Nigeria’s former Finance Minister and Coordinating Minister for the Economy, Ngozi Okonjo-Iweala, has warned that growth and development cannot be achieved in any country that has distortions in its foreign exchange rates.
Her concerns came amidst optimism by the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, that the economy will be out of recession by the end of the third quarter of 2017.
Speaking after the Monetary Policy Committee (MPC) meeting in Abuja recently, Emefiele said the CBN will not dictate where the much-needed foreign exchange convergence will be, but hopes the rate will head southwards rather than remain on the high side.
But the former World Bank Managing Director who spoke at the launch of Beating the Odds: Jumpstarting Developing Countries, a book written by Justin Yifu Lin and Celestin Monga in Ahmedabad, India, said there was no one way to growth and development, for any economy without putting some basic principles in place.
“You can have development that takes specific country and context specific situations in hand and begin from there,” she said.
“So, the proposals for industrial parks, industrial zones or what you want to call them as a way of kicking off development in a country fits within this context. For me, I think we should just absorb the lesson that there is no one correct answer to economic growth and development. There is no one path.
“There are some specific and fundamental principles that are important, which, if you do not observe, you will not take off. And I think, even with this, you would agree; if your prices are not right within the economy, it is still not going to work.
“And when I mean prices, I think like, if you have a distorted exchange rate regime, if you have very severe distortions within the economy, that are fundamental to macroeconomic stability, it is not going to work.
“So we can outline those principles, and say you need to observe certain principles; these are not conditionalities or 450 prescriptions we are talking about. They are just certain basic principles that underpin development,” she said.
The former Minister said the state also has a major role to play in achieving economic growth and development, emphasising that not all can be left to the market to do.
“We forget that even in those countries where the economic theories we are expounding were born and are being practised that there is an acknowledged role for the state,” she said.
“That there are market imperfections and failures, where we have to call in other instruments other than the market. These are things we need to bear in mind.”
Okonjo-Iweala said many people do not know the president of Switzerland but investors and individuals from all over the world trust the Swiss with their monies because the nation had built institutions bigger than the president.
She called on African nations to build institutions rather than building personalities.
However, despite the former minister’s concerns, the CBN boss while commenting on Nigeria’s chances of exiting recession stated: “My view is that with all the positive signs we see: inflation tending downwards, GDP improving to the extent that negative growth rate has decelerated significantly; in fact, we have seen foreign exchange going to the real sector and industrial capacities are beginning to improve,” he said.
“We’ve seen positive signs in various economic sectors and I am very confident that at the end of the third quarter, we will be out of this (recession), and I still hold that position. We would prefer a convergence that will significantly be going southwards, than a convergence that will go northwards. The fact that we have seen a convergence in the southward direction gives us a lot of hope that things are working in the right direction.”
Emefiele stated that as a person, he would want low interest rates for the economy, but the economic aggregates available to the MPC do not allow for such at this time in Nigeria’s economic life.”