Saturday, June 25, 2016

Buhari’s Economic Policies Need An Overhaul

By Hector-Roosevelt Ukegbu
The Federal Government seems to be floun­dering with its economic policies, showing no particular direction or strategy. This, perhaps, should not be surprising given that President Buhari came into office with a fixed mindset on how the economy should be run. And, he didn’t want any intellectual opposition from anyone. So, in forming his Cabinet and Inner Circle, he gave short shrift to professional economists and packed his government predominantly with lawyers – to the extent that the Minister of Bud­get and National Planning is a lawyer, no less.
Happily things are changing, but not soon enough. It will take some time to reverse the damage done by the untutored, time-wasting attachment to a two-tiered currency market, with one category’s exchange rates fixed by fiat. Circumstances have forced President Bu­hari to finally listen to economists he previ­ously said had been talking over his head, not to his head.
But, certain economic policies of this gov­ernment point glaringly to the misfortune that economic policies are geared more to the gov­ernment’s saving face politically rather than putting the country on a sure economic footing for the long haul.
Almost with glee, the Information minister has stated that with the decisions to begin pay­ing N5,000 monthly to one million unemployed Nigerians, and hiring 500,000 graduates to be­come school teachers, the Buhari government is now fulfilling its campaign promises. In his recent Op-Ed article in the New York-based Wall Street Journal business newspaper, Presi­dent Buhari added that the government is now taking steps to refloat the economy.
The Central Bank itself is jumping in with a program it says will fund millions of young entrepreneurs. All these policy actions are mis­guided and are not what the Nigerian economy needs to grow again, and sustainably into the future.
Take the issue of refloating the economy, a Keynesian strategy used since the Great Depres­sion era in the West and proven to help lift strug­gling economies. The U.S. Federal Reserve Bank (the Central Bank of the United States) pumped in tens of billions of dollars monthly for several years to “refloat” the U.S. economy, and cut its interest rates for financial institutions to zero – what it called an economic “stimulus” program. Years before the world financial meltdown of 2008, the Japanese economy was mired in stag­nation as the citizens just preferred to save rather than to spend. The Tokyo government then em­barked on a policy to give out cash to its citizens so that they could start spending. These programs in the U.S. and Japan were designed to increase consumer spending, so that manufacturing and construction jobs could rise as consumer demand expanded, borrowing costs were very low, and loanable funds were abundant.

However, each of these countries has solid in­frastructure, and a vast manufacturing base, all they needed was for people to spend money to stimulate the aggregate economy. But applying the Keynesian formula this way is not appropri­ate for Nigeria under current conditions.
Unfortunately, the correct solution for the eco­nomic quagmire Nigeria now wallows in is not being provided by the lawyers and politicians around President Buhari. And, it doesn’t help that the economists in Nigeria now are bargain-basement.
What does one expect given the kind of uni­versities they have got down there? If they had good professional economists from the time mili­tary rule ended in 1999, Nigeria would not be in the dire straits it is in today, even with the “mind-boggling” corruption. Things arguably could have been at least somewhat better.
Start with Prof. Charles Soludo, who was first, a presidential economic adviser (for President Obasanjo), then Central Bank governor. Prior to coming to Abuja he had spent all his adult life in classrooms at the University of Nigeria, Nsukka, none in the real world.
Post doctoral graduation, Dr. Ngozi Okon­jo-Iweala never worked in a regular business (prior work in a commercial bank would have helped), and by all accounts never took a uni­versity course specific to the Nigerian economy. That may explain why neither of these brilliant economists gave electricity the kind of priority it should have been given, all through their years in government.
Government policy of spending on infrastruc­ture side by side with welfare spending at a time of depressed revenues exposes an ignorance of development economics.
It is a harmful strategy. With funds unavail­able because of the sharp fall in oil revenues, it is totally unwise to spend any money on anything not electricity. Money should not be spent on building new roads, bridges, or railways for now. Nigerians can live with the present roads and railways for the next one year or two.
What Nigeria needs, and very urgently, is Electricity. A hour constant electricity for every­one and for every company is what will solve vir­tually all of Nigeria’s economic problems. It will enable massive job creation by the private sector, it will draw in foreign investments, which would strengthen the value of the naira, reducing the importance of oil revenues in determining for­eign exchange rates.If you now employ 500,000 graduates and begin paying them salaries, what will they spend the money on?
*Ukegbu is director of International Research Group, a division of the Ac­crezion Corporation, in USA.

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