Tearing The Country Apart For The Wrong Reasons/

As the debate for secession or restructuring continues unabated, the underlining cause for agitation is, as usual, glossed over. It is the economy - Stupid!!! It has become fashionable these days to comment on the state of the politics in this country. Unlike the thinking of most elites in Nigeria, whose primary concern is self, the writer sees the discus differently.

For so long, Nigeria has focused on the macroeconomics and microeconomics and has ignored welfare economics. Welfare economics is a branch of economics that deals with normative issues. Its purpose, unlike the other over flogged branches, is not to explain how an economy works, but to assess how well it works. Our renowned economists had, for reasons best known to them, ignored welfare economics since the introduction of the Structural Adjustment Program (SAP) in 1986. It is the reason why we have not realised that whatever we had had not worked well in Nigeria. Consequently, the majority of Nigerians, in Nigeria, have found themselves, due to no fault of theirs, outside of the Nigerian economy, or at best on the periphery.  

This country is not the Nigeria I grew up. Where are the likes of Sam Aluko in today’s Nigeria? Years had gone by when bold economists were never afraid to come out of the cupboard and challenge populist economic theories. Today, famous economists have littered Nigeria's landscape; these are “twinkle, twinkle little super stars” - graduates of faculties of social sciences of ivy-league colleges. And, you wonder for what? Why would those who should talk, hide in the cupboard? Where also are Nigeria's graduates of the best world faculties of engineering? The Nigerian socio-economic woes and their solutions have gone beyond the classroom stuff. 

To come out of our economic quagmire, we need these so called experts commence debates on how to get us out. COREN needs to get out of their shells and, at least, come up with gadgets that will ease the way the lowly among us do menial tasks; for crying out loud. Most of these fellows graduated with flying colours - at least on paper. Why can they not take Nigeria out of this logjam? These people ought to realise that it was the wealth of this nation (either personal or public) that trained them; in whatever way, we want to argue. Besides, most still carry Nigerian passports, including those with dual nationality. 

In other countries, economists and engineers, in their separate fields, argue from both sides of schools of thought to forge a way-forward. In Nigeria, all the so called professionals and professors say the same things, waiting for the government, devoid of developmental arguments. Everyone considers it wise to conform to a familiar theme; afraid to differ. Nigeria's economic growth, without delusions, is glossy painted and that is why it has not translated into jobs or joy. The country's earnings are majorly from oil receipts (about 96%) by foreign companies that operate 90% on the other side of the Nigerian economy. Since the 70s, the Nigerian economy has been running on rents like the legendary “omo oni ile", somewhat without real productivity. It is the reason many public holidays outside of oil production have not affected the economy. 

The more public holidays that we have is even better for the economy in any case because the civil servants and their political bosses will steal less on those holidays. You can imagine if the country would have to be on vacation for 365 days, it would only affect 4% of our foreign earnings and it would mostly eliminate corruption. That Nigeria needs to diversify its economy, sounds like a broken record, as if Nigerians are not diversified enough. We are bamboozled every day with economic and technical jargons that have not improved the living standards of Nigerians - both wealthy and poor. It is not that the rich live a real life, they are only able to afford what ordinary people in some countries have taken for granted; ours is an alternate lifestyle to the good life. 

The Nigerian economy has faltered long enough; electricity that the rest of humanity has taken for granted has become a puzzle and unattractive to investors. Every Nigerian knows how to produce electricity with over 60 million owning their generators; it is the production of electricity of better economies of scale (the commercial power) that has eluded us. To say there is nothing wrong with us in this country, is, to put it mildly. The elites in Nigeria fiddle, while the country burns. The madness is such that even the privileged amongst us still live below par when compared with the living standards of the less privileged in some sister countries - where you turn on any switch, there is always light; you open any tap, there is always water. 

We are so busy trying to survive individually, and recently trying to tear the country apart, with little or no capacity left to nation building. Those in positions of trust and responsibility often lace their decisions with personal interest. Suggestions to enhance nation building, which does not put money into the pockets of those in authority, are never considered worthwhile. So, for many years in the country, we gleefully continue to panel-beat unworkable systems; mostly only beneficial to a few individuals as against the majority. Marginalisation of the majority of us, irrespective of tribe or religion has taken a backstage, while the elites want us to believe that it is the exclusion of our tribe that should take centre stage. 

Monetarism is a branch of capitalism; that, for instance, has not worked for the majority in Nigeria, not even remotely, but it is not on the discussion table. Most Nigerians hope that their time will come somewhat; some day, and so on, just as it had profited some of their friends or relations. Otherwise, alternatively, we want to tear it apart. Do not get me wrong, capitalism in any form is still the best, but monetarism that IMF peddled from the mid-80s that saw the death of Nigeria’s industrial base remains suspect. The structural adjustment program (SAP) institutionalised monetarism (using the effect of market forces to determine the health of businesses, among other things) in Nigeria’s economy as against Keynesianism (allowing a government to bail out companies during cyclical lows). 

The result of the misapplied model has destroyed Nigeria’s road to industrialisation as our wealth creation on the factory floor veered off course into the abyss of creating national wealth on the trading floors (commission taking) that generated fewer jobs at its best for our teeming youths. In the past 45 years of allowing the market forces, alone, to determine economic road map, the imperfections in the market (individual greed, non-equity, a weak tax base, the value of local currency) have derailed most Third World countries’ growth. To come out of the economic quagmire, the following we must do:

1. revisit the method used to determine the value of the currency (Naira) against other currencies to reduce distortions that militate against an equitable value;

2. find a way to empower the government to control the cost of borrowing, i.e. interest rates;

3. lessen the pressure on the oil receipt by funding the national treasury through the tax route and,

4. constrain salaries and overheads of civil service to only the tax revenues to lower the pressure the government, its arms and agencies exert on the oil receipts.

The exchange rate of the Naira is in a runaway mode, and it is only being held back by an unsustainable intervention by the CBN. The faulty tax system in Nigeria, allows the under-taxed majority to distort the money market. My non-taxed excess, in my pocket, for instance, would easily afford an unrealistic exchange rate. This process will generate a faulty market-force, and the ensuing value of the Naira remains, therefore, suspect. This process produces a large volume of un-taxed free money within the system, that distorts an unparalleled Colossus, especially since what the under-taxed regards as a real exchange rate is what becomes the official exchange rate for everybody (including those that pay their fair share of tax) in Nigeria. It is a shame that it is in the parallel market that the value of the Naira is determined 

Even if this weak market force is tolerable to most Nigerians, it is evident that it is not acceptable to potential foreign investors as they have shied away. It has to be a disincentive to foreign investments since it does not secure invested funds. You could imagine an investor that brought in a billion U.S. dollars into Nigeria when the exchange rate was at N240.00 to $1.00, only to have it valued to a fraction of what it was worth in dollar term within a year due to the madness at the CBN. In these regards, the only quick-get-in and quick-get-out kind of investment would risk coming to the Nigerian market and not a long time investment in manufacturing or the power sector. The investor would be filing for bankruptcy even before opening his doors for business.

The money in the commercial banks does not belong to the banks, but to their depositors. Unless the government’s influence in these bank deposits is overbearing, banks’ compliance with government directives on interest rates will remain illusory. The Federal Government needs to bring back its money to the commercial banks as a starter to have some influence on deposits. One of the tools used to enforce interest rates determined by the government’s instruments, in a capitalist system, is the power of the insurance industry on the banking deposits in such countries. State legislations institutionalise insurance businesses. As such, government influence in insurance industry’s deposits in the banks would be overbearing. 

A sound insurance policy will also boost insurance industry’s deposits in banks with increased premiums. With the number of economic activities going on in Nigeria today, insurance deposits could quickly become the largest deposits in Nigeria’s commercial banks. In doing so, the government could then use such influence on insurance money together with public funds in the commercial banks as leverage to enforce its directives on interest rates. Until that happens in Nigeria, the imposition of interest rates by the government will continue to remain unenforceable. Individual depositors would by then no longer be the largest and would have no other choice but to abide by CBN directives on interests. Will it kill incentives to savings? I do not think so.

A tax reform or a policy shift in taxation as the Acting President recently signed an executive order is a step in the right direction. Most economists agree that levies from everybody old enough in the community that meets certain criteria are what fund government activities. The process is known as taxation. There is no alternative to tax for the running of governments, and there can never be a perfect tax system. The idea of tax has been with humanity since Mesopotamia when the citizens paid for the dredging of the Tigris and Euphrates many thousand years ago. The goal is toward social equity and the common good that will mitigate present agitations. People pay higher as their wealth increases. It makes sense because the rich have an economic advantage over the rest of us. 


Reactions

Join the conversation through disqus comments or via our forum. Click on any of the tabs below to select your desired option. Please engage decently.

  • Disqus Comments
  • Facebook
  • Forum Discussion