Neo-liberal policies won’t solve Nigeria’s economic problems – Prof Kwanashe
Do you share the view that the World Bank induced policies end up crippling the economies of third world countries? The first observation is to realise that we are also part of the bank that advises us on policies. Although the strength of the member countries differ, but being that the present minister of finance […]
Do you share the view that the World Bank induced policies end up crippling the economies of third world countries?
The first observation is to realise that we are also part of the bank that advises us on policies. Although the strength of the member countries differ, but being that the present minister of finance was a former managing director of the bank, I would argue that a number of third world countries make inputs into the bank, though the interest of these countries are not well represented in the bank.
Nevertheless, we have to be careful in pushing all the blames on the bank. There are a few countries who would say we know our country and we have listened to your advice but this is the direction we want to go and there is nothing the world powers could do than to say we are not going to assist you.
The problem with most third world countries, Nigeria inclusive, is the fact that the elites like the World Bank policies because it is advantageous to them even at the detriment of the generality of their people.
We have to look at the internal contradictions and the external dynamics if we really want to resolve our economic issues in favour of the majority of the people. We have to solve the internal contradictions to be able to know why a country like Nigeria with huge human and material resources has not been able to develop its people. It is from here that we can start to look at external dynamics.
How do you see the strategies of the Minister of Finance on the economy?
Let us start with the most controversial, which is the removal of the fuel subsidy. I don’t believe that the price regime of most things in Nigeria, not only oil, is sustainable. The problem of the debate is that we are running away from the critical issue that revolves around the pricing of these resources. The debate is not looking at the issue in a holistic manner. The efficiency argument and the political economy argument are very critical. Basically, on the level of efficiency, there is no doubt in my mind that a country like Nigeria cannot continue to import refined products at the price we are importing it, if the information we are getting is correct. It is not sustainable.
On technical basis, why are we importing fuel while we are oil rich? The answer is that they have thoroughly mismanaged our refineries and we are not able to build new ones. We suppose to clean up the system and do away with corruption then we can do away with subsidy. The best thing Nigerians should do, especially the labour and civil societies, is to rise up and ask those in power some basic questions than fighting the removal of fuel subsidy. We should ask them why they are mismanaging our economy. This should be a better fight than fighting the removal of fuel subsidy. We can’t continue to run dilapidated infrastructure in the oil industry that prevents us from supplying our own fuel. If we can build more refineries and sell our crude oil to those refineries not necessarily according to the world pricing because it is our resource and we want our people to have relief, then the price of fuel in Nigeria would actually come down. But in a situation where we import petrol from abroad and pay subsidy to a foreign supplier, not even Nigerians, I think that should stop.
Among the controversial issues being debated is the issue of the Sovereign Wealth Fund, what is your take on that?
I think that is less ambiguous; it is clear. I support that hundred per cent. This is the absorption capacity of the Nigerian economy on annual basis to use all that is coming out from the oil resources, which have led to the mismanagement of those resources. We are yet to develop the institutions and the capacity to effectively utilise these resources to maximum point. Two, there is need to stabilise the economy over a medium term and you can’t do this unless you have some funds that ensure that when the economy is moving below or above its average growth trajectory, you stimulate it. And that gap is made up of some funds. That is what the sovereign wealth fund is supposed to do for the economy, to provide a reservoir of funds to enable you stabilise your economy when there is crisis, especially when your absorbing capacity is such that when you pump too much money into the system, you would have a lot of wastages. What happens if oil price falls by 50 per cent, are we going to cut our budget by 50 per cent; that would certainly distort the whole economy. This is why we should have a reserve to fall back on.
Thirdly, this generation should know that oil is an exhaustive asset. We can’t say that this generation is getting the money and should spend all the money. This generation should look at the next generation to come. So, from a purely economic perspective, the sovereign wealth fund is a stabilisation fund and if what is happening in Europe now is anything to go by; we should have such fund.
Since the assumption of office of the incumbent Finance Minister, why has the Naira continued to depreciate against the US dollar?
The more our naira depreciates, the more expensive imported items will be. Theoretically, that should make us less dependent on imported items. It should make us consume local products rather than imported products, unless we don’t produce such products locally. Let me be careful here because I am only talking on consumption here. But as Naira depreciates, your input into the production process would increase and the cost of production would increase. There is no doubt about that. Again, the CBN has tried to stabilise the value of the naira with the belief that the decline in the value of the Naira would harm the Nigerian economy. I think the CBN has done a good work there because we should have a region in which the naira can fluctuate.
To make any meaningful analysis on the new strategies that are now being put in place, we have to look at the Nigerian economy from the neo-liberal perspective. What informed policy making in Nigeria today is neo-liberal philosophy. We voted a government that all through the campaign made no pretences about the type of the economy it would run. Then what do you expect? How would you expect neo-liberal economy not to rely on market?
If you look at the progress of our development, the only person, to my mind who came out with a different system of running our economy, despite being elected on the platform of the neo-liberal perspective, is President Yar’adua. He upgraded the planning mechanism; he started putting in place a mechanism to plan this country on middle and long term basis. He sets targets and that was when planning of our economy came to limelight. He tried to remove this country out of this orthodoxy.
The question we should ask is; how many Nigerians are contesting the neo-liberal posture of this government? Where is labour, civil society groups; are they contesting it? You can’t sit back and say we are part of the global economy therefore we accept the market liberalisation; we accept the neo-liberal orthodoxy from our leaders and turn back and say why are they deregulating, why are they liberalising while we did not fight for the change of what the country bargained for.
From the point of view of the political economy, I don’t think you can solve the issue of poverty, the issue of employment and other related issues using neo-liberal policies.
This takes us to the issue of job creation; how do you think Nigeria can handle this problem?
It is through empowerment. The era of people depending on government jobs is gone. Our recurrent budget is out of order. How can you spend 72 per cent of your budget on recurrent cost; when some states are spending even more than that on paying salaries? And the salaries are only to about two to three percent of your population. We must empower small and medium enterprises to create jobs. We must empower small scale farmers to be efficient in their production and be globally competitive. We can spend money to support individuals to create wealth.
How would you assess the 2012 budget presented last week?
As an economist, I will tell you that security is not a productive sector of any economy. When we aggregate budgets, we look at the sectors that are directly responsible for production and security is not one. This year, we cannot do that because of the huge allocation of resources to security. But can you have investment without security? Can any investor, even local ones, invest in the economy without security? Can you have production without security? The insecurity in the country is even making our local investors to look elsewhere like Ghana, South Africa and even Niger, not to talk of foreigners coming to invest. If I tell you I know the position of the equilibrium, I am telling lies because I don’t know how much it would cost to secure Nigeria. I don’t know whether that money would be effectively utilised. But the implication of what we have in that budget is that the money that is supposed to be used to develop the economy has been shifted to security. It means that the level of poverty in the country will continue to be the way it is. The infrastructure will continue to be the way they are; unemployment will continue to be the way it is; investors will continue to run away from the country among many other implications.