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Recession, assurances and the evidence (2)

THERE are so many things that appear uncertain and tentative in the management of the Nigerian economy in the second missionary journey of Muhammadu Buhari as the first citizen. In an earlier incarnation he was an usurper as a military head of state and a prime beneficiary of the despoliation of a democratically elected government which was then headed by his own ‘kinsman’, Alhaji Shehu Aliyu Shagari. For 16 years, beginning in 1999 to 2015, the erstwhile ruling party, the Peoples Democratic Party (PDP) savaged Nigeria and left her prostrate. They achieved nothing. And to make matters worse their henchmen and collaborators stole us blind. The PDP led us into recession but they were smart enough to paper over the cracks until they hurriedly handed over power to the All Progressives Congress (APC) on May 29, 2015. That has been the tale of the APC. And in 16 months, the new squabbling, I mean ruling party, has changed the face of Nigeria. If you say for bad then you are among the wailing wailers and if you say for good then you are in the company of the hailing hailers. The good or bad thing is that the ‘desperate hunger’ afflicting majority of Nigerians today does not discriminate between the hailers and the wailers. It is the same Ogbete (Enugu), Mile 12 (Lagos), Diobu (Rivers), Sabon gari (Kano) etc. markets that we all patronise.
Fruits and soup condiments could be cheaper in Bauchi (apologies Mr. Bayo Onanuga, managing director of News Agency of Nigeria) and passenger aircraft out of Nigeria could still be experiencing full load, again courtesy of Bayo via his daughter, but there is no evidence that the hailers are getting the products and services at any special bargain. It was reported this week that a global carrier no longer accepts Naira payments for its services. For the avoidance of doubt, collecting money for products or services in currencies other than the Naira predated the Buhari regime. For many years rent had been charged and collected in the United States of America dollars in the upscale property markets of Banana Island, Ikoyi, Parkview Estate among others in Lagos. The irony is that properties owned by governments are involved in this scandal and vote of no confidence in the Naira. But back to the issue. In our first installment (September 23rd) we argued that the assurances from members of the Economic Management Team (EMT) that we are already digging ourselves out of the recession hole flies in the face of evidence before us. We also promised to interrogate the assurances against the evidence.
Fixing Nigeria’s economy in a sustainable manner will involve the addressing of the public power supply nightmare. During the era of recurring petrol supply shortages, it used to be that once Lagos and Abuja were fixed, it was assumed that the problem has been solved nationwide. Probably. Because Lagos and Abuja were reputed to consume quite a lot. We should resist transferring that mindset to power supply. The prognosis in the power sector is that it will be dire in the coming months unless the federal government intervened in a manifest and significant manner. And that should be NOW. Those who should know are emphatic that what appears to be an improvement in power supply in parts of the country, particularly Lagos and Abuja, is a mirage. Recently, the Chief Executive Officer of Egbin Power Plc, the biggest gas-powered plant in Sub Saharan Africa, Mr. Dallas Peavey, Jr, said in an interview that the country would be thrown into darkness soon. He claimed that the semblance of improved power supply was due to the rains and the enhanced generation by the hydro power plants. He said Nigeria would be exposed as we head toward the dry season. “We have had more rains, leading to increase in generation from the hydro power plants. But in the next few months, there won’t be any more rain and so the output from the hydro power plants will dissipate and we will be back to generating from Egbin…
“Normal generation in Egbin is about 1,320 megawatts (mw). Currently we are doing about 425mw, only 30 per cent of what we should be generating simply because of gas. The other side that we are having an issue with is that the TCN (Transmission Company of Nigeria) cannot take the full amount of power that we can generate. Right now the biggest issue is gas, and we don’t know what the future is going to bring to us in terms of gas supply. On top of that, we are owed over N86bn by the federal government, we have been producing but we haven’t been paid for almost six months. The last amount of money that we got was about 16 per cent of the total bill for the power that we generated for the month”. Mr. Peavey lamented the huge exposure to financial institutions, the increasing inability to pay suppliers, the escalation of their debt portfolio in the wake of Naira floatation. The lamentations of Egbin are not markedly different from the experiences of other generating and distribution companies in Nigeria. In an informal discussion about two weeks ago, a ranking staff of a power distribution company in the North said not more 10million electricity users pay their bills. And that governments and security installations are the worst culprits in non-payment of bills. Without real improved power supply the talk of exiting this recession in an enduring and sustainable manner is an illusion. Power will bring a spark to the informal sector of the economy though we are still grappling with how to accurately capture that sector’s contribution to the gross domestic product (GDP).
The prediction from virtually all relevant global agencies is that the recovery in the price of crude oil will not happen anytime soon. And the low oil price will not be helped by the militancy in the Niger Delta region, and the now on, now off dialogue between the militants and the federal government. Low crude oil production as we are experiencing currently plus low oil price equals low revenue to the tiers of government. And this means that the government has to look elsewhere on how to spend us out of recession. And there is no quick fix on how and where to raise the huge amount of money to reflate the economy. Borrowing whether onshore or offshore will not come easy and fast. The now crystallizing elite conspiracy to auction our commonwealth to themselves in the name of fighting recession is without sense, reason or logic except to those who are canvassing it. The planned asset stripping is, however, a subject for discussion another day. But it has to be said here and now that an administration which its leadership has said unabashedly that it will discriminate against critical stakeholders in the Nigerian project cannot and should not be trusted with equitably disposing off of our national assets, were the need to arise.
The health, better still ill-health, of majority money deposit banks in Nigeria is another evidence that the claim of soon recovery from recession is hollow. The liquidity challenge faced by our banks was aggravated by the ill-advised one fell swoop implementation of the Treasury Single Account (TSA), a good policy on its own. A newspaper quoting the Central Bank of Nigeria (CBN) report said that since the second quarter of this year banks have been frequent visitors to the CBN window to borrow cash to shore up their liquidity positions. It was reported that 21 banks (of about 25 banks operating in Nigeria) borrowed N4.06trillion from the CBN window during the second quarter (April-June) as against N560.8billion in the first quarter. That should be a red flag. The banks are expected to play active part in the quest to get us out of recession. But how can our seemingly unhealthy banks help our clearly unhealthy economy out of recession?

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