Renowned economist and former presidential aspirant, Dr. Tope Fasua in this interview speaks extensively on the disparity and lopsidedness of the naira to the dollar, economic trends, inflation, and other topical industry issues.
Nigeria’s inflation has reached a five-year high, do you think this trend would continue to steer upwards or can we expect a decline soon?
No, it’s not going to come down in a while. Recall that global inflation is also going up and it is the kind of phenomenon that we also expect the world to go into another global recession. But there is every reason why inflation will continue to go up. If you look at where the inflation is coming from, part of it is demand-driven and could be hindered on a lot of money that had been spent since COVID, which didn’t go directly into productivity.
Also, with a lot of the interventions from CBN, you will see some of the farmers now saying they can’t pay back now. That means that money has just gone and those monies went to the system, but to other purposes, perhaps for consumption. And of course, some of the inflation is on the supply side as producers and retailers have to incorporate their increased costs into the prices of their products and their increased costs also are in two ways. We are still very much import-dependent and, there is what is called imported inflation, which is when you import the inflation that is on that other side you are importing from apart from your own internal inflation.
And of course, it costs so much more to produce things or to even import them these days because of the period of the shutdown we found that during COVID companies closed down, or companies shrunk their operations as some of them were finding it difficult to expand back to where they were before. Also, there are no new investments going on per se, even to find staff for many of them became a major problem.
So, inflation is multi-dimensional and is coming at us from several angles. I think that inflation would continue to go up before it comes down.
Electioneering has its impact on the economy, how much impact would this upcoming election have on the macroeconomy?
As usual, election season is also a time for a lot of consumption spending. Because I mean, election going on today, there is what we call vote-buying even if you don’t see it on the streets. Big parties spend billions and if the money doesn’t go directly to the hands of voters, they go to the hands of party bigwigs at the ward level, at the local government, state level, and so on.
So naturally, that kind of money goes into the system and increases inflation as well. And a lot of that money will be used either to purchase dollars to keep, especially as Nigerians are speculating or to consume directly. And of course, devaluation itself whether the one that happens officially or on the streets in the parallel market itself is inflation. Devaluation itself is inflation; we should also expect everything that makes the lives of average Nigerians to be more difficult.
Are you saying we would see devaluation soon and can you assess the CBN foreign exchange policy?
Well, I think they are in a fix. I support what they are doing which is what people would call heterodox policy or heterodox economic ideology as against orthodox. So, the Orthodox guys who are the liberal guys would be pushing to just devalue as quickly as possible, and float the naira. The fact that the central bank is holding it down, of course, may be expensive, but I think it’s the way to go.
I think the CBN is doing its best but how can they hold up into the future is debatable. Whether they can continue because the pressures are bearing down on us heavily from a macroeconomic perspective. One fears that it may not be very sustainable in the future, where the central bank is intervening every time in the market, and so on.
At some point, we’ll have to ease up, especially as there is N200 gap between the official and the parallel markets as it is right now, which is unprecedented in itself. And of course, it is also a pointer to what you do with this gap.
One of areas where the pressure comes from is people traveling every day has its demand from banks and if its fulfilled, the demand that goes to the parallel market would be reduced.
Also, one of the things I proposed in the past is this Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) issue is that the CBN should direct the commercial banks that have at least five to six currencies. Why would I be going to France and you are giving me dollars. The CBN didn’t take my idea of this, what we ended up having was a scenario where the naira was actually worshiping the dollar, and we solidified in such a way that it is straight to the dollar.
I am one of those who are totally opposed to the idea of BDCs in that number that we had close to 10,000 of them, and everybody had a BDC in their portfolio. BDCs are pushing to come back and their argument is that they want to be a channel. I don’t mind if they are given the opportunity to collect remittances and work for them, but the central bank giving them allocation every week I don’t agree to that.
I believe BDCs are still valid. Let’s take our eyes off the dollar, this worship of the dollar, and let them be able to stock some dollars, some Euro, and some Pounds depending on where people are traveling. That will take the pressure off the dollar. Secondly, if the BDCs will come back, they have to be like banks, with proper capitalisation, branches everywhere, and, of course, we don’t need more than 100. They can consolidate to twenty serious brands that will be online in real-time and are well connected and they would make their money.
Still on CBN’s policies, how would you assess the RT200 initiative so far?
If you really want to target $200 billion, which for me shouldn’t be a big issue; but at least for one, we have a scenario where we’re putting a number to target. You then have to try and break it down, per crop, tourism, and so on. But most importantly because proceed is the coming in at N420 with some add-ons, is not enough and they know that they can sell at N620. So, they will debate and find every means by which they can collect that money abroad or use it to buy something else and send it back and that’s what we’re seeing. So, there is still a need for serious thinking and brainstorming on behalf of the central bank.
So N200 billion should be achievable but if you have this N200 gap it is a big, big problem that needs to be taken out of the way first.
We are still an agricultural country, our input side the biggest import is technology, which is about $35 billion to $40 billion and it goes to that every year in this country. All of these air conditioners, all these TVs, we don’t manufacture anything, nothing. Perhaps we can force these manufacturing companies to come and establish here because Nigeria is good market. Let a Chinese company come and set up shop here that’s the next level for us.
If you look at technology, the next import is petroleum, which they’re hoping that maybe when Dangote refinery starts, but I don’t know what’s going on with that project and so on. The people can’t do much in that respect, except government gets serious. The petroleum sector seems to be dead now. They seem to have eaten that sector dead presently. Because what we get in terms of exports, we are also spending on the import side. And these guys, they were running that sector as if there is no tomorrow people were paying themselves exorbitantly traveling everywhere. It is wickedness because now there’s no sector anymore.
Now having said that, you know, on the import side, you have things like milk which is still imported into this country, about $800 million worth, fish about $900 million worth, grains about $1.3 billion as at 2020 and sugar is at about $800 million worth.
So we should roll up our sleeves on some of those things. And if you look at the export side, apart from crude oil and gas which are in the billions, the next item is in the millions which are oil seeds that is sesame seeds that they export from the north of Nigeria, in fact, most of that we don’t capture as lot of the sesame seeds from that region gets exported by land to Ghana, and then shipped out to Europe, through Ghana and that about $350 million. The rest are groundnut okro of which the importation of wheat or grains swallows our entire non-oil export.
Having ventured into politics in the past, are there plans to return to politics in the future?
I have ideas and that was the reason I ran the first time. I was thinking about everything and how to enhance the economy. I’m not even sure we have many honest economists in this country who have the kind of idea and velocity of ideas that say honestly we are thinking for our country so that things will be better. Many people will push the country in a certain direction based on their ideology. And then when we fall inside the gutter, they will laugh at us. And some of them have second addresses abroad and second passports and when things go awry, they would go.
I have a Ph.D. in public policy and analysis and when I was doing my Ph.D. I was hoping it might be relevant to use if somebody gets into government. But now, I’m sorry, I’m afraid because I see a permanent disconnect between the leaders and the followers. The followers are angry and when they are angry the best they will do when he blows over is like they did last time in #endSARS they destroy things. So, I’m afraid that sometimes I fear that maybe we will have crossed the Rubicon and we may not be able to pull ourselves back.
So, if you are not going into politics, would you go work with an administration to provide policy directions since you are passionate about saving the country and economy?Well, if it comes, I’ll consider but daily I get discouraged because like I said before; the link between leadership and leading is broken. I think that without that link being solid, a country may not be able to move on and move forward.
