ECONOMY News

Chief/Dr Emi Membere-Otaji, maritime investment guru, shows the way out of Nigeria’s economic quagmire

Written by silvernewsng

• Raises alarm as services outpace production in GDP

By Ignatius Chukwu

Introduction:

Chief/Dr Emi Membere-Otaji, Kalabari Chief and Co-Author of ‘Push Through The Wall’, has continued to amaze economic thinkers in Nigeria and beyond, bringing innovative solutions to management crises. For years, even as the then President of the Port Harcourt Chamber of Commerce, Industry, Mines and Agriculture (PHCCIMA), he has continued to give investors and business leaders new ways to escape business downturn.

The Nigerian Institute of Management (NIM) and other elite institutions and organisations have continued to tap from his wealth of knowledge in the sectors despite his coming from a medical background. He was twice the Chairman of the West Africa Glass industry (WAGI), the youngest at that; he was a Special Adviser to a Governor on Investment, was a Commissioner for Health with outstanding records and awards at it, and he has been a serial investor starting from hospitals (The Princess chain) to maritime, being the Founder and Executive Chairman of Elshcon Limited that is into shipping, oil and gas logistics, etc. The Unilag-trained medic who worked at the Uniport before veering into the larger world of investments and public administration thus draws deeply from the rich well of theories and hands-on practice to create solutions other may cherish much.

Details

The biting effects of the new economic measures by the Federal Government on Nigerians and businesses seem too much to bear. On this, Chief/Dr Emi Membere-Otaji, a maritime investor and shipping magnet who is a top management expert, has outlined some measures the Federal Government must take to save the situation.

Chief/Dr Membere-Otaji, a medical doctor-turned entrepreneur, who is the Deputy National President of the National Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), mentioned the urgent policy measures as stricter fiscal discipline in government, national emergency on producing at home, cutting down on import and promoting export, rejigging foreign exchange and monetary policy management, attracting foreign investments, and diversifying the economy.

He also urged the FG to immediately deal with inflation by attacking food cost crisis and food insecurity, boost production with a range of production palliatives.

Delivering the lecture titled: Managing Foreign Exchange Crisis, Inflation, and Food Crisis in Nigeria, at the Annual National Management Conference (ANMC) of the Nigerian Institute of Management (NIM, chartered) held last week at the Obi Wali Cultural Centre in Port Harcourt, Membere-Otaji said Nigerians were facing the effects of two critical decisions they never faced before: subsidy removal and floating of the naira.

What went wrong:
Recasting what went wrong, the multiple investment guru said its no news that the Nigerian economy has been challenged for some years, with key economic parameters now in the negative territories. What is troublesome, he stated, is that the situation has reached a tipping point as government’s recent reforms have worsened the already bad situation.

Membere-Otaji, the Kalabari chief, went on: “Now, there is now severe hunger boosted by unemployment, increasing poverty, reduced productivity, increasing human morbidity and mortalities. These are outcomes, primarily, from crisis in the nation’s foreign exchange regime, inflation, and food security situations.”

He declared that an economy where contributions from agriculture, industry (including manufacturing and solid minerals), into its gross domestic product (GDP) is less than contribution from Services, as Nigeria has, is unusual and a cause for worry.

The former President of the Port Harcourt Chamber of Commerce (PHCCIMA) said; “They are not only intertwined but are the principal indicators of the nation’s economic health. Truth is, there’s frustration, suffering, increasing criminal activities and stress in the land. The various nationwide protests, and the increasing economic migration of many Nigerians to other countries, are all outcomes of the nation’s economic dilemma.”

On the forex crisis, the healthcare investor, founder of the Princes Hospitals and one-time Commissioner of Health in Rivers State said: “For many years, Nigeria has been operating dual foreign exchange rates (official and the black-market rates). While these lasted, only few entrepreneurs got the lower official foreign exchange rate. Some of the beneficiaries, even abused the privileges through arbitrage, with no benefit to the economy.

“Since the present government’s harmonization and floating of the exchange rates, however, the same has literally gone out of control, with exchange rates, today, hovering around $1 to ₦1,600. Only few months ago, rates even went beyond $1 to ₦2000. For an extremely, import-dependent and low-production economy, the bandwagon effects of the forex abrupt float have been disastrous.”

He noted that Nigeria’s economy depends to about 90% of its foreign earnings from crude oil and gas exports. However due to oil theft and poor investments to ramp up crude oil reserves, the nation’s daily crude oil production is currently about 1.352 million barrels per day, lower than even the nation’s OPEC production quota of 1.5 million barrels per day.

“To add salt to injury, through crude oil forward sales, the nation has pledged some of its present and future crude oil production to obtain foreign loans. Truth is, its suicidal for any country to almost solely rely on a product that is a wasting asset whose price and global demands are out of its control. Meanwhile, proceeds from non-oil exports are not also improving significantly.”

Why we didn’t have to float the Naira:
Taking a position on floating the naira, he said summary of all these is that some drastic and realistic steps need to be taken to turn around the negative situation. “With inadequate exports income and non-convertible national currency, floating the currency is bound to cause economic challenges.”

Urgent measures:
To tame the crisis, he reeled out serious measures that must be taken, now, top on the list being stricter fiscal discipline. He thinks the approach has to be a matter of life or death.

Stricter fiscal discipline: “The nation’s governments at all levels need to realistically maintain strict fiscal discipline to reduce pressure on foreign exchange demand. Truth is at this time, the country is not rich and frugal spending, for needs not wants, should be the order of the day. A government that spends most of its annual budget in servicing loans (97%) is bound to have economic challenges. Leadership and good governance with more transparency are very necessary.”

Local production: As far as the onetime chairman of all commissioners of health in Nigeria is concerned, local production must be made a national emergency. Most things now imported must be fabricated or fashioned at home to have nothing to do with forex in those areas. Importation should only be for machinery and things we cannot attempt to improvise at home.

Export promotion: He said to promote non-oil exports and increase foreign exchange inflow is key. “Truth is, there are many rich, non-oil producing countries, and lest we forget, ‘Renewable Energy’ would soon upstage fossil fuel as main global energy source. The Zero Oil Plan, with One State One Product strategy championed by Nigerian Export Promotion Council (NEPC) then under Segun Awolowo, needs to be seriously pursued to grow exports.”

Rejig the Foreign Exchange and Monetary Policy Management: He said the Central Bank of Nigeria (CBN) should put in place an improved framework to reduce the foreign exchange volatility and stabilize the naira; and to also balance the interest rates hike and access to bank loans, all to increase productivity and reduce laying off of staff. “Needless to say that it is critical that our external reserve is adequate, and a managed float system is adopted, mindful of misalignment with market forces and speculative attacks on the economy.”

Attracting foreign investments: The UNILAG-trained medical expert said there is need to increase investment in critical infrastructure, and to practicalize, the mantra of, “Ease of Doing Business”, especially in policy formulations, and executions with proper alignment, among government agencies, at all levels, in order to attract foreign and even local investments.

Diversification of the economy: He said it’s critical that government be intentional in encouraging non-oil economic activities, especially in the real and solid mineral sectors. He said this is to get good participation of the nation’s teeming youth youthful population. “We did it before the oil boom of the 1970s with huge cocoa, palm-oil, groundnuts and other exports. So, we can do it again. Afterall, with the nation’s 1960 independence Federal Constitution, the three subnational regions were competitively productive and the economy was vibrant with no significant contribution from crude oil.”

Inflation:

On inflation as a problem to the Nigerian economy at the moment, he said Nigeria has been experiencing high inflation rate driven by currency depreciation. He said this has also led to high import cost and high cost of fuel due to fuel subsidy removal which has created exorbitant increase in transportation of goods and personnel. This has also led to a higher energy cost for businesses. “Needless to say that general insecurity and frequent farmer-herders clashes in the country have added to food inflation as farmers feel unsafe in their farms. The net effects are erosion of purchasing power, increasing cost of living, unemployment from economic turbulence, and increasing poverty with attendant reduction of the nation’s overall economic performance.

“The nation’s, month-on-month inflation was 33.5% in July 2024, inching down in august 2024 to 32.15% (with food inflation down to 37.52% from 39.5% within the same period).

Inflation in rural areas higher: “Worthy to note is that rural inflation is higher and the year-on-year rate is also higher. The statistics is expected to worsen due to the early September, 2024 nationwide massive fuel price increase.
“While some of the recommendations under managing foreign exchange crisis are also applicable in fighting high inflation, additionally, there’s need for food security.”

He said issues impeding food security include high cost of transportation, insecurity, and lack of agricultural implements and chemicals. He suggested better training in modern agro-practices and use of technology needed to be seriously addressed to tame food inflation.

Membere-Otaji also demanded the FG to encourage a regime of ‘production supports and palliatives economy’. He said there is need to reverse the balance of import and export trends through more production to meet local consumption demands and to increase exports. “Again, this can be achieved by exercise of strong political will, better infrastructural development (with efficient use of resources), and better coordination within the federal government agencies and also those of the sub nationals. Improvement in the ease of doing business, cannot be overemphasized.”

He stated that monetary and food palliatives can only assuage, on the short term, even when managed properly. “So far, what we are noting are non-impacting outcomes because of corruption and lack of transparency.”

Food Security Crisis:
He said this constitute a major component of the hydra-headed socio-economic crisis Nigeria is facing. “About 12.5% of Nigerians are deemed acutely food insecure, and about 90 million Nigerians living below the poverty line, are mostly underemployed or unemployed, and can barely afford, a decent meal a day. For nearly 10 years, conflicts, insecurity, and farmers/herder clashes have been negatively impacting food security. This is worsened with the recent Russian and Ukraine war and COVID19-induced supply chain disruptions. He stated that the sudden floating of the national currency and removal of the opaquely managed fuel subsidy that accounted for 15% of the nation’s budget have made inflation a national issue.

He went on: “Annual food inflation currently stands at about 41%. With a combination of low consumer buying power and drastically reduced food supply, now hunger and its complications including health issues, crime, and social disorder, are now the order of the day. Nigeria was 109th out of 125 countries in the global hunger index in 2023, so, 2024 is expected to be worse. Even some who are not yet food insecure are so at the expense of other living necessities like education, healthcare, accommodation, clothing’s etc.”

Membere-Otaji quoted the National Bureau of Statistics (NBS) in the second quarter of 2024 which said the Agric sector slowed to 1.4% and contributed only 22.61% to the overall Gross Domestic Product (GDP), in real terms, within the period.

He said: “Wholistic measures and strong political will by leaders at all levels of governance are critical to turn the tide. In particular, infrastructure developments, especially roads, affordable fuel supply, taming insecurity and conflicts, inflation and other economic challenges are key. Also making available and affordable, implements, chemicals, fertilizers to the real farmers, are necessary especially to small-holder farmers, while continuous teaching on modern farming methods, easier access to funds, and market linkages, are all key to improving harvest and reduce post-harvest losses, thus increasing food supply.

In addition, fostering public-private partnerships to support government efforts is also necessary to make people more food secure.
“While inaugurating the Presidential Food Systems Coordination Unit (PFSCU) in July 2024, President Bola Ahmed Tinubu acknowledged that Nigeria is in food security crisis. He admitted that it can also provide us the opportunity to re-engineer and reposition the nation on a firmer footing”.

He deemed it a very good statement from a leader; but said it now remains to walk the talk in order to achieve the desirable goals.

Conclusion:
The serial investor insisted that good governance and leadership were crucial to Nigeria attaining macro-economic stability, while taming inflation and foreign exchange volatility as well as growing the nation’s agro-sector through a well-coordinated, multifaceted approach plus generally converting the economy from that of consumption to one of production.
For now, he said: “Truth is, unfortunately, the government is applying play book applicable in a normal case. In our situation, high monetary policy rate (MPR) will be injurious to our economy and cannot tame the present high inflation for obvious reasons.

“Firstly, our economy has been prostate for a while, with many businesses operating under a hostile environment. We are not a production economy but import-dependent one, also depending on a single wasting product, crude oil with boom and burst cycles for 90% per of its forex needs and exports. Meanwhile, all levels of government operate with gross lack of fiscal discipline and corruption. We simply cannot make something from nothing.”

Once again, Chief/Dr Emi Membere-Otaji has dished out his inner mind and thoughts to the management and business community to review and apply.
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