One of the highlights of the just concluded Spring Meeting of the World Bank and the International Monetary Fund (IMF) is the narrative on Africa. The question, quite legitimate, was whether the crisis facing the continent will turn out to be temporary or we are seeing a longer-term crisis. Following a full decade in which growth averaged over six percent, and the number of those in the middle class doubled to 326 million people in 2010, up from about 157 million in 1990, according to data from the African Development Bank (AfDB), growth has been halved and per capita growth is less than one percent in the last year.
Two of the three major energies that fuelled the progress of the last decade – high commodity prices, and significant capital flows in the form of both portfolio flows and foreign direct investment (FDI), have vanished. The third – extensive economic and political reforms – will be threatened the longer, deeper, and wider the economic crisis. Following this crisis, many African countries have approached the World Bank and or the IMF for support, including Zambia, Kenya, Mozambique and of course, Nigeria.
This narrative was supposed to tie in with the theme and notion of the summit – “global challenges, global solutions”. However, as in all economic problems, it is the responsibility of Africans to solve the present economic crisis in the continent, even as they leverage on whatever support is available in the global economy. Kemi Adeosun, the beleaguered Finance Minister, in her first outing at the global meeting, had a good performance, and made the same arguments.
She argued vigorously and defended the government’s plans to tackle the growing economic uncertainty at home. She reiterated the themes around expanding the revenues from taxation, expenditure plans on infrastructure, and prudent expenditure by the government, and in the process, improving the value that Nigerians derive from every Naira spent by the government. Essentially, Nigeria will devise domestic solutions to her problems. Yes, we will seek help, but we will seek help that is good for us. I agree. So, while we are suffering from external shocks, our progress will mainly come from how we exercise our thoughts, energy, and ingenuity.
Meanwhile, since I cannot recall any moment I felt she was out of her depth, I wonder why she has been the most scrutinised minister in the last few months. First, the budget function was taken out of the finance ministry, reducing significantly her portfolio and influence. Second, she was unfavourably compared to her predecessor, as if any current minister could match the resume and global reach of NOI. Third, the head of Customs publicly undermined her position when he said he would not report to her. Fourth, assuming these previous situations were all coincidences, her absence in China is inexplicable. Currency Swaps agreements have concrete fiscal implications and dimensions, especially in relation to what value the Chinese receive in return, and so her absence gives the clearest indication that she does not enjoy the full confidence of the President.
In the context of the very ambitious fiscal programme of the government, including the expected borrowings from the World Bank and the African Development Bank to the tune of about $2. 5 billion, (which, by the way, it is becoming increasingly unlikely that this will come any time soon, with implications for the government revenue and invariably expenditure plans), it is not helpful sending a message of a lukewarm support to your finance minister.
Finally, I will use the remainder of my piece to comment on the little Chinese I have learnt in the last week. “Chin Chian Jin” is the title of the waffle that I have read about the currency swap between Nigeria and China. Let us be clear about the things that this arrangement is not. First, it is not addition to Nigeria’s debt. Second, Nigeria is not the first country to enter into a swap arrangement with China. Indeed, Nigeria is rather late to the party, as the Chinese has signed bilateral currency arrangements with at least 30 countries already, including the United Kingdom and Australia. Thirdly, it is not a replacement of the dollar. The estimated value, put at the equivalent of $6 billion over three years, is inadequate, and not intended to replace trade we conduct in the US dollars.
With an estimated trade worth 15 billion dollars in 2015, the swap arrangement will help reduce the intermediary links between the Naira and the Remnibi (Yuan). This is the main benefit, as it reduces the pressure looking for a third currency (dollar) that will eventually be converted to Yuan. The other benefit that has been largely overlooked is that this arrangement invariably “forces” the Chinese to look at trade and investment opportunities in Nigeria in order to utilize its own Naira value. Given the estimated value of the swaps at $6 billion dollars over the next three years, it allows us to maximize and leverage growth opportunities for Nigeria. Nonetheless, Nigerians have very reason to skeptical because even the best looking deals can sometimes be a loss because of the way we would have managed it. I thank you.
Ogho Okiti
