By Adadareporters
Aliko Dangote’s activist stance on the need for lower interest rates to attract investments and create jobs is a rallying cry for urgent and pragmatic government intervention in Nigeria’s current dire economic situation. Although Dangote’s argument is rooted partly in Reaganomics – a supply-side theory favouring lower corporate taxes and interest rates, his youth unemployment prognosis meets the bull’s eye. Strangely, youth unemployment and widespread poverty, which has grown into a national crisis, continue to escape the priorities of the political elite. As Dangote alludes, a failure to address these critical macroeconomic conditions that stifle business growth, will trigger further job losses, resulting in hopelessness.
In the last decade, poor economic choices and corruption have decimated the average per capita income, halved the national GDP, worsened unemployment, and plunged over 20 million Nigerians into poverty. It has gotten even worse. Food inflation has intensified, leaving nearly 60 million people on the brink of starvation. At least 14 multinationals have exited the country, and about 767 local manufacturing companies have shut down operations, according to the Manufacturing Association of Nigeria (MAN).
The trend is evident, and the outcomes are predictable. If the current macroeconomic conditions persist, Nigeria might be heading towards another lost decade, with the potential for massive social unrest. Hence, the country’s political leadership must stop the unnecessary fiddling and halt the nation’s accelerated descent into anarchy. Thankfully, Dangote’s comments offer both a barometer and a guiding compass. A barometer because he echoes the sentiments of critical actors in the private sector and a guiding compass because he proposes a gamut of policies that should, at the very least, spark a public debate.
While Dangote’s criticism of high interest rates is valid, monetary policy, as Aloysius Uche Ordu recently argued, “ought not to be the only game in town for the express purpose of stabilising Nigeria’s macroeconomy. An activist fiscal policy stance is urgently needed to bring inflation down quickly and painlessly.” It is the absence of complementary policies on the fiscal side that continue to wipe out the meagre monetary policy gains.
The harsh reality is that Nigeria competes for investment capital with countries like Egypt, Ghana, and Kenya. If the CBN relaxes its interest rates, Nigeria will lose portfolio investments to Egypt and Ghana and will be hit by a devaluation crisis that would push inflation to unbearable limits. Therefore, while it is important to keep Mr Cardoso on his toes, it is even more pertinent to awaken the ministers of Finance, Agriculture, and Trade, all of whom appear to be asleep at the switch. Professor Murtala Sagagi, a member of the Monetary Policy Committee, frames the issue succinctly when he argued that, “The efficacy of monetary policy tightening, a global best practice for taming inflationary pressure, largely depends on government’s reform agenda anchored around reducing market distortions, stimulating inclusive economic growth and fostering innovation.” Put differently, interest rates will remain high if the Federal Government’s economic team fails to deal with distortions, inefficiencies and insecurity that are stifling growth.
Understandably, the nation is currently in a fiscal mess. Debt is high, and revenue is low. However, how the country allocates its scarce resources, the assets it leverages, and what it prioritises, will determine whether we stop the bleeding or continue in this endless cycle of widening unemployment and poverty. Consequently, the government should consider food security as the centrepiece of its economic stabilisation and growth programme.
Food prices are the biggest driver of inflation and they account for close to 70 per cent of most household expenditure in Nigeria. Therefore, achieving food security will translate into lower inflation and higher discretionary income for most households, driving the demand for goods and services. A comprehensive food security plan aimed at agricultural transformation and industrialisation will be the springboard for accelerated growth, job creation, and prosperity.
This will begin by tackling insecurity and ensuring a safe environment for farming, harvests, and markets. Simultaneously, a critical investment in technology, agricultural research and development, and market infrastructure, will help to boost productivity, increase yield, and prepare the conditions for industrialisation. As the Nobel Laureate, Theodore W. Schultz, once said, “Once you make modern technologies available to farmers, farmers will turn sand into gold.”
If we keep investing scarce resources in airports people don’t need or in flyovers that don’t lead anywhere, we will continue to mortgage the future of young Nigerians. Politicians should quit the obsession with political permutations and elections and focus on creating jobs and lifting millions of Nigerians out of poverty.
Ayodele Adio, a media and communications strategist.
