The Triumph of Common Sense
- Posted By Vitalis_Obidiaghaa | On September-28-2020 13:42:20
- How Emefiele-led CBN’s interventionist policies helped pull Nigeria’s economy out of recession, laying the foundation for economic more growth. By; Vitalis Uchenna Obidiaghaa
“Common sense is not so common.” ….. Voltaire
When Voltaire, (21 November 1694 – 30 May 1778), the French author, historian, satirist, and philosopher— whose real name was François-Marie Arouet —did publish the above quote in his book “Dictionnaire philosophique portatif” in 1764, he began a philosophical inquisition which still goes on in the hearts of men, centuries after he has gone to great beyond. It seems that more and more people are quoting this timeless aphorism without even knowing its origin and its connotation in the economic destinies of nations. Although the maxim has seen resurgence in modern times in personal decision making, the application of common sense, which is not so common, seems to be in the decline especially when it comes to issues and policies that affect the greater number of people.
The concept of common sense is unarguably a long-standing term, based on human experiences —people’s individual perceptions and interpretations of facts for decision making especially on everyday economic matters. Since Economics is broadly defined as a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses, it follows that the application of common sense is of utmost relevance, both for individuals and nations. It is an established fact that the basic problem of economics is that needs and wants are unlimited, but resources are scarce. Scarcity means that resources are limited, and because resources are scarce, people must make choices based on common sense. The economic dilemma of individuals and nations, therefore, is that their common sense is often betrayed by their impulses and emotions. The outcome of this cold war between impulse and common sense is shaping the economic destinies of individuals and nations especially in developing economies. When common sense triumphs over impulse in the economy of nations, the people rejoice, but when common sense is sacrificed on the altar of emotions, what follows is economic recession. This explains what happened to Nigeria’s economy in 2016.
For every informed citizen of Nigeria, who is concerned about the economic destiny of our nation, 2016 will never be forgotten in a hurry because it was the year the Nigerian economy officially entered recession with its negative consequences. That unfortunate recession, which was an effect of long years of neglect of common sense, proved to be too much a burden for a nation that is destined to be the hope of Africa. The National Bureau of Statistics (NBS) of Nigeria released official Gross Domestic Product (GDP) figures for the second quarter of 2016, confirming that the Nigerian economy was in recession. According to the statistics released then, the GDP contracted by 2.06 percent in the second quarter of 2016, following a contraction of 0.36 percent in the first quarter. That officially placed Nigeria in a recession, which is defined by two or more consecutive quarters of negative economic growth.
The economy was severely challenged that Nigerians were struggling with the cost of basic amenities as prices soared and the value of the naira depreciated compared to the US dollar. “In the Second Quarter of 2016, the nation’s Gross Domestic Product (GDP) declined by -2.06% (year-on-year) in real terms,” the NBS report stated. “This was lower by 1.70% points from the growth rate of -0.36% recorded in the preceding quarter, and also lowers by 4.41% points from the growth rate of 2.35% recorded in the corresponding quarter of 2015.”
That NBS report also revealed that Nigeria’s unemployment rate in the formal sector rose from 12.1 percent in the first quarter of 2016 to a staggering 13.3 percent in the second quarter. That statistic, however, is separate from informal workers and economic activities in Nigeria’s vast black market which also experienced pains from inflation and rise in the cost of basic goods. “In view of this, there were a total of 26.06 million persons in the Nigerian labour force in Q2 2016 that were either unemployed or underemployed compared to 24.5 million in Q1 2016 and 22.6 million in Q4 2015,” stated the report. That rapid decline in growth marked the worst recession Nigeria had experienced since the Ibrahim Babangida’s regime, when the economy declined by 0.51 percent and 0.82 percent in two consecutive quarters in 1987.
Expectedly, that news was followed by mounting criticism of President Muhammadu Buhari’s ability to manage the Nigerian economy, and consequently, all his key public officers were severely criticized along with Mr. President, for being at a loss in managing the economy. Amongst Mr. President’s key economic managers, the Governor Central Bank of Nigeria was specially targeted and almost held solely responsible for the challenges that the economy was facing as at then. Mr Godwin Emefiele came under attacks for not devaluing the Naira; for restricting Forex, FX, access to 41 imported items, including toothpicks; for making FX available to a “privileged few” amongst other things.
It seemed that some forces were funded and set loose to undermine the hard-earned credibility Mr. Emefiele managed to gather all through his meritorious banking career in the private sector before becoming the Governor of the Central Bank of Nigeria. Amongst his public critics was a group of seven, who authored an infamous letter published in the Vanguard of 27th February, 2017, titled; AN OPEN LETTER TO CENTRAL BANK GOVERNOR, GODWIN EMEFIELE REQUESTING FOR HIS RESIGNATION. In the said letter, they pressured Mr. Emefiele to either revert his interventionist policies, resign or get sacked. Those challenges were enough to weaken his spirit, but he came prepared for the job. At a time when his detractors wanted him to shift focus from his pragmatic resolve to help reposition Nigeria’s economy through his philosophy of economic nationalism, Mr Governor maintained his position.
Speaking on a television programme in 2016, in defence of the restriction of Forex, FX, access to 41 imported items, Emefiele said “The issue of those 41 items, unfortunately, is one that has been on my table. But I think it is important that in the life of an economy, there is a need for us to take a look and ask ourselves: what really are we importing into this country? “When this thing started, we said: Why should we import rice? Why should we import toothpick? Why should we import palm oil? At a point in this country, Nigeria was the largest producer and exporter of palm oil and we were controlling 40 per cent of the market share. “So, there is the need for us to say at this time when there is a scarcity of foreign exchange, it should be set aside for the import of items we cannot produce in this country.” My view would be that if you have Forex, you should devote it for the import of items that are important and can’t be produced in the country. “If you have excess Forex, save it or create reserves.
My view, which is the view of government, is that there are certain items that we can produce locally. “But by importing some of these items, you impoverish the people. How can we create jobs for our people by living like that? Donald Trump is the president of the largest economy in the world. “When he was campaigning, he said everything must be about America and he takes the interest of Americans first into consideration and by doing that, you create wealth for your people,” That has been the CBN governor’s position since then and he seems to have weathered the storm and prevailed.
One of the major indicators of Mr Emefiele’s triumph was the news from The National Bureau of Statistics (NBS) in 2017, stating that Nigeria had exited its worst economic recession in more than two decades, notching up growth of 0.55 percent in the second quarter of 2017. The report showed that the economic recovery was driven mainly by improved performances of oil, agriculture, manufacturing and trade sectors of the economy. Looking closely at that report, one would appreciate the impact of the interventionist policies of the Central Bank of Nigeria especially in agriculture and manufacturing. Take the restriction of Forex (FX) access to 41 imported items for instance, it is evident that the policy has prompted improvements in the domestic production of those items. The dogged implementation of that policy in early 2016 has denied importers of the affected items access to foreign exchange from the Nigerian Forex market because of the chronic FX scarcity in the country at the time.
Delivering a speech at the 2017 Annual Bankers’ Dinner of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos last year, Mr. Godwin Emefiele asserted that local manufacturers were recording profits and major boosts to their revenue due to the policy. According to him, in spite of opposition to the introduction of the policy restricting 41 items from Nigeria’s foreign exchange market, the faithful implementation of the policy had seen to the considerable decline in Nigeria’s import bills. From an average of about US$5.5 billion, the nation’s monthly import bill had fallen consistently to US$2.1 billion in 2016 and US$1.9 billion by half year 2017.
Citing the example of Psaltery International Limited (PIL), an agro-allied company based in Oyo State, he said the introduction of the policy had reversed the fortunes of the starch-producing company. He noted that prior to the policy; Psaltery had only few customers and a huge backlog of inventory. Emefiele however disclosed that the company now has over 50 multinational clients including Nestle and Unilever, thereby saving the country $7 million in foreign exchange drawdown over the two years of the policy. While also asserting that the access restriction policy had freed Nigeria from the perennially embarrassing importation of toothpicks, the CBN Governor disclosed to the delight of the audience that as part of the gains from the policy and in line with an agreement reached with Unilever, which moved its production facility to another country a few years ago, the company had agreed to commission a new Blue Band Factory in Agbara, Ogun State before the end of 2017.
Mr. Emefiele further disclosed that the implementation of the policy had had a great impact on Nigeria’s import bill and boosted local rice production in the country. He recalled that Nigeria, in 2012, imported about 1.2 million metric tonnes of rice from a trading partner, noting that, in 2016, one full year of implementation of the policy, rice exports to Nigeria had fallen by 99 percent to only 784 metric tonnes. “These are clearly verifiable successes of government’s attempts to create jobs locally, improve the wealth of our rural population, improve industrial capacities and ultimately attain economic growth in Nigeria,” he noted.
Speaking recently in Lagos, The Acting Director of Corporate Communications Department, The Central Bank of Nigeria (CBN), said that The Central Bank of Nigeria (CBN), has done commendably well in promoting inclusive growth and sustainable development as its intervention programmes have created over seven million jobs in the country. Mr Isaac Okorafor, who stated this at the CBN Special Day, at the last Lagos International Trade Fair said the theme of the event: Promoting Industrialization for Economic Recovery and Sustainable Growth resonates with the apex bank’s development financing agenda, through the interventions in critical sectors of the economy. He explained that this demonstrates CBN’s strategic objective of promoting inclusive growth and sustainable development.
He stated that “It is pertinent to note that the following CBN interventions have impacted the Nigerian economy through direct creation of millions of jobs as at August 2017: Agricultural Credit Guarantee Scheme Fund (ACGSF), 3,045,900 jobs; N200billion Commercial Agricultural Credit Scheme (CACS), 1,134,772 jobs; N200billion SME restructuring & Restructuring &Refinancing Facility (SMERRF), 89,860 jobs; N300billion Power and Airline Intervention Fund(PAIF),7899 direct jobs and 14,304 indirect jobs; the N220billion Micro, Small and Medium Enterprises Development Fund (MSMEDF),139,156 jobs; Textile Sector Intervention Facility (TSIF),1,668 jobs”. Mr. Okorafor added that N44.18billion has so far been released through the 13 participating Financial Institutions (PFIs) in the Anchor Borrowers Programme (ABP) for the 200,000 small holder farmers across the 29 states cultivating over 234, 581 hectares of farmland. The ABP was said to have equally yielded 653,250 jobs.
Looking at these figures in comparison with those that The National Bureau of Statistics (NBS) released in the Second Quarter of 2016, one would be moved to appreciate the efforts of the Governor of the Central Bank of Nigeria and his team of strategic thinkers who have remained resilient in the face of an unprecedented media assault against their efforts even as they tried to do what they thought was the right thing for Nigeria to do under those challenging economic circumstances. Little wonder, the Governor of Central Bank of Nigeria won the Vanguard Personality of the Year Award, 2016, the 2017 Forbes Best of Africa Innovative Banking Award, and the Central Bank of Nigeria earned the open commendation of Mr President during the 2017 Independence Day Broadcast for its efforts in helping revitalize the Nigerian economy. This is truly the triumph of common sense over personal sentiments.