An Analysis: Is Liberia’s Economy in Deep Recession?
Presently, our economy is facing difficult times, because there are less trade between our country and our trading partners. Industrial and manufacturing activities have dropped and most people are unemployed due to layoffs by companies and NGOs within the confined of our borders.
The layoffs have taken place over the last two years. Unemployment was also created when some government agencies or Ministries merged, like Planning and Finance.
During the Ebola crises, some companies and other NGOs in Liberia left, with the intention of returning whenever the Ebola endemic was contained or eliminated.
However, some of them abandoned all their operational activities and never returned. For the last two years, and in recent weeks, we have observed that the value of our major exporting products such as: rubber, iron-ore, gold and a few other commodities in our country have diminished drastically on the world markets. At the same time, production and operational costs have increased. While this is happening, the costs of goods and services have increased exponentially.
This is a serious downside of business activity. Businesses had no choice but to layoff many employees. Therefore, based on my first paragraph, and my review of the recent-past and current economic activities in our country, I can surmise that we are in a recession.
Maybe, some economists may not agree with me, because we all observe and analyze economic activities from slightly different perspectives or theories. But truths can only be extracted from facts and nothing else.
What has exasperated the reduction in trading activities with our international partners and the current trend as indicated above, include the dropped in actual-values or prices of some of our major exports-commodities. Hence, countries that have demand for our products now have bargaining edge with us, although we also have the right to reserve our products and wait until their value begin to appreciate on the world’s markets.
Yes! This is possible, if we have reserved-cash to infuse into our economy as stimulus. It may not be the most prudent method if there are no reserved cash to stimulate the economy.
The departure of huge contingents of the United Nations Mission In Liberia is observed to be one of the causes of the shortage of the US Dollar and so, the cost of purchase for a single Dollar has skyrocketed.
The UNMIL uses the US Dollar for most of their operational-costs and so, when said fund which is the secondary currency of our dual currency becomes tightly available, our economy suffers. The US Dollar significantly influences economic activities in our country probably than our own Liberian-Dollar. It is used for imports of major goods whether from the West, East or South of the Globe.
This trend frustrates life for businesses. Because of the reduction in such currency that overwhelmingly steers the economic activities in our Nation, wholesale and retail-dealers are getting the early pinch, while consumers get the last squeeze. The Gold Standard was eliminated in 1934 and it resurfaced in later years until 1971, when it was completely abolished by the US. It is still used by a few countries.
Therefore, I believe that we should revisit the gold standard because our country has humongous gold-reserves in our soil that can be mined with strict oversights like they do in Botswana and South Africa. When our Central-Bank prints paper-bills, we can use our gold reserves to peg the paper-bills.
My idea may be a little far-fetch to some, but I think that it should be examined in order to determine the costs and benefits to our economy. The vast experiences of Botswana and South-Africa can be rewarding lessons for us.
The limited circulation of the US Dollar in our economy while the prices of goods and services have not fallen but continued to rise is creating uneasy feelings. This has created a frustrated inflationary-environment for petty traders and for the general consumers who do not have the edge that the major exporters and the affluent consumers have.
The purchasing power of the Liberian Dollar is decreasing, because it costs many more Liberian Dollars to purchase a single US Dollar. However, prices are on the increase for most goods. Our Liberian situation is a little mucky because of arbitrarily inflations across the country.
Prices are not being monitored for willful manipulations. Unlike Africa or Liberia in particular, the Western markets or stores do price-label their goods or commodities. This gives little room for negotiations because all prices are affixed to goods or merchandise. In Africa on the other-hand, petty-traders will quickly determine your costs of purchase based on your dress code and the vehicle you drive.
Prices Hiked Last Rainy Season
During the last rainy season, in the months of July, August and September, of 2016, business fluctuations that affected our Liberian markets especially in remote areas like: Voinjama, Kolahun-District, Foya-District; River-Gee, Grand-Kru, Zwedru-Grand Gedeh and Greenville-Sinoe Counties were due to internal factors such as; heavy rain-falls that got the loose soil extremely wet, and subsequently the traveled of unchecked or non-weighted and, overloaded trucks, led to deplorable roads’ conditions.
This hindered our transportation system. Usually during this season, we in remote areas experience rampant-arbitrary inflations of the prices of commodities that are brought from either Monrovia or neighboring Guinea.
Today, the re-pricing of goods by our local wholesalers and retailers or petty traders has become a common factor in our country during every rainy season.
Again, this trend is not necessarily due to inflation that surfaces due to factual economic activities. Local businesses do intentionally re-price or hike prices even when the goods have overstayed their expirations or when there is no longer a cause to do so.
In retrospect, our major leading economic indicator(s) are no longer drought, floods, nor the dramatic increase in the prices of raw materials, whether locally or internationally, but basically it is our bad roads that bring our rural-transportation system to a complete halt.
Therefore, as we strive to reduce poverty in our country, and to increase our manpower capacity, I suggest that prospective 20018 national planning board members, assume an innovative strategy that would enhance moderate wealth accumulations among our people. Moderate financial gratifications by the Liberian populace will bring rational exuberance.
This will not eliminate poverty completely but when the silent majorities are pleased with their lifestyles and circumstances, the noisy minority will have less reason to cause noise, nor create political-irritations and headaches for the ruling Administration.
The happiness of our populace, which I like to term as popular exuberance, is something that every administration should seek for the people.
Yes! Today, we have many petty traders: whether it is mixed items in the wheelbarrows, hand-full of socks and babies’ clothes, used-jeans, cold-water, donuts, vines, fish, meat, oil, bitter-balls, kitillays or other vegetables, all merchants of these commodities seek to gain some profits from their investments.
Consequently, we all need to be guided by strategic thinking that; only development can make a difference in the lives of our people.
The development that would help grow the economy and increase employment in the short and long-term is agriculture, with emphasis on (food production). When we become self-sufficient in consumable commodities that can be produced right here at home, and where we can even export some, we will be creating jobs and reducing our unemployment rate. This will eliminate world weariness and resentments for our national government by the noisy minorities.
It will eliminate cultural disharmony and political upheavals or irrational angers among citizens. I was especially pleased to have heard the Minister of Finance and Development Planning, outlined in his recent press-briefing that: Liberians should foster agriculture development as a priority in our overall development agenda. This is good for our labor force.
Another key way to supplement this exuberance or rejuvenate our people is the establishment of a stock market. Genuine moderate wealth accumulations by most of our people will rejuvenate their lives.
The political parties that are vying for electoral offices this year must comprehensively promote economic, fairly-political, social and ecological advancement and must continue to advocate for continual reforms.
Why Should We Establish A Stock Market?
In today’s global economy, stock markets have become the driving economic force in the accumulation of wealth (capital accumulations). To put it flatly, one of the best methods to help our people create wealth for themselves, involve the establishment of a stock-market.
Yes! We are ready for such market. Why wait this long in the first place. When Liberians and other legal residents in our country are trained to invest in stocks for the long-term financial security despite some risks, they will likely accumulate wealth for their own livings, financial-disposure and future retirements.
Stock-market is about capital markets or long-term investments. In our economy today, with the exception of profit making corporations like: the (LPMC)-Liberia Produce Marketing Corporation, (LPRC)-Liberia’s Petroleum Marketing Corporation, (LNPA)-Liberia National Port Authority, (NTA) National Transit Authority and a few others; almost all the largest businesses are owned by elitists and some foreign nationals who may care less about our social overhead developments. Hence, won’t it be prudent if these companies go public while our citizens invest in their shares.
We must create the atmosphere where most citizens will have the opportunity to participate in the creation of wealth by investing in various companies through the purchase of their shares. Investment in stocks has shown that wealth can be accumulated generously, but gradually overtime, once the companies are growth oriented, well managed and are doing well while the value of their shares appreciates.
When a stock market is established, there will be many investment vehicles that shareholders (investors) will take advantage of, and these include: Special Retirement-Plans (SRP), Individual retirement Accounts-(IRA); Custodian Accounts-CA, Profit Sharing Plans-(PSP), Defined Contribution Plans-(DCP), Defined Benefit Plans-(DBP) Tax-Deferred Annuity Plans (TDA), (403b) and Payroll Deduction Savings Plans-(PDSP). In addition, it is speculated that Lofa county alone has enough granite, marble, limestone and smooth-clay and the four essential elements that are needed to make cements for commerce-e.g., silicon, aluminum, calcium and iron ore to supply the Liberian economy for the next 40 to 50 years.
Calcium is said to be the main ingredients for cement and it can be obtained from limestone; while silicon can be obtained from sand or clay, in addition, aluminum and iron can be extracted from bauxite and iron-ore, and only small quantity of the last two are said to be needed for making cement.
The elements/substances named above are said to be in huge deposits in hills and mountains in Lofa County. Other counties like Nimba and Grand Gedeh may have equal or higher quantity. These valuable elements can be produced at cost effective mining, due to modern technology.
What we need is the training of manpower to operate and manage such projects or corporations-and the provision of capitals to start such enterprises. The cements produced in Lofa, Nimba and Grand-Gedeh could be sold in our markets around the country for less than $6USD or its equivalents in Liberian Dollars. This will enhance savings and conveniences for our local consumers. Until then, I rest my pen.
Samuel TM Dunbar, Contributing Writer
[email protected], 0880702909 or 0770015785