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Business Analysis

Nigeria’s Economy: The Path to Prosperity




By Kingsley Moghalu

It is a given that the incoming Federal Government of Nigeria will have to decisively tackle the macroeconomic challenges of a fraudulent and wasteful petrol subsidy regime; our debt, revenue and resource allocation crisis; and a broken foreign exchange regime, in order to get our economy back on track.

But, if we are to put our country on a firm path to prosperity, we must go beyond these well-known challenges because they are only symptoms of deeper, more foundational obstacles.
Three BIG ISSUES have kept us poor – the absence of nationhood, the absence of political will for real reform, and knowledge gaps in economic policymaking.
The links between these issues, on the one hand, and high rates of poverty and unemployment and low economic productivity, on the other, have not received adequate attention in the past.

Nigeria cannot become a wealthy, prosperous country without first becoming a nation with a shared sense of national identity and unity of purpose, even in our diversity. Development begins in the mind. When people agree on a common goal of prosperity, based on an inclusive sense of national identity, shared values, justice and equality before the law, they can collectively put their shoulders to the wheel and push in unison. This characteristic, sometimes described as “social cohesion”, can have a transformative impact in terms of productivity. Because our country has been fractured along ethnic and religious lines of primordial identity, our politics reflects this fractionalisation. Electoral outcomes create “Governments of Nigeria” that frequently (mis)manage the economy, not for purposes of real wealth creation, but for that of advancing group vested interests of class, ethnicity, religion, or partisan political affiliation. In essence, then, what passes for economic management has become mostly a “rewards” system for chosen cronies of multiple hues. A national economy managed in this manner, rather than on the basis of technocratic competence, cannot create the wealth of nations.

Moreover, the matter of constitutional reform back to real federalism has foundational implications for Nigeria’s chances at economic prosperity. The recent constitutional amendments signed into law by President Muhammadu Buhari, including giving states powers over electricity generation,  transmission and distribution, as well as to establish railway services, are a pointer to the potentially positive impact on our economy of an even more foundational constitutional restructuring of Nigeria. Such restructuring will also address questions of nationhood, equity and justice, creating a more durable foundation for development.

Political will to embark on necessary reforms to reverse state capture by vested interests requires the self-confidence and courage of elected political leaders. While it might be assumed that such political will can only come from a political leadership that emerges from “outside the system”, there is nothing that decrees — especially given the existential crisis of the Nigerian state and its economy — that it cannot exist, even if imperfectly, in a leadership that has emerged from “within”. Whatever its provenance, such political will depends largely on the decisiveness of an elected political leader, and is essential for our national economic progress because of the challenge of state capture.

Perhaps the most tricky problem of economic policymaking in Nigeria is that of knowledge gaps. I use the word “tricky” advisedly, and based on both insight and experience. Most Nigerian political leaders have university degrees and Nigeria has thousands of brilliant economists, yet we have a suboptimal economy. This reality is due not just to the two big issues of a weak sense of nationhood and absent political will, but just as important, a frequent lack of fundamental understanding of economics and its relationship with the other social sciences, law, and technology to create a productive economy.

The first problem is that, even within the economics profession itself, there often is an emphasis on the technical and the mathematical, with little appreciation and application of a sound knowledge of economic philosophy and political economy as the necessary foundations of economic development and wealth creation. All successful economies are based on some sort of philosophical foundation or the other. The internal dynamics – and sometimes contradictions – of these philosophical leanings matter for economic policy, as do their differences. This, then, requires a certain amount of intellectual interrogation, a level of comfort with ideas and concepts, and their application to everyday economic policy challenges. Alas, this is only too rarely a habit of economic policymaking in Nigeria.

Let me illustrate this: Most Nigerians today believe in profit-oriented, market activity. We are dynamic and entrepreneurial. We are therefore mainly capitalist in persuasion, at least to varying degrees. But, you see, capitalism is a philosophy. If we fail to understand this, as we often do, we will copy capitalist societies who understand this, and then fail to create wealth for 200 million Nigerians the way these societies have done for their citizens. The wealth of a few and the poverty of many are the natural outcomes, because we are “doing” but without first thinking deeply. According to the Nigerian Deposit Insurance Corporation (NDIC), 99.4% of Nigerians who are banked have less than N500,000 in their bank accounts. From this we can see why, for the average Nigerian, an “alat” hitting his or her “acant” is a truly big deal.

In order for capitalism to create wealth, we must come to a clear, pragmatic understanding of the right balance between the state and the marketplace (this leans too much in favour of the state in Nigeria, thus distorting the economy), the essential bedrocks of successful capitalist economies (strong property rights as opposed to state ownership of land, an important factor of economic production, under the Land Use Act, an innovation-driven economy, and capital), as well as the four kinds of capitalism – entrepreneurial capitalism that is dominant in the United States, welfare capitalism that is practised in Europe, crony capitalism that is dominant in Russia and Nigeria, and “state capitalism”, an unlikely but functioning oxymoron that has been invented and practised in China over the past 40 years.

Another example: We are fixated on economic GDP growth. “The Nigerian Economy Will Grow by X % in 2023” is a frequent headline of economic news. But we have taken our eyes off the ball: Such growth must be inclusive. To be precise, this means it must be broad-based across sectors and anchored on a steadily increasing productivity of labour.

This misunderstanding takes us away from a more important focus on overcoming poverty with skilled human capital, jobs, and increasing GDP per capita. Nigeria’s GDP per capita is $2,000, and its average between 1960 and 2021 was $1,867.70. Comparisons with Malaysia, Indonesia, Thailand, Brazil and South Korea will make you weep, and I don’t want you to cry. Our economic policymaking, going forward, must understand the distinctions and the three stage-linkages between human development (literacy, water, health, skilled human capital), economic growth, and structural economic transformation. Economic growth without real human development is not just unsustainable. It will not be able to yield structural economic transformation. The latter means a shift from subsistence agriculture, commodities and mineral resources as a share of the GDP, to value-added manufacturing and export as an increasing part of GDP. This cannot happen without “productive knowledge” (PK), or skills. This means that educational system reform must become the number one priority for our medium/long term economic progress.

We were once tipsy with the “Africa Rising” myth, when the continent had not yet become an industrially productive economic powerhouse, with a significant share of world trade (only 3% today) and foreign direct investment (5%). Ten years ago, I argued in my book Emerging Africa: How the Global Economy’s ‘Last Frontier’ Can Prosper and Matter against the conventional wisdom that Africa was rising. The continent, I asserted, was simply emerging from the shadows, and setting out an agenda for its possible rise. “Rising” was more accurately applicable to Rising Asia – China, India, Malaysia, Thailand, Vietnam, etc. Looking back now, I take no pleasure in having been proved right.

I would recommend two (in my view) critical executive education programmes for political leaders and economic managers in Nigeria (federal and state levels). The first is “Leading Economic Growth”, taught at Harvard Kennedy School by Professor Ricardo Haussmann and his colleagues. This course provides important knowledge and perspective on how to actually diversify an economy and achieve “economic complexity”. The second is “Macroeconomic and Financial Sector Management”, taught at the International Monetary Fund (IMF) Institute.
And then we have the matter of institutions. Without strong, independent institutions to uphold accountability and the Rule of Law, and to regulate the economy to create a level playing field for market players, a national economy cannot prosper. Institutions need to be independent, precisely so that they can work for the citizens and the economy broadly, and not for cabals or for partisan political interests. Where the latter is the case, the economy suffers because it weakens investor confidence, reduces both foreign and local investment, and promotes capital flight. But the truth is that institutions also cannot be strong, especially in an economy such as ours, without strong, competent individuals leading them.

These are the big issues as I see them, along with the immediate crisis of the petrol subsidy, irresponsible and untransparent borrowing, and a dysfunctional forex regime, all of which need to end as soon as possible, in order to stop the economic bleeding of our country. Alongside these reforms, however, we must also engage the heavy lifts – the even bigger work that must also proceed apace – of national consensus building and constitutional reform for greater national stability and prosperity. Nigeria can be the next China – on its own terms. The foundation can be laid over the next four years.

Kingsley Moghalu, a former Deputy Governor of the Central Bank of Nigeria, is the CEO of Sogato Strategies LLC, a global investment advisory firm, and President of the Institute for Governance and Economic Transformation (IGET), a public policy think tank.

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Business Analysis

The New forex regime and 2024 Budget Proposals




By Uche Uwaleke 

Overall, the 2024 budget proposals hold a lot of promise for the economy if well implemented.

A major snag, however, stems from the likely distortionary impact of the new Forex regime.

A naira float in the face of weak supply and strong demand with its attendant forex market volatility introduces uncertainty in budget implementation.

This is why I consider the N750 to the dollar rate used for the 2024 budget as a tall order.

It’s most likely the exchange rate will be the major cause of wide budget variances in the 2024 budget on account of NAFEM operations.

This is particularly so in respect of the dollar-denominated component of the budget much of which can be found in the over N3 trillion proposed defence spending as well as in recurrent debt expenditure.

A volatile and high exchange rate will increase the cost of servicing external debt and further widen the budget deficit.

In my view, a well implemented and corrupt-free  dual (not multiple) exchange rate regime (one official including for debt service and another tier for other transactions) helps to bring certainty in government procurements and short term planning in general.

A related issue has to do with the mode of financing the over N9 trillion deficit and its likely impact on cost of capital for firms and the stock market.

Unlike in previous budgets where the amount voted for new borrowings were split fairly equally between domestic and foreign sources, this time around domestic borrowing is taking up a huge chunk at about 78% (N6.1 trillion out N7.8 trillion provisioned for new borrowings)

This can have the effect of  crowding out the private sector, hiking interest rates, increasing cost of funds and depressing the equities market as investors migrate to fixed income securities. The outcome will be a further weakening of the productive sector.

In this regard, the government is advised to explore more opportunities for concessional project-tied loans from multilateral and bilateral sources. This will help to boost forex reserves and stabilize the exchange rate.

With respect to borrowing domestically, it’s important that emphasis should be placed on the use of the right instruments such as infrastructure bonds as opposed to FGN bonds that are inflationary prone.

Uwaleke is Nigeria’s first Capital Market Professor 

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Business Analysis

CBN’s Monetary Policy Committee Meeting and the Frenzy? 




By Ademola Oyetunji 

The atmosphere in the Nigeria’s financial sector is in a state of frenzy. Stakeholders are befuddled on why the apex bank’s monetary policy committee have not met. This is because the CBN had twice postponed the meeting under the leadership of its new Governor.


The first postponement scheduled to hold shortly after the appointment of Mr.

Cardoso and his four deputy governors, was obviously put on hold to enable them settle down.
The reason could also be that the new management team needs time to study and digest President Tinubu’s 8-point agenda and current trends in the financial system to align them with his vision.

 Mr. Cardoso at the NASS screening had promised to ensure the independence of CBN. He also pledged to ensure that the CBN under his watch will play its role as a catalyst for growth, and adviser to the government.  He said “his-CBN” will shy away from interloping responsibilities.

It is also a common knowledge that President Tinubu had ordered a clean house of the Bank believed to have veered of its mandate under the immediate past governor.

It is also a public knowledge and concern that the Naira has been under attack by speculators and rent seekers, a chronic headache for the Bank’s new helmsmen. Forex illiquidity has also become malignant. Thus, convening the MPC meetings amidst these challenges may not be an immediate priority, rather they have been unobtrusively addressing and stabilizing the financial sector. The gains of these efforts are visible, though the parallel market is still chaotic.

The postponement of what was supposed to be its last meeting for the year further heightens the palpable fear and uncertainties of the consequences of the MPC not meeting. Stakeholders’ fear cannot be dismissed as Nigerians battle economic hardship, rising food inflation and unbridled Naira depreciation.

However, the CBN Act 2007 section 12 saddles the Committee to ensure price stability and support economic policy of the federal government. The Committee consists of the Governor as the chairman, the four deputy governors, two members of Board of Directors, two members appointed by the Governor, and two members appointed by the President to formulate monetary and credit policy. 

It is the highest policy making organ of the Bank responsible for reviewing economic and financial conditions in the economy. It also determines the appropriateness of policy applications in short to medium term, and regularly reviews Bank’s monetary policy framework, and adopt changes when necessary. 

The Act mandates the Committee to communicate monetary and financial policy decisions effectively to the public and must ensure the credibility of the model of transmission mechanism of monetary policy. It is to meet bi-monthly, except otherwise (as it is the case presently) or on emergency.

Until the appointment of the present CBN Governor, the Committee had met four times under the last dispensation. It is also a public knowledge that boards of federal parastatals and agencies were dissolved by the President with many yet to be reconstituted. The CBN board is one of those dissolved and yet to be reconstituted, neither is it a public knowledge that the President has nominated his two candidates. 

Hence, the Bank presently does not have the required number to form a quorum, nor the Governor and his deputies have the constitutional mandate to overtly make certain monetary policy decisions without the approval of the Board.

The concern by the public is normal, particularly the way economic saboteurs have been attacking the Naira and manipulating the parallel forex exchange market. The concern is also noted considering the latest inflationary figure, 27.33%, released by the National Bureau of Statistics (NBS).

But to allay the fears of the public, the Bank’s spokesman, Dr. Isa Abdulmumin had on the eve of the scheduled September MPC meeting issued a press statement to announce its postponement. He regretted any inconvenience the change in date may have caused the Bank’s publics. 

The hullabaloo over non-holding of the meetings may have been misplaced but expected. And with Nigeria’s current economic reality, it behooves the economic managers to be strategic in meeting economic saboteurs at their wits ends.

Notable economists and financial technocrats have entertained worries over continuous postponement of the organ’s meeting. They believed it may further heighten economic uncertainties. Mr. Boluwafemi Agboladun, a chartered accountant, expressed fears that the silence from the Bank amidst economic turbulence is unsettling as no concrete reason was given for not holding the meetings. 

He was however quick to add that the strategy adopted so far by the new management of the Bank is yielding positive dividend. There is stability in the forex market, and Naira exchange rate is no longer volatile. The strategic management adopted by the CBN so far, he noted, is commendable, making currency peddler unsure of what next is coming out from the Bank.

Agboladun also felt that the new CBN Governor may have decided to start the new year with his own monetary policy calendar after he would have gotten a clear heads-on of the fiscal direction to align it with his monetary policy philosophy. He stressed that, it is better for the CBN and the government to have a clear distinction in roles, unlike the muddled and overlapped responsibilities witnessed in the last administration.

Feranmi Deepak, a public commentator, was not surprised that the meeting, though statutory, has suffered two postponements. He was only worried that the outcome of the meetings would have avail the public of the monetary policy direction of Mr. Cardoso, as it would have road mapped investment decisions by local and foreign investors.

The CBN, he observed, may also be taking its time coming out with its agenda. This, he noted, may be due to the ongoing economic diplomacy drive of the President who has been unrelenting in his travels, marketing Nigeria. Therefore, the CBN, he said, “may be collating all he has been saying to the investing community to develop its monetary policy roadmap as government banker and advisor”. 

He was optimistic that the MPC meeting would assume its normal mode next year, when probably the President in his wisdom would have reconstituted the bank’s board to allow for normalcy in its calendar and restore stability in the financial sector.

*Ademola Oyetunji writes fro

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Business Analysis

Tweaking CBN Act, NASS Must Tread with Caution 




By Chisom Adindu 

The ongoing effort by National Assembly to tinker with the Central Bank of Nigeria’s Act, 2007, has been generating heated debate within the polity. The concern has been the rationality of the exercise.  This effort is spearheaded by two distinguished Senators, Senators Steve Karimi and Darlington Nwokocha.


The bills are – ‘A Bill to Amend the Central Bank of Nigeria Act 2007, and Matters Connected Therein’, and An Act to Amend the Central Bank (establishment) Act 2007 to Make the Central Bank More Transparent and Accountable in its Operations and to Ensure Enhancement of its functions and for Connected Matters’.

The crux of the two amendments already consolidated by the Senate is the ban on the CBN governor and his deputies from partisan politics, reconstitution of the CBN Board; subjection of CBN staff renumeration to the Salaries and Wages Commission; and ceding the position of the Board Chairman to a person outside the CBN. Also proposed prohibition of use of foreign currency in local transactions. Until this proposal, the Governor doubles as the Board Chairman.

The preoccupation of the sponsors of the bills is to enhance transparency and efficiency of the Central Bank of Nigeria, and to strip its governor of certain powers. The Senate Committee on Banking and Finance is saddled with the responsibility of reviewing and working on these bills for the Senate to take a position. 

Whatever is the expectation of the sponsors, it is important that the National Assembly does not in a spasm of emotion erode the independence of the Bank. CBN Act 2007 had settled this.

It was a common knowledge that the immediate past CBN governor’s hiatus and unprofessional conduct by engaging in partisan politics may have warranted this quest. His action was an infraction, and antithetical to his oath of office. It was also against the norms of central banking ethics. Anger against a rare singular infraction should not be used as an excuse to cripple a vital organ of government as the CBN. It amounts to throwing the baby away with the bath water. 

An International Monetary Fund (IMF) working paper titled: The Role of Board Oversight in Central Bank Governance: The Legal Design Issues describe the Central Banks as a public law institution established to fulfill essentially sovereign functions delegated to them by the State. It admitted that certain central bank laws explicitly prohibit certain operations. 

Continuing, the paper said, for a central bank to be effective, it must enjoy a high level of autonomy vis-à-vis both political institutions and private economic interest. This autonomy it enumerated as: institutional, functional, personal, and financial. Institutionally it said the central bank should not be influenced by the State or private third parties in its decision-making in the context of the performance of its functions, e.g., through ministerial instructions. 

Functional points to its capability to implement its functions without direct governmental interference, and Personal ensures that key decisions makers of the central bank (Governor and members of the Executive Board, Monetary Policy Committee and Oversight Boards) are autonomous from political and private economic interest. 

The Financial entails the capability of the bank to pursue its mandate by way of the financial means required to do so (the emphasis is mine).

Banning the CBN governor and his deputies from partisan politics is a good proposal, and well approved. But to appoint/impose an outsider as the chairman of the board other that its governor is incongruous with global central banking practice. 

Typical of our clime, as being proposed, will not augur well for a critical institution as the CBN. The infraction of its former governor – highly condemned, is not an excuse to deal a fatal blow on the Bank. It amounts to killing a fly with a sledgehammer.

Subjecting its staff salaries to an external body violates the financial independence of the Bank. Infractions committed by its former governor has nothing to do with staff welfare. There are other organs of government earning far higher than the CBN staff, yet the legislators turned the blind eye. 

Why are all eyes on the CBN? Are the Nigeria National Petroleum Plc staff salaries a subject of scrutiny by the National Salaries and Wages Commission? The Debt Management Office (DMO), Nigeria Deposit Insurance Corporation (NDIC), and many others. It is public knowledge that the staff of some of these agencies earn fantastically higher, (excluding other perks) than the CBN staff.

The Central Bank of Nigeria like its peers is the heart of the monetary system of the country. Nigeria’s economy is influenced heavily by the actions it takes, thus, any spasm of irrational decisions to alter or whittle what international investors and global partners would see as an erosion of the Bank’s independence, will further hurt the already fragile economy.

 It was the Central Bank of Nigeria during the COVID-19 pandemic that ensured the stability of the economy while other organs of government were at a loss on what to do. The CBN should not be politicized. What happened under Godwin Emefiele was a rash decision that should be treated in isolation. 

Amending the Act is not investor friendly, and it should be jettisoned. It will also encumber the effectiveness of monetary policy, and once the institution is seen as an appendage of the political class, there will be loss of faith, and confidence, in the economy. Ultimately, the economy will suffer for it. 

Mr. Uche Tochukwu, a financial expert, said tweaking the CBN Act now, just because of what happened under Godwin Emefiele will hurt the economy and the integrity of the CBN. He welcomed the decision of the lawmakers to ban the Governor and his deputies from partisan politics but frowned at appointing an outsider as the Bank’s Board Chairman. He said it is an aberration. 

Tochukwu called the attempt to subject the CBN staff salary to Salaries and Wages Commission as meddlesomeness. What about their own opaquely fatty allowances the public has decried? Doing that, they advised, will kill the morale of the staff. Are we even sure the staff are earning fantastically, he asked?

The legislators should get serious with other national pressing issues in the economy rather than tampering with the CBN Act. Dr. Babatunde Adisa, an economist expressed this. He said, globally, independence of central banks is high advocacy, why is our own legislators thinking of reversing the CBN gear of progress. He said those advocating for the weakening of the CBN governor’s power or administration of the institution are not in tune with reality.

Thus, the National Assembly should be guided as posterity will not forgive them if they are resolute on this unprofitable voyage.

Chisom Adindu writes from Umuahia, Abia State.    

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