Buhari and governance: How to handle crises, by Patrick Dele Cole (OFR)

President Buhari Talking

One way to deal with economic crisis is to isolate the main elements and deal with them or go after those who caused the crisis in the first place. The worldwide economic crisis of 2007-8 (Black Wednesday) which still remains unresolved fully, was caused by several factors but mainly by banks who sold products and derivatives to people who clearly would be unable to pay or took advantage of regulations to make maximum profits in unorthodox ways such as leveraging the LIBOR rate etc. The banks sold prime mortgages to clients who had no way to pay because the mortgages had US Federal Government (Freddie May) guarantees. In some cases Governments borrowed far beyond their capacity to pay etc.
The intentions of Federal Mortage guarantees were noble since it helped the common man to buy his own house. But in order to raise the portfolios of the banks, many sold to people who could in no way redeem the loans. Mr. White is living in a US$200,000 house in a middle class suburb. A housing development company has recently developed a new gated estate with gardens, swimming pool etc. going for US$400,000. Mr. White is now told that this new development was available to him at “nearly the same mortgage rate” if he agrees to move. He does so. His US$200,000 house is sold to someone who in reality can only afford a US$100, 000 house.
But all these mortgages are federally guarantees. The banks portfolio has quadrupled; the bankers have received their normal large bonuses for “improved performance”. The developer had also borrowed money and he too has a seemingly profitable business.
Then oil prices spike. Chinese goods flood the market. Mr. White cannot pay his mortgage. His company which cannot compete with Chinese prices is unable to retain him. He loses his job, but still has to pay for his car which he cannot. The car is repossessed.

The government has to borrow more – sell more bonds. Mr. White cannot meet the monthly payment of his car, credit cards etc. similarly, the whole country is in economic meltdown. Many of the banks have done worse than the useless papers they have. Should the banks be allowed to fail? No. To meet these crises the West comes together. The Governments seize percentage of the shares of the banks, only to find out that the government itself cannot pay its health bills; the merry round continues. What to do? Japan had the same problem.
The governments could round up all the bankers who made money, earned bonuses etc. They could round up the developers, thus create more unemployment. Or they could start inquiries to find out whether the houses were not over inflated in prices, jail a few bankers, investors etc.
Instead – they freeze interest rates at %. They hunkered down to produce polices that would grow their economy – i.e. get out of the mess through growth. They pumped more money into the economy; propped up the industries etc. They banned all gas guzzler cars; recall all cars over 10 years old and give incentives to their owners to buy new cars and forced the manufacturers to make better cars, with less fuel consumption, etc. Encourage modernization of ship yards, manufactured planes that are quieter, faster engines and encourage airlines to buy new fleet. They kept inflation low at about the same rate as interest rates. They outsourced – did all things possible to cut cost, increase efficiency and grow.
Where and how does Nigeria fit? Old cars and planes not for the West end up in Nigeria, the dumping ground of all Europe’s rejects, including clothing, refrigerators, broken down computers etc.
Without a proper analysis of our problems – do we chase the bankers, the looters etc. or do we put our economy right by growing out of our crises?
The President must convince all politicians from local Government, State to Federal levels that the fight against corruption is a serious sustainable battle. At the moment only the members of the past administration are feeling the ill wind of, according to them, “persecution” misnamed corruption.
Almost all politicians were motivated by the need for self aggrandizement. At the local government level the Chairmen of the local governments simply take the money for their personal use; some money gets to the councilors. At the moment most local government chairmen are appointed. They do nothing. Political office holders are proceeding as usual, nothing has changed. They still openly demand gratifications and complain that they invested their own money to get to where they are now. And that they contributed to the success of the party at the election. If you remind them that they were put in office to serve, you may as well be whistling in a strong wind. Houses are still being bought by the corrupt public holders. In the universities, President Buhari’s change philosophy has not hit any responsive nerves. Ask any student who is registering or trying to finalize graduation arrangements.
But the pursuit of corrupt people cannot be the salvation of a sagging economy. If we have to grow agriculture, where are the plans? Are we sure we are getting value for money in our purchases? Do we have conditions for peace in the Niger Delta to allow unimpeded exploitation of our natural resources?
The President and his cabinet will do a lot of good to themselves by going and staying in the area where the golden goose resides. No one dears the source of his wealth unattended and unprotected.
This Government is broke. It must live within its means – that means the politicians and the Governors, National and State assembly must cut down expense by at least 50% to 60%. No more free bees. Salaries of all who work in Nigeria must be in Naira; how people source for forex is entirely their business. We cannot run four parallel economies – one for the super rich, one for the rich, one for dollar earners, another for the normal people and even a fifth for the underclass.
The President and all APC and PDP members must join in the effort of national redemption. A major public affairs effort that can communicate effectively with the people must be undertaken. For a Government committed to change, the paucity of its handling its image is incredible. The tardiness and complacency mind boggling. What is everybody waiting for? Running a country is more than a gladiatorial show.