Monetary policy management and insincerity (9) - Vanguard

Written by Les Leba

Sunday, 02 December 2007

President Yar’Adua is doggedly keeping faith with his predecessor whose economic achievements and noble aspirations scored highly in the realm of rhetoric than in performance. There is no better evidence of this loyalty than the content of the ill-conceived and insincere expectations of the 2008 budget proposals. Mr. President will undoubtedly realise by December 2008, a year hence, that his economic advisers, including the Budget Office, the Central Bank and the Finance Ministry have cleverly set him up for failure big time! There is no better evidence of the abysmal failure of the economic and fiscal policies of Obasanjo’s eight years in office than the increasing level of unemployment, the decreasing value of earned income, the dilapidated state of our infrastructure, the collapse of the real sector and the heightened state of insecurity in the land. In this series titled Monetary Policy Management & Insincerity, we have laboured to explain that the failure of our systems is in fact the direct result of insincerity and deliberate manipulation on the part of the advisers of the Presidency in the past eight years! President Yar’Adua has obviously also now become a victim of these same blood-sucking elite, and the poisoned chalice of the 2008 budget proposal is the appetizer in a deadly menu that will confine our nation to the sick bed for the next 12 months, and for long thereafter. In the same manner that Obasanjo sang the shrill unending chorus of the dreams of Vision 2010, President Yar’Adua has now been tutored on a fresh melody with the same beat and his hopes for Vision 2020 are expressed at every given opportunity as if mere repetition of the song of hope will make it manifest! Vision 2020 will remain a depressive illusion for as long as we fail to recognize the catalytic effect of interest rate structure on an economy. As things stand, our Central Bank’s rate or monetary policy rate has no practical impact on the economy and so long as commercial lending rate plus other charges hover around 20 per cent, Mr. President will be better advised to listen to the advice of an ‘‘O’’ level student of economics than those self-serving Nigerians whose apparent satisfaction is the increasing deprivation suffered by our people in all areas of social welfare. These vampires have managed to convince Mr. President that it makes more sense to borrow back government’s money in the banks (with an attendant projected cost in the 2008 budget of almost N400bn) than to dip into the idle funds in our treasury to meet our needs! Indeed, the reality is that with the price of crude approaching $100/barrel, the cost of withdrawing much of the $5-6bn which the CBN will put in the system after converting same to Naira every month, may push this interest burden to over N500bn or 25 per cent of total budgeted Federal Government revenue of N2.026bn. For President Yar’Adua to expect that we will develop along the line of Vision 2020 when we are foolhardy enough to pay such a staggering sum for monies that we borrow and just lock up in CBN vaults, may be an indication of our leader’s shaky grasp of economics and his reluctance to ask common sense questions which may expose his weakness to his celebrated advisers. The debt management office and the Ministry of Finance have been emboldened by Yar’Adua’s shortcoming and they have gleefully announced their intention to borrow an additional sum of over N600bn ($5bn) to repay old loans and cover deficits projected in the 2008 budget. Note that, the monies so borrowed will not bring any benefit to our decrepit infrastructure or improve the social welfare of Nigerians. The question is, why borrow to cover these deficits and enrich particularly the banks when we have a large stock of idle funds which we are busy giving away at minimal cost to the same banks and sundry speculators? An unambiguous clear indication of the lack of sincerity in the spirit of the 2008 budget is the complete absence of any mention of the domestic pump price of fuel. Even the ubiquitous layman knows that the price of fuel has been the major cause of mass industrial unrest over the last eight years in this country. Fuel price, together with Naira depreciation and high interest rates, have been the major drivers of inflation in our economy and any upward movement in petrol prices becomes transmitted to the prices of all other products prices, particularly, transportation and food. A current truce exists between the Labour Unions and the government that fuel price will be kept at N70/litre until about mid-2008 and government will absorb any upward price movement caused by the international price of crude during this period. full story