Lending as panacea to full employment
We all now agree that unemployment is a major problem of the Nigerian economy. Creative problem solving affirms that the best way to solve a problem is to assume you are the victim. However, we must first organise a good finance system from where import substitution lending can proceed. Sadly, we have intentionally prevented the growth of the Nigerian economy by mismanagement and corruption. During recent International Monetary Fund (IMF), World Bank and the Africa section of U.S. Department of State meeting, it came to light that we can prosper if we managed our resources prudently.
According to them, following the rebasing of our gross domestic product (GDP), it turned out that Nigeria’s economy is more diverse than previously imagined. However, the steady diminution in our oil receipts has several causes. One, crude oil prices have been sliding for years now. Two, before the softening of the prices, there was a steady decline and since July 2014, a complete cessation of exportation of Nigerian oil to the United States
The new development was attributed to rising shale oil production in the U.S. Three, frequent disruption of crude oil pipelines blamed on youth militancy and oil theft. Currently, oil theft eats about 30 per cent of our total crude oil production. Finally, with the forced reduction in oil output, Nigeria intermittently experiences unsold crude oil cargoes.
Even then, the IMF/WB people have told us that there is a willful lack of proper management of our oil resources. Also, they observed that reduced oil export receipts would not hurt the economy. Indeed, the trouble with our economy isn’t the volume of oil receipts but the refusal of the Federal Government to allow Federal Account beneficiaries to convert oil receipts to naira revenue through deposit money banks for budget expenditures.
The Federal Government gets the Central Bank of Nigeria to withhold oil receipts in exchange for spurious naira equivalents printed by the CBN and disbursed to the tiers of government for budget spending. This way unlegislated excessive fiscal deficits are created.
This explains tardy budget implementations that instigate delayed budget approval by the legislature. We are now into the Fourth Industrial Revolution; the previous fiscal policies are now obsolete and should be changed. Which is why Nigeria today is a mirror of that obsolete policy making of waylaying the oil receipts, a persistent hostile production environment that wilts productive resources, spreads joblessness and impoverishes the populace. This makes the economy remaining forever stunted, increasingly dependent on foreign interests and incapable of achieving self sustained growth and rapid development.
This obsolete budgeting that we have adopted as medium of economic management should be dumped forthwith in the interest of the newly adopted change mantra. However, the failsafe economic buffer is robust, inclusive growth compliant and a sound policy. Therefore, the hysteria over the falling oil prices being stoked by the hurriedly assembled economic monitoring groups is uncalled for. It is normal for prices to rise and fall. The dwindling oil receipts elicited called for economic diversification. Bank credit to the private sector as a proportion of GDP indicates the degree of economic diversification. This economic indicator stood at about 20 per cent of Nigeria’s GDP in 2012. But it was 100 per cent in Malaysia, 200 per cent in the UK and the U.S, while it was over 300 per cent in Japan. That is how to gain economic diversity and full employment.
While the World Bank says Nigeria must create 50 million jobs within the next four years earlier this year, the International Energy Agency stated in a report that the worst wasn’t over for the oil glut, so, Nigeria must diversify or perish. Therefore, for full employment and diversity, the government must cultivate conducive atmosphere for the private sector to access cheap bank loans with which it can embark on investment projects on all fronts.
In order to move Nigeria forward on sustainable and inclusive growth, the CBN should abide by the budget and institute its own import substitution loans scheme and faithfully implement the management float naira exchange rate system. Also, government should keep deficit expenditure within three per cent of the GDP. Under the managed float system, the relationship between supply and demand for foreign exchange must be restricted. That will make the naira assume its realistic value and become stable and strong; with surplus dollar flowing into the CBN to form a deep pool of investable external reserve funds. For Nigeria, accumulated external reserves constitute a supplementary fiscal buffer that will invite new investors.
In effect, properly managed, the Nigerian economy should boom and be among the strongest economies in the world. Then we can aggressively pursue full employment with a Federal Full Employment Loans Scheme with offices in every federal constituency and credits ranging from N100,000 to N100 million. These loans should be without interest and collateral. It shall be contract between the government and every loan applicant. To ensure the loan is properly utilised, every applicant, must undertake skills training in his trade and be made to forfeit his company to the state if he becomes a loan defaulter.
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