Lecture delivered under the joint auspices of the Geographical Society and the Federalist Society of Nigeria at the University of Ibadan on 16th May, 1970
Continued from last week
Consequently, when Britain actually devalued its currency, unilaterally and without consultation with the members of the Sterling Group, on 18th November, 1967, I already had clear in my mind what the implications of this action would be for the Nigerian economy, and also what the effects of devaluation or non-devaluation of the £N to the country’s economy would also be. Nonetheless, I quickly arranged a meeting with my officials and the Governor of the Central Bank to argue the matter all over again. Powerful arguments were marshalled for and against the devaluation of the £N. But, in the end, we decided not to devalue; and whatever might have been the theoretical arguments to the contrary, subsequent events have shown that we were wise not to have devalued in slavish sympathy with Sterling devaluation.
In this connection, I would like to observe, in passing, that though the requirements of politics and the realities of economics do not always mix, yet, even if it had been wise for us to devalue, the unilateral manner in which Britain called the tune would have been regarded as such an affront to our independence and sovereignty as to make me want to refuse to dance to that tune.
As I said before, we lost substantially as a result of the Sterling devaluation, and would have lost much more if we had devalued. We could ill-afford any loss – let alone a substantial loss – of foreign exchange, in the prevailing circumstances. But this was the risk we took as a member of the Sterling Group. Howbeit, it was a risk we did not want to continue to take. Yet, after a careful consideration, we came to the view that it would not be prudent for us to pull out of the Sterling community. In order, therefore, to avoid a repetition of our painful experience, we sought to secure from the British Government a guarantee against a recurrence – that is, against loss, in the event of another devaluation of the British £. It must be said to the credit of the British Government that the guarantee which we sought was readily given. The same thing goes for other countries, similarly circumstanced as ourselves, within the Sterling community. In other words, we are now fully insured against loss, in the event of a future devaluation of the Sterling.
As a result of all these measures, we were able to provide, on our own, £230.8 million in local currency, and £70.8 million in foreign exchange, to finance the civil war. We were also able, as a result, to survive the strains, the stresses, and the exigencies of the war, without blemish to our national honour and pride, and without any corrosion of our sovereignty and self-confidence. Furthermore, by being compelled to mobilise and deploy the financial resources of the country to meet the ineluctable demands of war, we were able to discover – this much is revealed by the facts and figures which I have given in the course of this lecture – that the capacity of Nigeria for economic growth and self-reliance is enormous.
My officials and I have been commended for the prudent manner in which we had managed the finances of the country during the war. It would be hypocritical for me to say that we do not deserve some praise. But I think it is to our great and beloved country that ‘all glory, laud, and honour’ should go, for its expansive and fascinating manageability. No one in this country could have predicted that Nigeria could go through this kind of war without being heavily indebted financially to anyone outside Nigeria, and, at the same time, emerge at the end of it all as a most virile and buoyant economy. We had successfully weathered the storms of one of the worst civil wars in history, and we are now fortified by our war-time practical experiences to meet the multifarious and intricate challenges of peace, including the rapid development of our country. In other words, we are in a position today to say truthfully that we have fulfilled the first of our two objectives by winning the war, and that we are properly equipped and sufficiently strong financially to fulfil our second objective of winning the peace.
It would be erroneous to regard the sum of £300 million as representing the total and only cost of the civil war to Nigeria. This figure is no more than the calculable and visible cost of the war. There are other costs: some are hidden; some are incalculable; others are waiting to be calculated by diligent economists, econometricians, and statisticians.
In the early part of this lecture, I spoke of lost grounds and progress foregone. The average growth rate of our GDP (excluding oil), during the period of 1958/5.9 to 1966/67, is 6.6 per cent. Dr. John D. Letiche, Professor of International Economics at the University of California, in the United States, assuming a growth rate of 5 per cent for our GDP, opined in September 1968, eighteen months before the end of the war, that, because of the civil war, Nigeria ‘has lost income foregone of a minimum of$400 million . ‘This must have since doubled to about £286 million. The cost of infrastructure, public and private properties, damaged and destroyed, during and because of the war, has not yet been fully calculated. But it will be generally agreed that this must run into several millions of £N. And, of course, we all know that the cost of the civil war, in terms of human sufferings, and of human lives lost, is incalculable. I now turn to the second part of this lecture: the implications for the future economy of the nation of financing the Nigerian civil war.
I take it that we all agree that the civil war, like any war at all for that matter, could not have been fought for any length of time, let alone victoriously after a protracted campaign, without adequate funds. This being so, I would like to state that financing the Nigerian civil war – that is, making it possible for us to wage the war as we did – has left us with bad and good legacies which can have far-reaching implications for the future economy of the nation. I propose to deal with six of such implications.
FIRST: Because of the protraction and continuous escalation of the war, Nigeria is now left with a large army – about twenty times its pre-war size – which poses a serious dilemma for the economy. If we continue to keep them at the present strength, the bulk of our resources would have to be diverted for their maintenance, to the prejudice of the economy and of the masses of our people. On the other hand, if we demobilised a large number of them immediately, without their simultaneous absorption into alternative employments, our highways and alleyways would, of a certainty, be infested by hungry, discontented, and disillusioned youths who might be tempted to commit violent crimes, again to the prejudice of the economy and of the masses of our people.
SECOND: Today, most of our hospitals as well as many of our homes are filled with the maimed and the wounded of the war. For many years to come, they will, quite properly, remain an unreciprocated charge on the economy. In other words, they will remain an inevitable addition to the country’s population of non-producers who must be fed, housed, clad, and generally cared for at public expense.
THIRD: Extensive damage and destruction to public and private properties had been caused, in certain parts of the country, as a result of the war. All these will have to be made good and restored with new resources which would otherwise have been utilised for new and additional developments.
FOURTH: I did speak before of the crazy vagaries of the unorthodox market for arms and ammunition in which we were obliged to operate in the early stages of the war. This is putting it mildly and politely. In all its aspects, war is very bad business; and the unorthodox ,market for military equipment is the worst and the most sordid black market conceivable. It was abundantly clear to us that, if our proposed Iron and Steel Complex had been in production, we would have been able to produce all the small arms and ammunition needed by us, at the Nigeria Defence Industries. Partly because of the state of mind into which it was thrown by the sharp practices of arms racketeers, the Federal Military Government gave a big fillip to the negotiation for establishing an Iron and Steel Complex for Nigeria; and if all goes well, the Complex should be in production by about 1974 or 1975. All of us know what this means for the future economy of our country, especially if petro-chemical industry is established in the country, simultaneously. In concrete terms, it means self-sufficiency in practically all consumer durables; it means the local production of a good number of capital goods; and it also ipso facto means considerable savings and increase in our foreign exchange reserve.
FIFTH: The exigencies of the war did well to shock us out of our traditional complacencies, and to compel us to make a clean break with the injudicious and injurious economic policies of the
past, and chart for ourselves a new path of financial prudence. Practically, all the important measures introduced by us during the war testify to the validity of this assertion. The selective restrictions on imports and the attendant switch to import-substituting goods; the sealing of wasteful loopholes in our foreign exchange transactions and earnings, including the centralisation in the hands of the Central Bank of all foreign exchange receipts emanating from Nigeria; the financing of the Marketing Boards by the Central Bank with consequent automatic advantages to the Government and Marketing Boards alike, in additional revenue for the former and lower rate of interest, coupled with assured source of finance, for the latter, the introduction of companies super tax and payment of terminal dues – all these and more are concrete evidence of what we had done to arrest the unhealthy trends of the past, and are accurate pointers to what can be done in the future to make Nigeria a free, self-reliant, and prosperous economy.
SIXTH: The financing of the civil war has enabled us to discover that Nigeria possesses an economic resilience and expansiveness which we did not sufficiently notice before. In this connection, I would like to emphasise that this resilience, and this expansiveness, was by no means accidental.
All the requisite material and manpower resources for the early attainment of economic greatness have always been available in abundance, and are only waiting to be conscientiously recognised, mobilised, and deployed. Potentially, Nigeria is a giant economy capable, under prudent and competent guidance, of making giant strides. All those who are concerned with making plans for her forward motion must recognise this important fact, lest, as in the past, they hinder her natural velocity. There are classical instances of inadvertent hindrances in the past. The 1962/68 NATIONAL DEVELOPMENT PLAN assumed a growth rate of 4 per cent. The GUIDEPOSTS FOR SECOND NATIONAL DEVELOPMENT PLAN which was published in June 1966 assumed a growth rate of 6 per cent for 1968/73. In paragraph 10 of the GUIDEPOSTS, the following revealing passage occurs: ‘If the 4 per cent minimum growth rate per annum assumed under the current plan is realised, the GDP will amount of about £1,304 million in 1967/68. During