National Economic Recovery: Nigeria’s lending from China instead of learning

 

There is an old wise saying that urges and charges everyone to prefer an offer of one willing to teach him/her how to fish over one who is just going to give him/her fish and nothing more. This saying is so designed to ensure one’s life is not short-changed or mortgaged – often, contrary to his will but out of his/her own doing or undoing.

In the same wise, the everlasting book of economic wisdom admonishes any person or system intending to build a tower to first sit-down, and count the total cost, whether the person has what is sufficient to finish it. Lest haply, after the person lays the foundation, and is unable to complete it, mockery will be the lot of such person.

Without mincing words, the foundation of our economy is being laid on quicksand. In other words, the leaders of Nigeria’s economy have recently launched a ballistic missile that may ground our economy to a very costly stoppage if the nation’s steps are not timely retraced. This might be contrary to our leaders’ will or wish but it won’t be an oversight of their doing or undoing.

The reasons for this assertion is not far to see or difficult to comprehend. The $2 billion loan being sought from the Export-Import Bank of China by the federal government of Nigeria is said to be part of the N1.84 trillion the fore-leaders of Nigeria have proposed to borrow to finance the 2016 budget. Yet, we have a budget of N2.6 trillion for recurrent expenditure viz-a-viz 1.5 trillion for capital expenditure. Much worse, is considering the fact that the country’s debt burden is already being serviced with 25 percent of the Federal Government annual budget. How economically-smart is this approach?

What an economic calamity! Only about 28-30% of our total budget is mapped-out for capital expenditure yet our leaders say they are underpinning our economy on the wings of its quickest recovery. What fallacy! Bearing in mind that is only when a nation invests in capital projects over recurrent projects that the economy will grow and prosper as recurrent expenditures are basically for consumption purposes. In other words, it is only vide capital investment that an encouraging economic growth is surely promised for us as a nation in the nearest future.  The provision of jobs and infrastructures that are part of the major indicators of economic growth and prosperity are only possible if capital expenditure is well sustained with adequate funds.

Action speaks more truthfully than voice: The Federal Government seem to be singing in a direction and dancing in a contrary direction. The motives behind the lending from china is pregnant with questions as to whether it is indeed meant for the forward-marching of our economy or whether it is driven by unsubstantiated reasons like political and religious affiliations. Considering the present hard-times the people and nation is going through, we must not again short-change ourselves of our future. Rather, we must protect it from getting worse and preserve it to get better. We should not be cornered and cajoled by the ill-pressure from economic-desperation/distress into taking unjustified loans even if the future of Nigeria and its people will be salvaged. Truly, tough times demands tough measures but desperate times demands wise/patience measures, not desperate measures. More often than not, when desperate measures are taken, they are often wrong-footed

The move of the loan also raises concern about if the leaders of our economy are protecting the nation’s long term interest and how skilful they are at securing the citizens against any looming or active economic predicament. In the same light, eye-brows have been raised to investigate if the loan is genuinely to our economic advantage following the declaration by the IMF that Nigeria has no need for loans. Accordingly, it was disclosed by IMF Managing Director, Christine Lagarde, that after their evaluation of our nation and the scrutinizing of our 2016 budget, it became conclusory that any loan been sought by the leaders of the nation is detrimental to the nation and its people.

Beyond the IMF, dusts have remained unsettled with respect to economic positivity, productivity and sustainability of the loan considering the fact that some western nations approached by the Federal Government for loan utterly and cleverly declined because they deemed that loan is neither our problem nor was it our solution.

Though it is argued that the loan is necessitated on the heels of the benefit of global relationships and cooperation in a world that is fast-changing as a result of globalization and trans-border economies, social and even criminal activities. The argument does not go far and deep. We do not need any affiliation that will afflict our future with a sour-pill of economic torment.

What’s most pathetic about our economic and monetary relationship with china is that Nigeria is leaning on and lending from them rather than learning from the good and bad lessons the Chinese country often employ in overturning their seasonal economic plight.

Good and bad lessons from China’s Economy: Asian counties like Singapore, Malaysia and the China we are ass-kissing because of loan have their recurrent expenditure at about 20% while their capital expenditure at 80%. In Nigeria, we have a completely reversed case yet we expect to be progressive in the pursuit of our economic recovery.

However, in 2014, China overtook the United States as the world’s largest economy when measured on a Purchasing Power Parity (PPP) after the IMF estimated the country’s GDP at end of 2014 as $17.6 trillion using purchasing power parity   method. That was equal to about 1% larger than the U.S. GDP of $17.4 trillion.

China preferred to use the PPP model otherwise called the adjusted-GDP – a method that is generally inappropriate and unacceptable to earn the crown of the world’s largest economy.  Rather than use the nominal GDP at the current exchange rate which is vested with more accuracy in calculating GDP. China felt more at home using to the ill-method to conjure a world largest GDP. Measuring GDP at purchasing power parity takes into account the differences in prices that people pay for goods and services in different economies. By implication, since the price level in China is still much lower than in the United States, a dollar in China buys much more than a dollar in the United States. Also china makes use of a method that calculates China’s GDP data, in terms of value and growth rates, from cumulated figures rather than actual economic activity of a particular year.

However, in their attempt to put their economic blueprint right, sometimes in 2015, China’s statistics bureau said it has changed the way its gross domestic product data is calculated. It has now adopted the international standards to improve the accuracy of Chinese numbers. It is exemplary and encouraging that the Chinese country has shifted to a more accurate method in measuring the economic activity and have become more sensitive in capturing information that are consistent, seasonal and unusual economic elements like fluctuation.

As such, we ought to be economically cautious about china as even at the topmost government level, there has long been an increasing widespread scepticism about the reliability and reality of Chinese data. For instance, China as the world largest economy in 2014 had unemployment remained low even as poverty rate remained high. Today, as the second largest economy in the world, there are recent move to cut capacity in bloated industries like coal and steel. By implication, many laid-off workers from old-economy sectors have been shifted into lower-paying government jobs, cleaning up offices – good for political stability but bad for economic growth and recovery.

It is not strange or surprising to think that China may be trying to draw -in Nigeria into their unrealistic and unsustainable economic approach in an attempt to augment and patch-up their shortcomings and backlash resulting from the precedential false methods they might have adopted to fine-tune their economic data. We need to be wary of the move and motive of the loan because at some point in the nearest future, when the water of our economy is levelled, we shall then know what proportion of dry land is left.

It will be unwise as a nation to be caught unaware as it is usual for the Chinese government to recover its markets from financial crisis by increasingly seeking the tamping and ramping of market expectations during protracted economic slowdown.

It is quite conclusory that the move of the loan will only pauperize and pulverize our economy more than it will prosper it. With careful examination, the move is more or less a function of bad economic policies and principles and the consequence is tantamount to; an increase in elimination of the middle class, increased inequitable distribution of income, increased poverty, non-inclusive growth, unsustainable development and so on.

In summary, the essence of this article is to put it straightforward and forthright that; in as much as Nigeria is in dire quest of the recovery of its economy, a loan/debt-fuelled one is simply unsustainable. It would only lead to an increasingly aggressive stimulated-recovery that would create a national economic bubble. Thence, the bubble would inevitably get popped in the nearest future which will blow-out and black-out the nation’s prosperity that is already the pipeline.

Like China did in the past during the global and their national financial crisis, we cannot afford to hand-crank our economy by ourselves out of the current slowdown through massive stimulus (like debt-powered one).  Rather we must adopt solution-driven and strategic structural reform that will deliver and coffer a sustainable economic recovery into the grips and bowels of our nation.

If we follow the ‘stimulant’ way to recover our economy, we will certainly be eased off without any iota resilience. By opting for the loan as a national economic decision, the nation is more or less acting out of undue economic diligence and beyond reasonable monetary and fiscal policy loosening to recover and stabilise our economic growth as the effort would deter and derail us from the structural reform that necessitates and promises a long-term economic sustainability.

In corollary, when going about bilateral arrangements with other nations of the world, our leaders need to task themselves more innovatively and originally about how they plan to turn-around or transform our economic downturn into testimonies. Nigeria needs affiliation or collaboration with international countries like the Government of China in the area of labour transfer, technology transfer, energy transfer and the likes rather than granting loan that may not be put to its highest-and-best use. Financial services solution like the creation and enhancement of Initial public offering (IPO) can be a form or product of strategic reform.

Perhaps because our leaders assume they have thronged out some efforts at generating some internal revenue, and have done a bit in plugging some sources of our economic haemorrhage, the have patched some sources of waste in our economy vide TSA, war against corruption and terrorism and so on, they have now reclined to ‘economic complacency’ even as we hope they don’t relinquish to a fate of economic nonchalance.

In conclusion, the fact our nation may be politically divided doesn’t mean it should be economically divided. In order for our nation to keep-afar the despicability that may beset our economy in the nearest future, we need to drop-off the ‘one step forward and several steps backward’ approach we are adopting in rescue mission our economy. Frankly, our leaders need to come together and put their heads into the big basket of our economy in a cumulative or combined effort to address and redress our economic strategies else, we might find our nation at the verge of an egress that may spill us into the economic red sea.