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.
*Buhari |
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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