I have had a number of interactions with citizens particularly the press on the parallel market since the views of the President that we will push for single rate of exchange. The push for single rate has been on the national table for a very long time now.
No one needs any lecture on the fact that something is wrong in a situation whereby you have different prices for the same commodity in the same market. But the fact to note is that this problem has been with us for as long and all manner of strategies have been deployed to berth single rate to no avail. It is necessary to bring up this reality as we discuss to help us manage our expectations. Put bluntly the expectations of a quick fix in his regard is unrealistic.
The existence of the parallel market sure provides a window of opportunity for all manner of rent seeking behaviours that are inimical to the growth and development prospects of the economy as non value added returns are made which contribute to lack of commensurate productivity of the Nigerian economy with all its many nefarious implications particularly on the level of unemployment.
But let’s understand how the parallel market appears in any economy. And as a matter fact, the parallel market is found in most Economies of the world. Illicit money which cannot find their way into the formal economy is the strong and main source for the monies that circulate in the parallel market. So, as we talk glibly about eliminating the parallel market, we must avert our minds on how to eliminate illegal funds that come from drug business, from money siphoned off from the national treasury and indeed how to stop crimes and criminality in an economy!
We all know that to the extent that we are not able to plug loopholes through which proceeds from illegal business flow, to that extent we are not able to eliminate parallel rates in the economy because hardly are the rates at both the official and parallel market going to be the same. As a matter of fact, a basic distinguishing character of both markets is the different effective rates.
Also to the extent that the official window is not able to meet all demands on it by citizens both for legitimate and illegitimate means; the unsatisfied demands must find satisfaction and the only recourse is the unofficial market for foreign exchange. There is therefore enormous demands made on the parallel market particularly for an unproductive economy like that of Nigeria.
The only approach that would answer this problem is to float the currency. The current managed float which we operate cannot provide the answer. But are we ready for the consequential effects particularly its inflationary fallouts for us to be able to float the Naira? I say this because over the years at some point or the other, as a Nation we travelled down this road only to beat a retreat as the reality of a free fall of the rates stares us menacingly on the face.
We need to exercise some caution with the implementation of these policies as laudable and as progressive as they sound. When you see countries in the world where the bottom has literally fallen off, it is because of hasty implementation of such policies. You suddenly witness hyper inflation, excruciating scarcity of essential commodities and rapidly deteriorating quality of life leading to citizens wanting to leave in droves to other countries. We need therefore to make haste slowly.
My preferred strategy is to focus intensely on the corrections of obvious distortions in the economy to boost productivity. There is no reason why we cannot rein in insurrection and banditry across the country to return farmers to the land, boost farm productivity and checkmate food inflation.
Why can we not focus on stopping the shame of fuel importation as the only OPEC country caught in that quagmire? Why not focus to make Dangote Refinery come on stream in the shortest possible time? We should quickly privatise the local refineries as it is clear that we are not able to manage them.
What about enabling infrastructure particularly power? Why not focus on improving the available power supply in a sustainable manner? Then the big elephant in the room; corruption! It is good sound bites to hear the President promise to end corruption in the oil market which has accounted for humongous loss in revenue. We can surely reduce the level of corruption as realistically no country in the world can eliminate corruption. But we can drastically reduce the scale of corruption by ensuring that nobody caught goes free. We must return the fear of consequences for malfeasance.
There is the need to deliberately boost our revenue inflow through the adoption of digital based approach to the collection of taxes which is difficult to evade and be ingenious with the identification of additional revenue sources to avoid over labouring the bird that lays the golden egg by attempting to hike the tax rates or multiple taxation which investors don’t like.
There is the need to critically examine our expenditure profile with a view to radical elimination of wasteful spending. The ghost worker syndrome should be tackled vigorously. What about the rationalisation of our Ministries, Departments and agencies where duplications have been identified with a view to streamlining same? The famed Oronsaye Report comes to mind here.
I have just been thinking aloud. There is so much work to do to get the Nigerian economy back on the right trajectory instead of focusing on aspects of our economy which essentially reflect the fact that the economy as it is configured today is simply not working. It is trite to note that if you don’t tackle the source of a problem as in cause/effect analysis, we might end up compounding the problem and multiply the misery index in the Land. Therefore in these heady days, we counsel caution.
Dr. Boniface Chizea is a retired banker and top Economics and Business Development Consultant.