each of their promises will cost and where they will get the money. None talks about the broken or near bankrupt public finance and the strategy to fix it.

In response to the question of where the money will come from, I heard one of the politicians say that the problem of Nigeria was not money but the management of resources. This is half-truth. The problem is both. No matter how efficient a father (with a monthly salary of N50,000) is at managing the family resources, I cannot see how he could deliver on a promise to buy a brand new Peugeot 406 for each of his three children in a year.  Even with all the loopholes and waste closed, with increased efficiency per dollar spent, there is still a binding budget constraint. To deliver an efficient national transport infrastructure alone will still cost tens of billions of dollars per annum even by corruption-free, cost-effective means.  Did I hear that APC promises a welfare system that will pay between N5,000 and N10,000 per month to the poorest 25 million Nigerians?  Just this programme alone will cost between N1.5 and N3 trillion per annum. Add to this the cost of free primary education plus free meal (to be funded by the federal budget or would it force non-APC state governments to implement the same?), plus some millions of public housing, etc. 

I have tried to cost some of the promises by both the APC and the PDP, given alternative scenarios for public finance and the numbers don’t add up.  Nigerians would be glad to know how both parties would fund their programmes.  Do they intend to accentuate the huge public debt, or raise taxes on the soon to-be-beleaguered private businesses, or massively devalue the naira to rake in baskets of naira from the dwindling oil revenue, or embark on huge fiscal retrenchment with the sack of labour and abandonment of projects, and which areas of waste do they intend to close and how much do they estimate to rake in from them, etc?  I remember that Chief Obafemi Awolowo was asked similar questions in 1978 and 1979 about his promises of free education and free medical services. Even as a teenager, I was impressed by how he reeled out  figures about the amounts he would save from various ‘waste’ including the tea/coffee served in government offices. The point is that at least he did his homework and had his numbers and I give credit to his team. Some 36 years later, the quality of political debate and discourse seems to border on the pedestrian. From the quality of its team, I did not expect much from the current government, but I must confess that I expected APC as a party aspiring to take over from PDP to come up with a knock-out punch. Evidently, from what we have read from the various versions of its manifesto as well as the depth of promises being made, it does not seem that it has a better offer.

Let me digress a bit to refresh our memory on where we are, and thus provide the context in which to evaluate the promises being made to us. Recall that the key word of the 2015 budget is ‘austerity’.  Austerity? This is just within a few months of the fall in oil prices. History repeats itself in a very cruel way, as this was exactly what happened under the Shehu Shagari administration. Under the Shagari government, oil price reached its highest in 1980/81. During the same period, Nigeria ratcheted up its consumption and all tiers of government were in competition as to which would out-borrow the other. Huge public debt was the consequence. When oil prices crashed in early 1982, the National Assembly then passed the Economic Stabilization (Austerity Measures) Act in one day--- going through the first, second, and third readings the same day.  The austerity measures included the rationing of ‘essential commodities’ and most states owed salary arrears. Corruption was said to be pervasive, and as Sani Abacha said in that famous coup speech, ‘unemployment has reached unacceptable proportions and our hospitals have become mere consulting clinics’.  General Muhammadu Buhari/Tunde Idiagbon regime made the fight against corruption and restoration of discipline the cardinal point of their administration which lasted for 20 months. I am not sure they had a credible plan to get the economy out of the doldrums (although it must be admitted that poverty incidence in Nigeria as of 1985 when they left office was a just46%--- according to the Federal Office of Statistics).

We have come full circle. If the experience under Shagari could be excused as an unexpected shock, what Nigeria is going through now is a consequence of our deliberate wrong choices.  We have always known that the unprecedented oil boom (in both price and quantity—despite oil theft) of the last six years is temporary but the government chose to treat it as a permanent shock.

The parallels with the Shagari regime are troubling. First, at the time of oil boom, Nigeria again went on a consumption spree such that the budgets of the last five years can best be described as ‘consumption budgets’, with new borrowing by the federal government exceeding the actual expenditure on critical infrastructure. Second, not one penny was added to the stock of foreign reserves at a period Nigeria earned hundreds of billions from oil. For comparisons, President Obasanjo met about $5 billion in foreign reserves, and the average monthly oil price for the 72 months he was in office was $38, and yet he left $43 billion in foreign reserves after paying $12 billion to write-off Nigeria’s external debt. In the last five years, the average monthly oil price has been over $100, and the quantity also higher but our foreign reserves have been declining and exchange rate depreciating.

I note that when I assumed office as Governor of CBN, the stock of foreign reserves was $10 billion. The average monthly oil price during my 60 months in office was $59, but foreign reserve reached the all-time peak of $62 billion (and despite paying $12 billion for external debt, and losing over $15 billion during the unprecedented global financial and economic crisis) I left behind $45 billion.  Recall also that our exchange rate continuously appreciated during this period and was at N117 to the dollar before the global crisis and we deliberately allowed it to depreciate in order to preserve our reserves.  My calculation is that if the economy was better managed, our foreign reserves should have been between $102 --$118 billion and exchange rate around N112 before the fall in oil prices. As of now, the reserves should be around $90 billion and exchange rate no higher than N125 per dollar. 

Third, the rate of public debt accumulation at a time of unprecedented boom had no parallel in the world.  While the Obasanjo administration bought and enlarged the policy space for Nigeria, the current government has sold and constricted it.  What debt relief did for Nigeria was to liberate Nigerian policymakers from the intrusive conditionalities of the creditors and thereby truly allowing Nigeria independence in its public policy. How have we used the independence?  Through our own choices, we have yet again tied the hands of future policymakers. This time, the debt is not necessarily to foreign creditor institutions/governments which are organized under the Paris club but largely to private agents which is even more volatile. We call it domestic debt. But if one carefully unpacks the bond portfolio, what percentage of it is held by foreign private agents? And I understand the Government had removed the speed bumps we kept to slow the speed of capital flight, and someone is sweating to explain the gyrations in foreign reserves. I am just smiling!

In sum, the mismanagement of our economy has brought us once more to the brink. Government officials rely on the artificial construct of debt to GDP ratio to tell us we can borrow as much as we want.  That is nonsense, especially for an economy with a mono but highly volatile source of revenue and forex earnings. The chicken will soon come home to roost.  Today, the combined domestic and external debt of the Federal Government is in excess of $40 billion. Add to this (to) the fact that abandoned capital projects littered all over the country amount to over $50 billion.  No word yet on other huge contingent liabilities.  If oil prices continue to fall, I bet that Nigeria will soon have a heavy debt burden even with low debt to GDP ratio. Furthermore, given the current and capital account regime, it is evident that Nigeria does not have enough foreign reserves to adequately cover for imports plus short term liabilities.  In essence, we are approaching the classic of what the Shagari government faced, and no wonder the hasty introduction of ‘austerity measure again.

Fourth, poverty incidence and unemployment are also simultaneously at all-time high levels. According to the NBS, poverty incidence grew to 69%  in 2010 and projected to be 71% in 2011, with unemployment at 24%.  This is the worst record in Nigeria’s history, and the paradox is that this happened during the unprecedented oil boom.

One theme I picked up listening to the campaign rallies as well as to some of the propagandists is the confusion about measuring government “performance”. Most people seem to confuse ‘inputs’, or ‘processes’ with output. Earlier this month, I had a dinner with a group of friends (14 of us) and we were chit-chatting about Nigeria. One of us, an associate of President Jonathan veered off to repeat a propaganda mantra that Jonathan had outperformed his predecessors. He also reminded us that Jonathan re-based the GDP and that Nigeria is now the biggest economy in Africa; etc.  It was fun listening to the response by others. In sum, the group agreed that the President had ‘outperformed’ his predecessors except that it is in reverse order.  First, my friend was educated that re-basing the GDP is no achievement: it is a routine statistical exercise, and depending on the base year that you choose, you get a different GDP figure.  Re-basing the GDP has nothing to do with government policy. Besides, as naira-dollar exchange rate continues to depreciate, the GDP in current dollars will also shrink considerably soon.

We were reminded of Jonathan’s agricultural ‘revolution’. But someone cut in and noted that for all the propaganda, the growth rate of the agricultural sector in the last five years still remains far below the performance under Obasanjo. One of us reminded him that no other president had presided over the slaughter of about 15,000 people by insurgents in a peacetime; no other president earned up to 50% of the amount of resources the current government earned from oil and yet with very little outcomes; no other president had the rate of borrowing; none had significant forex earnings and yet did not add one penny to foreign reserves but losing international reserves at a time of boom; no other president had a depreciating exchange rate at a time of export boom; at no time in Nigeria’s history has poverty reached 71% (even under Abacha, it was 67 -70%); and under no other president did unemployment reach 24%. Surely, these are unprecedented records and he surely ‘outperformed’ his predecessors!  What a satire!

One of those present took the satire to some level by comparing Jonathan to the ‘performance’ of the former Governor of Anambra, Peter Obi.  He noted that while Obi gloated about ‘savings’, there is no signature project to remember his regime except that his regime took the first position among all states in Nigeria in the democratization of poverty---- mass impoverishment of the people of Anambra. According to the National Bureau of Statistics, poverty rose under his watch in Anambra from 20% in 2004 (lowest in Nigeria then) to 68% in 2010 (a 238% deterioration!).  Our friend likened it to a father who had no idea of what to do with his resources and was celebrating his fat bank account while his children were dying of kwashiorkor.  He pointed out that since it is the likes of Peter Obi who are the advisers to Jonathan on how to manage the economy (thereby confusing micromanagement which you do as a trader with macro governance) it is little wonder that poverty is fast becoming another name for Nigeria. It was a very hilarious evening.

My advice to President Jonathan and his handlers is to stop wasting their time trying to campaign on his job record. Those who have decided to vote for him will not do so because he has taken Nigeria to the moon. His record on the economy is a clear ‘F’ grade. As one reviews the laundry list of micro interventions the government calls its achievements, one wonders whether such list is all that the government could deliver with an unprecedented oil boom and an unprecedented public debt accumulation. I can clearly see why reasonable people are worried.  Everywhere else in the world, government performance on the economy is measured by some outcome variables such as: income (GDP growth rate), stability of prices (inflation and exchange rate), unemployment rate, poverty rate, etc. On all these scores, this government has performed worse than its immediate predecessor--- Obasanjo regime. If we appropriately adjust for oil income and debt, then this government is the worst in our history on the economy. All statistics are from the National Bureau of Statistics.

Despite presiding over the biggest oil boom in our history, it has not added one percentage point to the growth rate of GDP compared to the Obasanjo regime especially the 2003- 07 period.  Obasanjo met GDP growth rate at 2% but averaged 7% within 2003- 07. The current government has been stuck at 6% despite an unprecedented oil boom.  Income (GDP) growth has actually performed worse, and poverty escalated. This is the only government in our history where rapidly increasing government expenditure was associated with increasing poverty. The director general of NBS stated in his written press conference address in 2011 that about 112 million Nigerians were living in poverty. Is this the record to defend?  Obama had a tough time in his re-election in 2012 because unemployment reached 8%. Here, unemployment is at a record 24% and poverty at an all-time 71% but people are prancing around, gloating about ‘performance’. As I write, the Naira exchange rate to the dollar is $210 at the parallel market. What a historic performance! Please save your breathe and save us the embarrassment. The President promised Nigeria nothing in the last election and we did not get value for money. He should this time around present us with his plan for the future, and focus on how he would redeem himself in the second term—if he wins!

Sadly the government’s economic team is very weak, dominated by self-interested and self-conflicted group of traders and businessmen, and so-called economic team meetings have been nothing but showbiz time. The very people government exists to regulate have seized the levers of government as policymakers and most government institutions have largely been “privatized” to them. Mention any major government department or agency and someone will tell you whom it has been ‘allocated’ to, and the person subsequently nominates his minion to occupy the seat.  What do you then expect? The economy seems to be on auto pilot, with confusion as to who is in charge, and government largely as a constraint. There are no big ideas, and it is difficult to see where economic policy is headed to. My thesis is that the Nigerian economy, if properly managed, should have been growing at an annual rate of about 12% given the oil boom, and poverty and unemployment should have fallen dramatically over the last five years. This is topic for another day.

So far, the Government’s response to the self-inflicted crisis is, at best, laughable. They blame external shocks as if we did not expect them and say nothing about the terrible policy choices they made. The National Assembly had described the 2015 budget as unrealistic. The fiscal adjustments proposed in the 2015 budget simply play to the gallery and just to pander to our emotions. For a $540 billion economy, the so-called luxury tax amounts to zero per cent of GDP.  If the current trend continues, private businesses will come under a heavy crunch soon. Having put economics on its head during the boom time, the Government now proposes to increase taxes during a prospective downturn and impose austerity measures. Unbelievable!

Fortuitously, just as he succeeded Shagari when Nigeria faced similar situations, Buhari is once more seeking to lead Nigeria. But times have changed, and Nigeria is largely different. First, this is a democracy and dealing with corruption must happen within the ambit of the rule of law and due process. Getting things done in a democracy requires complicated bargaining, especially where the legislature, labour, the media, and civil society have become strong and entrenched.   Second, the size, structure and institutions of the economy have fundamentally altered. The market economy, especially the capital market and foreign exchange market, impose binding constraints and discipline on any regime.   Third, dealing with most of the other issues--- insecurity, unemployment/poverty, infrastructure, health, education, etc, require increased, smarter, and more efficient spending. Increased spending when the economy is on the reverse gear?

If oil prices remain between 40- 60 dollars over the next two years, the current policy regime guarantees that foreign reserves will continue the precipitous depletion with the attendant exchange rate depreciation, as well as a probable unsustainable escalation in debt accumulation, fiscal retrenchment or taxing the private sector with vengeance. The scenario does not look pretty. The poor choices made by the current government have mortgaged the future, and the next government would have little room to manoeuvre and would inevitably undertake drastic but painful structural adjustments. Nigerians loathe the term ‘structural adjustment’. With falling real wages and depreciating currency, I can see any belated attempt by the government to deal with the bloated public sector pitching it against a feisty labour.  I worry about regime stability in the coming months, and I do not envy the next team.

The seeming crisis is not destiny; it is self-imposed. However, we must see it as an opportunity to be seized to fundamentally restructure Nigeria’s political economy, including its fiscal federalism and mineral rights.

The current system guarantees cycles of consumption loop and I cannot see sustainable long term prosperity without major systemic overhaul. The proposals at the national conference merely tinker at the margins. In totality, the outcome of the national conference is to do more of the same, with minor amendments on the system of sharing and consumption rather than a fundamental overhaul of the system for productivity and prosperity.

President Jonathan promises to implement the report of the national conference if he wins. I commend him for at least offering ‘something’, albeit, marginal in my view. I have not heard anything from the APC or Buhari regarding the national conference report or what kind of federalism they envisage for Nigeria.

In Nigeria’s recent history, two examples under the military and civilian governments demonstrate that where the political will exists, Nigeria has the capacity to overcome severe challenges.  The first was under President Babangida. Not many Nigerians appreciate that given the near bankrupt state of Nigeria’s finances and requirements for debt resolution under the Paris Club, the country had little choice but to undertake the painful structural adjustment programme (SAP).  I want to state for the record that the foundation for the current market economy we operate in Nigeria was laid by that regime (liberalization of markets including market determined exchange rate, private sector-led economy including licensing of private banks and insurance, de-regulation, privatization of public enterprises under TCPC, etc). Just abolishing the import licensing regime was a fundamental policy revolution. Despite the criticisms, these policy thrusts have remained the pillars of our deepening market economy, and the economy recovered from almost negative growth rate to average 5.5% during the regime and poverty incidence at 42% in 1992.

Under our democratic experience,

·     President Obasanjo inherited a bankrupt economy (with the lost decade of the 1990’s GDP growth rate of 2.2% and hence zero per capita income growth for the decade).

·     His regime consolidated and deepened the market economy structures (consolidation of the banking system which is powering the emergence of a new but truly private sector-led economy and simultaneously led to a new awareness and boom in the capital market;

·     Telecommunications revolution;

·     New pension regime;

·     Debt relief which won for Nigeria policy independence from the World Bank and Paris Club;

·     Deepening of de-regulation and  privatization including the unbundling of NEPA under PHCN for privatization;

·     Agricultural revolution that saw yearly growth rate of over 6% and remains unsurpassed ever since;

·     Sound monetary and fiscal policy and growing foreign reserves that gave confidence to investors;

·     Establishment of the Africa Finance Corporation which is leading infrastructure finance in Africa;

·     Backward integration policy that saw the establishment and growth of Dangote cement and others; established ICPC and EFCC to fight corruption, etc).

·     The economy roared to average yearly growth of 7% between 2003 and 2007 (although average monthly oil price under his regime was $38),

·     and poverty dropped from estimated 70% in1999 to 54% in 2004.  

·     Obasanjo was his own coordinating minister of the economy and chairman of the economic management team--- which he chaired for 90 minutes every week.

·     I met with him daily. 

·     In other words, he did not outsource economic management.

We expected that the next government after Obasanjo would take the economy to the next level.  So far, we have had two great slogans: the 7-point agenda and currently, the transformation agenda. They remain empty slogans without content or direction.

Let me suggest that the fundamental challenge for the next government on the economy can be framed around the goal of creating twelve million jobs over the next four years to have a dent on unemployment and poverty. The challenge is to craft a development agenda to deliver this within the context of broken public finance, and an economy in which painful structural adjustments will be inevitable if current trends in oil prices continue. Most other programmes on corruption, security, power, infrastructure, etc, are expected to be instruments to achieve this objective.

So far, neither the APC nor the PDP has a credible programme for employment and poverty reduction. The APC promises to create 20,000 jobs per state in the first year, totalling a mere 720,000 jobs.  This sounds like a quota system and for a country where the new entrants into the labour market per annum exceed two million.  If it was intended as a joke, APC must please get serious.  On the other hand, President Jonathan targets two million jobs per annum but his strategy for doing so is a Job Board--- another committee of sort.  Sorry, Mr. President, a Job Board is not a strategy. The principal job Nigerians hired you to do for them is to create jobs for them too. You cannot outsource that job, Sir.  Creating 3 million jobs per annum under the unfolding crisis would task our creativity and audacity to the limits.

I heard one politician argue that once we fix power, private sector would create jobs. Not necessarily! Well, this government claims to have added 1,700MW to the national grid and yet unemployment soars. Ask Greece, Spain, etc with power and infrastructure and yet with high unemployment. Structural dislocations play a key role. For example, currently in Nigeria, it is estimated that more than 60% of graduates of our educational system are unemployable. You can understand why many of us are amused when the government celebrates that it has established twelve more glorified secondary schools as universities. I thought they would have told us how many Nigerian universities made it in the league of the best 200 universities in the world. That would have been an achievement.  Surely, creating millions of jobs in this economy would, among other things, require ‘new money’ and extraordinary system of coordination among the three tiers of government plus the private sector. Unfortunately, from what I read, the CBN is largely likely to be asleep at this time the country needs the most revolutionary finance. This is a topic for another day. Only the President can lead this effort. Moreover, we are waiting for the two parties/candidates to spell out HOW they will create jobs, whether it is the 20,000 jobs per state by APC or 2 million per annum by President Jonathan.  Let us know how you arrived at the figures. Whichever of the two that is declared winner will have his job cut out for him, and I expect him to declare a national emergency on job creation.

Surprisingly, none of the parties/candidates has any grand vision about African economic integration, led by Nigeria. There is no programme on how to make the naira the de facto currency of ECOWAS or the international financial centre that can attract more than $100 billion per annum. Where is the strategy for orchestrating the revolutionary finance to power the economy during this downturn? For President Jonathan, I find it shocking that the most important initiative of his government to secure the future of the economy by Nigeria refusing to sign the ruinous Economic Partnership Agreement (EPA) with the European Union is not even being mentioned. 

President Obasanjo saved Nigeria from the potential ruin of an ECOWAS single currency while to his credit Jonathan safeguarded our industrial sector/economy by refusing to sign the EPA. Or does the government not understand the import of that?  It will be interesting to know the APC’s strategy for exploiting strategic alliances within Africa, China, and the world for Nigeria’s prosperity.

If Buhari wins, he will ride on the populist wind for “change”.  Most people I have spoken to who have decided to vote for Buhari do not necessarily know the specifics of what he would offer or how Nigeria would be different under him. I asked my driver, Usman, whom he would vote for President. He responded: “If they no rig the election, na Buhari everybody go vote for”. I asked him why, and his next response sums it: “The man dey honest. In short, people just want to see another face for that villa”.  But if he wins, the honeymoon will be brief and the pressure will be immense to magically deliver a ‘new Nigeria’ with no corruption, no boko haram or insecurity, jobs for everyone, no poverty, infrastructure and power in abundance, etc.  As a first point, Buhari and his team must realize that they do not yet have a coherent, credible agenda that is consistent with the fundamentals of the economy currently. The APC manifesto contains some good principles and wish-lists, but as a blue print for Nigeria’s security and prosperity, it is largely hollow. The numbers do not add up. Thus, his first job is to present a credible development agenda to Nigerians.

The second key challenge for Buhari and his team will be to transit and transform from a group of what I largely refer to as aggrieved people’s congregation to build a true political party with a soul from the patchwork of political associations. It is surely easier to oppose than to govern.  This should not worry us much. After all, even the PDP which has been in power for 16 years is still an assembly of people held together by what I refer to as dining table politics. I am not sure how many members can tell you what their party stands for or its mission and vision for Nigeria. The third but more difficult agenda is cobbling together a truly ‘progressive team’ that will begin to pick the pieces.  The lesson of history is that the best leaders have been the ones who went beyond their narrow provincial enclaves to recruit talents and mobilize capacities for national transformation.  In Nigeria’s history, the two presidents who made the most fundamental transformation of the economy, Babangida and Obasanjo, were exceptional in the quality of the teams they put together. I therefore pray that Buhari will be magnanimous in victory – if he wins—to put together a ‘team Nigeria’ for the rescue mission.

If Jonathan wins, then God must have been magnanimous to give him a second chance to redeem himself. Most people I know who support Jonathan do so either out of self-interest or fear of the unknown.  As a friend Summed it: the devil you know is better than the angel you do not know.  One person assured me that we would see a ‘different Jonathan’ if he wins as he has been rattled by the harsh judgment of history on his presidency so far.  I just pray that he is right.  In that case, I would just draw the President’s attention to two issues:

First, beside the coterie of clowns who literally make a living with the sing-song of transformation agenda, President Jonathan must know that it remains an empty slogan.

His greatest challenge is how to save himself from the stranglehold of his largely provincial palace jesters who tell him he has done better than God, and seek out ‘enemies’ and friends who can help him write his name in history.

Propaganda won’t do it.

Second, Jonathan must claw back his powers as President of Nigeria.

He largely outsourced them, and must now roll his sleeves for a new beginning.

I take liberty to tell you this brutal truth:

if you are not re-elected, there is little to remember your regime after the next few years.

On 7th January 2004, I made a special presentation to an expanded economic management team to set agenda for the new year (as chief economic adviser). The focus of my presentation was for us to identify seven iroko trees that would be the flagship markers for the administration as well as how to finance them. I use the same framework to evaluate your administration. What I say to you, Mr. President, is that your record of performance so far is like a farmland filled with grasses. Yes, they are many but there is no tree, let alone any iroko tree, that stands out.  Think about this. The beginning of wisdom for every President in his second term is to admit that he is racing against time to cement his legacy. So far, your report card is not looking great.  You need a team of big and bold thinkers, as well as with excellent execution capacity.  So far, it is not working!

Under the executive presidential system, Nigerians elected you to manage their economy. You cannot outsource that job. Our constitution envisages a federal coordination of the economy, and that function is performed by the National Economic Council (NEC) with Vice-President as chairman. Indeed, the constitution and other laws of Nigeria envisage the office of the VP as the coordinator on the economy.

All major economic institutions of the federal government are, by law, chaired by the Vice-President including the national planning (see functions of the national planning commission as coordinator of federal government economic and development programmes), debt management office, National Council on Privatization, etc. As chairman of National Planning (with Ministers of Finance, Agriculture, CBN governor, etc as members), the VP oversees the federal planning and coordination. Then the Constitution mandates the VP as representative of the federal government to chair the NEC, with only CBN governor and state governors as members—to coordinate national economy between federal and states. No minister is a member of NEC.

Many people do not understand the logic of the design of our constitution and the role of the VP.  Of course, the buck stops on the desk of Mr. President. Only the President and VP have our mandate to govern us. Every other person is an adviser/assistant. I bet that you will only appreciate this article AFTER you leave office. Now that you are in power, truth will only hurt!  Be assured that those of us who are prepared to die for Nigeria will never spare you or anyone else this bitter truth.

The above write up is a sequel to his piece in 2010, Pleas check it out before you draw conclusion, happy reading.

2011 Elections: Let the Real Debate Begin

By Chukwuma C. Soludo

14 Sep 2010

The 2011 general election will mark a watershed in Nigeria’s history. It comes immediately after Nigeria bids farewell to the first 50 years of political independence (and 96 years of existence as a country) and will usher in the set of leaders that will lay the foundation for the journey to the next 50 years. Like every other election all over the world, the 2011 elections in Nigeria should be mainly about the economy. As Bill Clinton once said, it is the economy, stupid! Put differently, sound economics ought to be excellent politics. But, have we even realized this?

Our first 50 years had a chequered history as we struggled to forge a nation out of the disparate nationalities. The first few years of independence with the regional economies as the driving force saw spectacular growth of the economy. With oil came a new political economy based essentially on consumption- distributional politics rather than production. So far more than $400 billion of oil rents have been spent with modest progress. We seem to be saddled with an oil resource curse and a political economy that emasculates the future. We have gone through series of development plans, programmes, visions, etc.  On paper, some were far reaching. We have also had the courage to implement some radical reforms. But, without a holistic systemic change and commitment to sustain reforms, we often take three steps forward and four backwards.

It appears that the future is foggy and serious discussions about that future—the new Nigeria in the next 50 years has not begun. The debate so far is about who would be President or so, and not about what they will offer. I am afraid that we may again conduct elections without any serious issues being canvassed and ‘winners’ will emerge. Our politics has degenerated. In the Second Republic, I recall the robust debates relating to the alternative ideologies and manifestoes of the five political parties during the 1978/79 elections. I remember specifically listening to Obafemi Awolowo in 1979 explaining how much it would cost to implement free education at all levels and free medical care, and how he would reconstruct public finance to squeeze out the money to implement them.

Not anymore! There are no alternative visions, no ideologies and no programmes that offer the voters clear choices about their future. Even my political party, the behemoth PDP, has no clear road map for the country. It has remained a platform to grab power, and I am not sure how many party members can coherently explain what the party stands for. Some of us joined it in the hope of changing it from within, and we have not given up. That is a separate issue for another day.

I am a strong believer in Nigeria’s future and in its God given destiny to lead the black race. If Nigeria does not make it, sub Saharan Africa cannot make it. It is not by accident that God has chosen to make us Nigerians. It is our collective duty to realize God’s purpose for Nigeria. That is why some of us have elected to devote the rest of our lifetime to work for Nigeria’s future.

But Nigeria’s future cannot be taken for granted. The challenges are herculean, and the next four years are critical. Given the population growth rate and if you believe the last census figures, there will be 161 million Nigerians this year, and 212 millions in 2020. By the time a child born this year turns 50 years in 2060, there will be 650 million Nigerians. At current GDP and population growth rates, Nigeria will still be a developing country in 2060 (below $11,000 per capita income). At current rates, it will only be in 30 years time (2040) that Nigeria will attain the current South Africa’s per capita income.

The tragedy is that the country has no implementable plan to steer a different outcome. Under the current political economy, the Vision 2020 will remain what it is—a beautiful dream! Neither the investment levels nor the productivity (given the decaying educational system and poor skills) required to realize Vision 2020 will happen.

For Nigeria to take a shot at 2020, the economy needs to be growing at about 14- 15% per annum (more than twice the current rates of 6-7%). Even with improved efficiency, this requires annual investment rates of more than 40% of GDP (higher than total earnings from oil). With the cessation of hostilities in the Niger Delta, and oil price rising to about $79, external reserves ought to be growing. Rather, external reserves are depleting precariously to about $36 billion currently, with weekly sales at the WDAS running into hundreds of millions of dollars. Private capital inflows have largely ceased. The capital market is comatose and capital flight is back with vengeance! With private saving rate of below 20%, public sector dis-saving (borrowing), and huge net capital flight, the numbers on the macro economy do not simply add up. Add to this the surfeit of liquidity and misalignment of basic prices and the conclusion is self evident: sooner or later, something will have to give!

As I ponder the future, I am deeply worried. As a consequence of deliberate choices made by public sector managers and the constitutional/structural bottlenecks, the economy cannot generate the required investment to secure prosperity for all. In spite of the heavy external debt of $34 billion and oil prices ranging between $25- $50 during the Obasanjo’s second term, we managed to grow the economy at about 6 -7% per annum (from average of 2.8% in the 1990s). We started saving for the rainy day when oil prices reached $35 and by 2007, despite paying $12 billion to write-off the Paris Club debt in 2006, we had saved about $22 billion as ‘Excess Crude’.

In the last few years, oil prices have averaged $70 to $85 per barrel. What has happened? We have spent the $22 billion saved under Obasanjo, and now massively borrowing at an alarming rate (domestically and externally) during a period of unprecedented oil price boom, and yet the economy remains static at 6-7% growth rate.  Recurrent expenditure of the public sector has more than doubled since 2004, leaving very little for investment. Recall that during the global financial crisis, we took a deliberate decision to allow the Naira to depreciate as part of the strategies to mitigate the effects of the global crisis.

Today, that effectively means that governments at all levels receive (in Naira terms) about 27% more revenue from oil receipts than would otherwise. Indeed, but for this exchange rate change under this circumstance, there would not be more than 11 state governments that can still pay salaries on a consistent basis. With massive government borrowing during a boom and paradoxically very low levels of public investment, the private sector is stymied into a trap. Who has the strategy to unbind this trap?

Effectively, we are repeating the worst forms of the mistakes of the late 1970s to early 1980s: accumulated huge debts and raised government consumption to unsustainable levels during the oil boom which we could not sustain during the slump and hence led to the inevitable SAP. Sadly, we are going through the same cycle again, and if the current trend continues, we are doomed to a worst form of SAP in the future. God forbid! As it is, the economy and the future of hundreds of millions of Nigerians are hinged on a life support of a temporary oil boom.

Our economy is still driven by the volatile primary commodity sector—oil, gas, and agriculture. With poverty incidence at about 50%, and urban youth unemployment at over 20%, we are sitting on a time bomb. The issue is not if the oil price will crash, but when. If oil price falls below $40 tomorrow, the economy will come down on its knees, with catastrophic consequences.  Surely, the oil price will sooner or later crash, but Nigeria has no contingency plan.

The good news is that Nigeria has all the potentials to be great. There are huge idle resources that can be put to productive use. With economy-wide capacity underutilization at about 60% and oil prices at unprecedented levels, broadly shared growth rate of about 15% is possible. This is where the debate needs to begin. Candidates and political parties need to outline their visions of Nigeria in the next 50 years and HOW they intend to rapidly create a broadly shared and sustainable prosperity.

The debate must begin! Can fundamental results be achieved by tinkering with programmes or will major changes in the political structure and Constitution be required? It is time the prospective candidates roll out their agenda, and HOW they intend to finance them! Nigerians will no longer be contented with a plethora of platitudes and wish-lists. Each candidate must tell us how he/she intends to finance each programme, the deliverables and timelines. More specifically, we need to know where they stand on critical national issues, even if they have no concrete plans on them. This is a necessary element of a democratic process.

Below, we outline some of the issues/questions we need answers from the prospective candidates.

The first issue we need answers to is how the candidates hope to reconstruct our public finance and put it back on the path of sustainability. How can they rein-in the obtuse and rapacious federal bureaucracy in particular, and the state bureaucracies, balance our budget during this period of oil boom, and yet spend at least 40% of the budget on capital expenditure as required by the Fiscal Responsibility Act? Personally, I am not convinced that we need more than 10 ministries and 10 ministers at the Federal level.

They should explain to us their contingency plans in case oil price crashes tomorrow. Candidates should also let us know their views on, and framework for, borrowing (when to borrow, for what, and how it will be paid back?). Without clarity on these issues, much of the talk about government providing power/electricity and infrastructure on a sustainable basis will remain a joke as funding will always remain a binding constraint. In other words, candidates should tell us their plans to shrink the domain of the public sector to free resources to enlarge the domain of the private sector--- to truly have a private sector-led, market economy. For example, I have always believed that company profit tax rate should not be more than 10% (down from the current 30% plus education tax of another 2%) especially at a period of oil price boom, and where the businesses provide their own infrastructure. For businesses to expand and create jobs, the tax rate needs to go down significantly. We need to debate this.

Second, Nigerians would like to know the plans of the candidates for reconstructing our political structures to create the new Nigeria with a new sustainable prosperity. Currently, we are running unitary-federalism, with a plethora of fiscally unviable states as the ‘federating units’, with the attendant wasteful duplication of bureaucracies all over the country. So far as everyone is spoilt with monthly allocations from oil rents, there is no incentive to recreate the prosperity engendered by the palm or cocoa plantations and groundnut pyramids of the old regions. Every village wants to become a state in so far as ‘allocations continue to come from Abuja to pay salaries’. Nigeria’s fiscal federalism seems to have its incentive system upside down, supporting a political economy based upon consumption- distribution rather than production. Should this continue?

Where do we stand on state creation? Should we create 8 states per zone as being proposed, or consolidate the existing ones into six regions with Abuja, Kano, Lagos and Port Harcourt as special territories as being proposed by some people?  What do we do with revenues from exhaustible natural resources (oil, gas, solid minerals)? Some propose that we can create as many states as we want (perhaps until every village becomes a state), but that revenue from Federation Account should never be used for recurrent expenditure but only as matching grants to create wealth and productive capacity for present and future generations, such as only for infrastructure, security and education.

 Where do candidates stand on this issue? What kind of constitutional changes are required to create a functional fiscal federalism, appropriate devolution of powers from the centre to the states/regions, and ensure effective economic management? What is our plan for effective policing of the country to ensure security of life and property? Where do we stand on the proposal for state or regional police?

On specific sectoral issues, the questions are endless. Who has the strategy to achieve uninterrupted power supply over the 2011- 2015 period? Where is the strategy to ensure accurate population census with biometric data of every citizen? If the last census figure is correct, then Nigeria’s population is exploding without any plans for the children of today and tomorrow.

Are we happy with the rate of growth of our population or will someone have the courage to propose a robust population policy? What is the magic wand to ensure that we have a free, fair and transparent electoral system where only votes count and all votes are counted? What is the new strategy to fight corruption? Where is the sustainable plan for the Niger Delta and the long term strategy for environmental sustainability of locations amenable to natural resource extraction? Since our current university system is a road to nowhere and producing largely unemployable graduates, candidates need to flesh out their plans to revolutionarise the sector for Nigeria to join the 21st century.

It is estimated that Nigerians have their wealth running into tens of billions of dollars stashed away outside the country, and capital flight has resumed. Who has the plans to reverse the trend? The Financial System Strategy 2020 (FSS 2020) was designed to make Nigeria Africa’s financial hub and an international financial centre by 2020. What is the commitment of the candidates to make this happen? How will the candidates address the various cries of marginalization by sections of the country, especially the South East?  What are the plans for women and youths, as well as the physically challenged? How do we deal with huge but unrecognized national emergencies such as erosion and desertification?

Furthermore, the future depends on how we deal with the tripartite problems of poverty, urbanization, and unemployment. Candidates need to spell out how they intend to solve the pervasive poverty in the North (averaging over 70% compared to average of less than 35% in the South).  To create high value-adding jobs and reduce poverty in the medium term require more than quadrupling of productivity in agriculture as well as mainstreaming of large-scale commercial agriculture. We need to hear the plans of candidates in this regard given the current irrigation level of less than 6%.  More specifically, we need to hear from the aspirants how many jobs they can create over the four year period and the strategies to do so.

There is also the challenge of urbanization and urban renewal strategies. At about 5.3%, Nigeria’s urbanization rate is one of the fastest in the world, with the attendant urban decay, slums and urban unemployment, poverty and crime. What is the plan to stem rural-urban migration? In the medium term, what special strategies for the renewal of mega cities like Lagos, Port Harcourt, Aba/Onitsha, Abuja, and Kano which continue to receive the largest influx of youth population in search of non-existing opportunities? What are the strategies to provide safe drinking water to our population?

There are about 20 million housing deficit in Nigeria. What strategies do the aspirants have to unleash a housing boom and a mortgage system in Nigeria? Surely, this can create millions of jobs, and Nigerians need to know how.

Nigeria has one of the most inefficient ports in the world, and much worse than many other West African countries. What are the strategies to revolutionarise our ports and ensure that importers clear customs in 12 -24 hours over the next four years?  Also where do the aspirants stand with respect to the proposed West African monetary union and common currency? Where do they stand with regards to the WTO and the Millennium Development Round, and the European Union’s Economic Partnership Agreement (EPA) vis-a-vis the Everything but Arms initiative of the EU?  What about the West African common tariffs vis-a-vis the plans for the manufacturing sector? If the aspirants believe that our foreign policy should focus largely on commercial diplomacy, how many missions abroad now make sense, and what kind of ambassadors do we need?

The questions and issues are legion. The essence of this piece is to provoke debate. The next 50 years will make or break Nigeria. Next year marks the beginning of the journey. The current players have a duty to lay a solid foundation for the future. As things are, that future cannot be guaranteed without a big struggle.

Those who know, and who have the capacity to contribute to the struggle for a new, prosperous Nigeria must stand up now to be counted! Elite indifference to the political process is not an option. Since we have adopted the U.S. style of state primaries for the President, can we also adopt the U.S.-style debates in various states among the aspirants of the same party? When will the debate begin? The world is watching, and Nigerians are waiting for answers.

• Prof. Soludo, CFR, was governor of Central Bank of Nigeria and governorship candidate of the PDP in Anambra State.