Agenda for Nigeria’s economic recovery and transformation (II)

By blindly pursuing and implementing the concept of “market forces” in economic reforms, the Bola Tinubu administration is bound to inherit the flaws and negative consequences of that model. Let us examine the main elements of the reforms closely. We were told the withdrawal of subsidies were to allow “market forces” determine the “real price” […]

By blindly pursuing and implementing the concept of “market forces” in economic reforms, the Bola Tinubu administration is bound to inherit the flaws and negative consequences of that model.

Let us examine the main elements of the reforms closely.

We were told the withdrawal of subsidies were to allow “market forces” determine the “real price” of petroleum products in the country and that the subsidies being paid sustains inefficiency and blocks resources needed to provide social services like health, infrastructure and educational development. But over one year since the removal of “subsidies” we have seen that the “subsidies” removed benefitted only but a few vested interests and aided the subsidised capture of the oil and gas industry by these same interests.

We were also told that the hike in interest rates that the Central Bank of Nigeria (CBN) has been implementing was to rein in inflation by restricting the money supply in the system. But then, which business will borrow funds from the bank at over 30 per cent interest and not hike up the cost of its product and services commensurately? From our experience with these monetary measures of the Tinubu economic reforms, invariably, we see instead, unrelenting inflationary pressures on the economy as businesses jerk up the prices of their goods and services to compensate for the cost of money.

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The floating or devaluation of the naira is predatory economics pro max. Here again as with the other policies, the administration says that the value and fate of the currency should also be determined by “market forces”. But in real terms, what we see is that the CBN has become a glorified bureau de change, arbitraging with the foreign exchange reserves as the currency fluctuates in the forex markets.

It is similar also with the tax regime under the administration’s market reforms. Like the monetary policies, the fiscal regime is prohibitive and counterproductive to businesses and individuals. Businesses that are struggling to cope with high operating costs now have been slapped with value added taxes on goods and services. Many businesses have collapsed under this policy.  The sort of fiscal policies being embarked on is only feasible in an economy where the aggregates of employment, production, services and incomes are determined.

President Tinubu’s reforms have not taken the necessary steps to integrate the forces of production in the economic process; workers, employees and employers, the oil and gas sector, transportation sector, production, etc to play their roles in the economy. These key players in the economy have all been pushed into disarray and uncertainty as they face the double whammy of unfavourable “market forces” and harsh domestic economic policies. How then can they hope to sustain themselves under such conditions?

The indicators resulting from these uncertain state of affairs is clear; stagflation, exchange rate instability, unemployment, declining productivity, low purchasing power, declining value of the currency, etc.

Essentially, Tinubu’s economic reforms are predatory, narrow and an abdication of responsibility. It is predatory because it offers him the opportunity to embark on the capture of the Nigerian economic structure using policies and programmes that aid this exercise. It is narrow because it restricts the beneficiaries of the reforms to a precious few against the majority of the populace and by claiming that the reforms are anchored on undetermined “market forces”, and it absolves the government from the vicarious responsibility of protecting the interests of the people to whom it owes its being and essence constitutionally.

Taken together the real aim of Tinubu’s economic reforms is the pursuit of a franchise for the eventual capture of the Nigerian economic space. With his economic and financial hit men in place in the various sectors of the economy and with him at the top of the pyramid, President Tinubu hopes to govern Nigeria just as he did in Lagos as governor.

Let us be clear about it, Tinubu’s reforms are not structured or meant for economic development of Nigeria. The World Bank and IMF from where President Tinubu seemed to have got the approvals for the franchise of economic capture of Nigeria will encourage him to continue to step his foot on the pedal because it serves the economic  interests of their principals. And since the economic reforms are being implemented in the form of a franchise by President Tinubu, they have no fear of a default or non-implementation of any of the agreed terms of the franchise. Nigerians groaning under the harsh economic policies of President Tinubu can expect no let up because he has to fulfil the terms of the franchise entered to with the two agencies. That is why periodically, we hear officials of these institutions instructing the government not to relent and indeed to increase the tempo of the policies to which the Tinubu government always obeys.

Ultimately, Nigeria cannot expect to realise its economic aspirations under the Tinubu economic reforms. For one, “market forces” driven economic reforms are no longer feasible in today’s internal and external economic relations.   This is what Keynes saw 103 years ago and convincingly repudiated with an alternative model of economic management. It is also what the Americans discarded in 1933 and Europeans from 1945 to date. None of the top 20 economies of the world implement the “market forces” mantra in their internal and external economic relations. Their economies are structured along the lines of Keynesian aggregation of the key economic sectors/actors to stimulate and sustain demand internally and in multi-lateral economic cooperation within regions and globally.

As countries around the world have since found out, “market forces” determining economic outcomes is a fallacy because all along the chain of economic interactions, there are human interventions acting to opportunistically distort economic activities either through privileged insider information, illicit connections and influences, and the use of corrupting power to determine favourable legislation and policies. We have seen proof of these factors in the oil subsidy and naira floatation and other policies of the Tinubu administration under the “market forces” economic reforms. And expecting economic development and growth under such circumstances is a tall order.

Through the ages, labour has been the key factor in human economic relations. The value and outcome of any economic interaction is determined by the quantum and quality of labour expended in the process.

Tinubu’s economic reforms are mainly focused on tax and revenue collection. Its currency flotation and monetary policies also place more emphasis on value of money in the economy than anything else.

But at this point in our existence as a country, we need to shift from a service economy where emphasis is on tax and revenue take to an economy where production is the focal point of economic activity. This is where an economic management structure of government and labour is imperative.

At this point in our economic development as a country, we are at ground zero; we need to commence industrial development and production; we need to build infrastructure right across the country on a massive scale over the coming years and we need large scale agricultural development.

If we leave these national economic imperatives to the dictates of “market forces”, we will never get there. These massive economic projects require government intervention to mobilise our labour resources across the country to deliver. It first happened in 1933 as a key element of American recovery programme, which worked to deliver public works projects like Hoover Dam, Tennessee Valley projects, the super highways and urban renewal programmes.

The government and labour co-determination was also key to the “Wirchaftswunder” or German post war economic miracle of economic recovery. Indeed, it was the template used by most countries in Europe and around the world for post war economic recovery.

How did this work and how can Nigeria adapt?

(To be concluded)