As the Central Bank of Nigeria continues to chase shadows about where the monies supplied into the economy are (as if they are operating from New York or London), and inflation continues to soar because of the wrong perception of its cause by those who should know and make appropriate policy measures, President Bola Tinubu’s special investigator, Jim Obazee, and his committee continue to reveal or exhume mind-boggling sources of our deepening poverty. We can forgive the World Bank and International Monetary Fund if they claim that inflation in Nigeria is caused by too much money in the economy because they are not here but just checking on our statistics. They have the right to propose mopping up liquidity through interest rates. And that would work if saving in Nigeria responds to interest rates. With low income, survival through consumption is more important to Nigerians than saving.
It must look insane to non-Nigerians that someone can pocket one billion of a country’s currency without destroying the pocket or consuming the whole body, but Nigerian thieves don’t just pocket N1bn, they have sown their clothes to accommodate many billions of naira. And, what they steal are not the rough, smelly and torn notes circulating in public places. They steal new, crisp and serially arranged naira notes. The initial stolen fund might be transferred from a government account to a nebulous private account where the stolen monies are converted into foreign currencies or stacked in custom-made boxes. All these happen with the knowledge of the banks. They are all complicit.
Apart from the initial identified sources, you may not be able to trace their whereabouts in local financial books. The innocent or ignorant CBN officials can only assume the monies are here and in circulation whereas those converted to foreign currencies would have passed through the borders after settling the appropriate officials at the airports while the rest are kept where they can even become baked naira notes due to forgetfulness. Of course, sometimes the stolen monies are used to set up businesses and all expenses, including payment of artisans and other types of labour in cash to avoid tracing the original source. But billions of naira cannot be spent with ease because it is a lot of money. A stroke of the pen makes it easy though.
I remember the late Prof. Eme Awa, one-time Chairman of the National Electoral Commission of Nigeria, who, when accused of collecting N1m bribe for election results’ manipulation, said that he would collapse if he saw N1m. Of course, one can imagine what he would do now that millions have become past tense in the annals of bribery in Nigeria. He would die many times over if given N1bn!
If our economic growth is graduating the way corruption is moving up, we would not even know there is corruption. But the two variables cannot move in the same direction. Naturally, they move in opposite directions. There is an inverse relationship between corruption and the growth of a nation. The deeper the hole in the pockets of the Nigerian financial treasury the greater the level of underdevelopment of the country. Stated in another way, the higher the level of corruption, the lower the level of economic development. That is why more Nigerians are getting into deeper poverty with rising levels of corruption.
The contents of the Obazee reports so far released are nauseating and worrisome. From the number and amount of money in naira and dollars mismanaged, misappropriated or mistreated by Godwin Emefiele’s Central Bank, to the N37bn humanitarian funds armada, it looks clear that the country was really caught in Buhari’s ‘one chance’ vehicle. It was under Buhari, whom we voted for based on his antecedents as an anti-corruption crusader, that an Accountant General of the nation stole N108bn and was not only walking arrogantly on the land but was given chieftaincy title by an Emir. In a serious clime, that man would be behind bars and the Emir deposed as well and tried for the effrontery to ridicule the government by his action.
It looks as if the government itself recognised the negative impacts of the twin policy of the removal of subsidy on petrol and harmonisation of the forex market. The President’s repetition of the pains the public is going through due to these policies gives the impression that his government recognises the seriousness of the impacts. But, there was no pre-announcement analysis and precaution, given the panic mode the government was thrown into immediately after the President announced the removal of the subsidy on petrol. Have there been serious in-depth analyses of the post-announcement effects beyond what we see in newspaper articles or media discussions? The government seems to still be in a quagmire!
An economy is more complex than the way it is being handled presently. Managing an economy is like running a business that is meant to be profitable. Most foreign firms, even those that are not multinationals, usually have a unit for research and development where ideas are generated, evaluated, sorted and executed. Without research and the required understanding, economic managers in developing countries tend to look at functions of money from the traditional or static perspective of the medium of exchange, measure of value or unit of account, store of value and standard for deferred payments. They fail to realise the dynamic functions of money whereby the presence or absence of money determines whether the economy is in boom or recession, whether consumption, saving, and investments are going on in the right proportion; and whether we describe an economy as prosperous/affluent society or poverty-stricken depends on availability and circulation of money to carry out transactions with ease.
The World Bank and IMF pronouncements are the outcome of data processing by their research departments. Individual country’s research goes beyond data collection and causal observation but also the knowledge of the society’s behaviour. That is why such departments should consist of not just economists but social scientists, in the case of the central bank, and other disciplines for ministries of Finance, Economic Planning and Economic Development as they carry out multidisciplinary research. The Nigerian economy is run on trial and error, not on concrete plans.
Understanding the behaviour of society is very important and only those who live within the society can largely understand such behaviour. That is why the World Bank and IMF or such multilateral institutions are good only at providing broad-based policy measures, while each country will still need to fine-tune such policies to meet its needs. It is therefore important that Nigerian policymakers should not adopt policies suggested by these institutions wholesale, without local content.
Back to the beginning or to the money matter, the money supply that the CBN thinks is in the economy is not in circulation: They are stolen monies. Some proportions have been changed to foreign currencies and kept in hidden flats or illegally transferred abroad, some are in the underground economy and parts are inadvertently kept for destruction as they have been forgotten in the trenches. Restricting the money supply in the economy currently as a way of controlling inflation is erroneous and counterproductive for a distressed economy. Some of the causes of inflation in Nigeria are the high cost of diesel and gas; the high cost of electricity when available; the high cost of borrowing due to high-interest rates; the high cost of transportation, including police extortion on the highways; scarce and badly depreciated naira affecting imports of raw materials; and the inefficient payment system. These are cost-push and structural problems, not demand-pull factors of inflation.
If the CBN does not allow money to perform its medium of exchange function efficiently and effectively, production, consumption, resource mobilisation, employment generation and ultimately economic growth will suffer. These are the problems we have now and they are the problems that, when solved, can bring inflation down, improve foreign capital inflows to solve the foreign exchange problems and promote domestic production and employment generation with consequent multiplier effects. The implementation of the 2024 budget, including new salary payments, should start in this first quarter.
