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Tunde Leye: Austerity In WonderBags

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On Thursday 20th, I heard over the news that because of the slide in oil price, we should be prepared for austerity measures. Over the weekend, I tracked as the CBN complained about the heavy dollar demand due to massive foreign investor selloff of Nigerian stocks was causing the Naira to weaken against the dollar and that it was becoming an impossible task to keep defending the Naira at the official exchange rate of 155. Then on Tuesday, the Naira was devalued to an official exchange rate of 168 Naira to a dollar, losing 13Naira. On Wednesday, the government announced Federal Executive Council approval for the procurement of 750,000 Clean Stoves and 18,000 WonderBags to distribute to Nigerian women. Total cost of this in Naira was N9.2Billion, and in dollars, at the new exchange rate was 55Million Dollars.

Pause and think about this. Whilst the CBN is struggling to curb dollar demand and pressure on the Naira in the economy, the Federal Government has just created demand for 55Million Dollars for a non-essential commodity in the economy. Actions like this makes one wonder whether there is a holistic and well thought through approach to managing our economy. Of course, we would not be in such dire straits at all if the boom time excess we made from oil sales over the last four years was better managed.

As is typical with our government when these kinds of project are announced, details are as little as possible, invariably to keep us in the dark, or because these details have not been thought out. So the details of unit cost of the items, expected delivery times, when and how they would be distributed and which modalities would be used were excluded from all the announcements and news reports I read in every newspaper. Rather than details of how this specific Nigerian project would run, the reports spent hundreds of words and newspaper space educating us on how Clean Stoves and WonderBags work. The reports read more like PR pieces than news reports.

So, relying on publicly available information and good old mathematics, one looks at what we are buying and at what cost. I researched the WonderBags. One unit on Amazon costs a little less than 10,000Naira, minus shipping costs. Let’s assume this is what the government will buy it at, considering that while they will get a discount due to the volume (hopefully), they will still bear shipping costs. Doing the math, we will have N9.02Billion left for Clean Stove procurement.

Let’s assume this is not Nigeria and there are no kickbacks involved in this deal. That means each Clean Stove will cost 12,027Naira. In the report, the government says over the next four years, they intend to distribute 20Million of these Clean Stoves. Total cost of the initiative will then come to 240.5Billion Naira, or 1.43Billion Dollars. That’s the kind of dollar demand this initiative will create over the next few years where the Minister of Finance, Ngozi Okonjo-Iweala has already announced an adjustment of the Medium Term Expenditure Framework downwards. Things like this baffle one.

The final clincher is this. For 1.43Billion Dollars, we could have built a factory to make the Clean Stoves in Nigeria if distributing them was so essential. The technology is not patent. Such an approach would have created countless jobs directly and indirectly, kept the money within our economy and created a huge value chain that would spawn other business. This is what most Asian governments would do if they decided to embark on such a scheme. But not us. We are so consumption driven, looking for the easiest way to go about solving our problems that we would rather spend precious forex to import ready-made stoves. In trying to solve a problem, we create another problem, and of course a few rich individuals.

But such a move is politically expedient. In a pre-election year, what better way to drive votes than to create something new to distribute – in this case, the clean stoves. Never mind that the deteriorating economic situation means that the people the stoves are being distributed to will have even less to use them to cook. Never mind that buying twelve thousand Naira stoves for people living on less than a dollar a day will have them roll their eyes.

The timing, manner and structure of this initiative is a microcosm of what is wrong with Africa in general and our country in particular. Rather than make our people richer, lift them out of poverty and create permanent growth in our economy, we cook up schemes like these that will only end up enriching a few contractors, build no lasting infrastructure and time it for only maximum political impact rather than economic realities. It’s the same thinking that makes a state governor point to building governor’s lodge as a developmental project. Or the distribution of tablets to students to enhance education whilst their teachers are being owed salaries. We leave the leprosies all over our nation and offer people palliatives for the eczema on their faces or makeup to cover the sores.

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Article written by Tunde Leye

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