It is an obvious statement to say that Nigeria’s economy is shrouded in a thick cloud of uncertainty.
In this interview, a renowned economist, Mr Henry Boyo, speaks on how monetary policies of the Central Bank of Nigeria (CBN) have contributed to the dismal plight of the economy and what can be done to rescue it from the precipice.
How do you feel about Nigeria’s rising debt profile?
Ordinarily, there is nothing wrong in taking loan, but you must make provision for repayment of any loan you acquire so that in future your economy is not unduly disrupted. But in the reality, it is disturbing that anyone would want to consider taking additional loan in a situation where you already used over 50 per cent of your earned income to pay existing debt. It is disturbing that some people in their wisdom; despite the obvious reality that it is unsustainable to use 50 per cent of your declared income to service debt, will still tell you that Nigeria has not over borrowed, we need to borrow some more. I think we should be weary of people who canvass such reckless position with regards to the economy. Certainly, it does not make sense for you to be spending 50 per cent of your income on debt and yet you are acquiring more debts and some good friends tell you that you can manage it, whereas when you look at the horizon, you don’t see anything being put in place to ensure that you earn adequate income to be able pay your debt. It is disturbing that we have some people who still campaign that the debt level is sustainable.
Government’s investment is largely on infrastructure. Do you think infrastructure investment can actually guarantee repayment of these loans?
You must have seen in the past 20 years or more that the same story about debt accumulation has pervaded the public space, but the promises have never turned out to be true.
What is the outlook of the 2019 economy based on the year’s budget as well as monetary policies of the Central Bank?
There is nothing different from the past in the management of the economy either from the monetary policy or fiscal policy. So, I don’t think as a rational person you should expect any meaningful change to evolve from a process that has made us one of the poorest countries in the world. First of all, in the area of debt, there is no meaningful infrastructural impact to justify all the monies that are being borrowed. You have heard of hundreds of billions of naira being spent on Lagos-Ibadan road, and yet we never get to see the benefit of it. You know, of course, there are two types of debts. One is domestic debt, the other one is international debt in foreign exchange. For the domestic debt, government is borrowing at an outrageously oppressive rate and the repayment schedules are not sustainable. A country where government is borrowing from anything from 10 to 18 per cent will continue to slide into poverty, because at the end of the day, repayment schedule and the amount being repaid are not sustainable. Sensible and productive economies, where our children run to, borrow at not more than three to five per cent rate. How can you ever put out a story that Nigerian goods can be competitive when they continue to borrow at a ridiculous rate of interest? On the international front, what is the business of the CBN claiming to be sitting on top of 40-something billion reserve going to borrow $2 or $3 billion from outside the country? Why can’t government say, ‘Mr Central Bank, give us $2 billion for some time, we will pay back later, instead of going to expose our porous economy to the same external source that is in custody of the same dollars the CBN claims it has? This is what they do all the times which is killing us. We are in trouble.
How real or imaginary is the apprehension about the Nigeria’s economy sliding back into recession?
We have always been in recession. Has there been a time in this country that you will say the economy of Nigeria is growing very well? Recession is just a technical term for measuring social welfare growth and improvement in the quality of lives of the people by increase in employment. These are the real factors you have to look out for, not just what people throw up, knowing that you will believe it without questioning. Since Sam Aluko left government in 1999 or thereabout, the direction of the Nigerian economy has always been towards the precipice. We are at the edge of the precipice because we are doing all things wrong. There is no way you can expect to get out of the ranks of the poorest countries in the world, if we continue to neglect those basic principles that drive the economy. The main requirement of the Central Bank is to ensure price stability. Price stability means if you bought an item for one kobo today, in two or three year’s time, you will still be able to buy it for the same one kobo. That is what creates a level playing ground. What drives the economy is monetary policy. In order to be able to expand the economy, banks are given a free reign. Unfortunately, they create money and lend it back to government. It’s crazy! And that is why the commercial banks don’t care much about lending to the real sector, which expands the economy. We are in a system that consistently weakens its own foreign exchange. Over the years, there has always been a rapid increase in the accumulation of dollar reserve. When former President Olusegun Obasanjo took over, we barely had $8 billion of foreign reserve. And that $8 billion exchanged for about N80 or N90 to a dollar. Why does naira continue to depreciate now that we have $45 billion reserve? It will continue to depreciate for as long as the Central Bank continues to auction foreign currency against its own. Anything you auction is bound to be sold to whoever bids the highest. Can you ever hope that your economy will recover? The answer is no. Anybody who elicits hope in you that somebody is doing something good in the government at the moment is telling you a lie. The economy is knocked in reverse gear.
What is the alternative way to strengthen the value of the naira vis-a-visa the dollar?
First of all, you have to stop auctioning the dollar because anything that you auction, you want a better price for it. Secondly, you don’t auction the dollar in a market that is suffocated with naira. You cannot have your compass needle towards ‘N’ when your destination is Atlantic Ocean. It will be unexplainable to put your car gear in reverse order and expect to get to your destination safely.