When anxieties with the state of the economy rose, as Oil prices went South in 2015, I was struck by how we went from worry to panic and how many actions failed to recognize similar experience from our recent history and more than enough knowledge on what happened before and what was trending in the global environment. That such knowledge was untapped caused me to begin to rethink many things.
How does Nigeria always manage to lose institutional memory, and what is responsible for the Knowing-Doing gap that seems to prevent us from properly handling routine problems without generating crisis of earthshaking proportions.
Surely we do not need Harvard Business School Professors Jeffrey Pfeffer and Robert I Sutton to see that there is a huge Knowing – Doing gap in the policy arena in Nigeria. Pfeffer and Sutton had in year 2000 wondered how come so many firms show significant gaps between what they know and what they actually do. You can see this applies to governments the moment you go to the many talk shops of Nigeria and from there cast a glance at the policy action arena.
When at one of these events recently someone reminded me of another one a few months before when it seemed a vow to defend the Naira was being taken. He reminded me that I had said pressure on the Naira, with a significant dollar earnings dip, was not the end of the world but that a floating “managed” exchange rate mechanism Bismark Rewane had talked about was appropriate response and also that in addition a clear game plan on how the financing from declining Oil receipts, could be bridged to tide over a temporary challenge by quick borrowing of dollars to shore up supply with other measures to block leakages could boost confidence. I suggested teams of people credible in economic and financial circles, head off to critical global capitals to show where we were going.
I was convinced that would have stimulated confidence in Nigeria at a time the gap between the nominal exchange rate and our purchasing power parity line was no more than six Naira, as Bismark Rewane pointed out. Had the teams out there telling the world about the new thrust of policy and growth potential in which decline in contribution of dollars from a sector contributing to a small portion of GDP was causing tightness, investment flows will make up for Foreign exchange supply lost, just as a little borrowing could bridge the financing gap and stave of currency speculations.
It seems to me that instead of focusing on a clear strategy of short, medium and long term perspective plan anchored diversification of the base of the economy and the tactics to hold off raiders of the currency by inspiring confidence based on plans for the future we slipped into this spurious discussion of symptom called devaluation of the Naira.
I never could understand why knowledge from 1983-85, in Nigeria, and the Asian financial crisis, failed to inform the passions spewing out or the subject from people with access to people who could better inform them. How about our national institutions that went through similar experiences with external shocks and managing access to Foreign Exchange in the before past. Why did they behave they had learnt nothing before.
One of the truly enduring explanations of how Nigeria went into de-industrialization from the 1980s, even before becoming fully industrialized is a comparison of Nominal exchange rate divergence from purchasing power parity.
A review will show that the regions of the world where nominal exchange rates and the Purchasing Power Parity line were a close fit had more growth and prosperity. Between Africa, Latin America and Asia in the 1980 and 1970s South East Asia was that zone.
What I found even more paradoxical was that those who favour state centrals to drive development and therefore should embrace some of the postulates of the South Korean Economist at Oxford Ja Joo Chang are signing off on the European Union ECOWAS Economic Partnership Agreement (EPA). This is quite curious.
Lets hope enlightenment descends upon us all.