Nigeria’s economic confusion: what is going on?

Rising unemployment, galloping prices of food and other consumer goods, delayed or unpaid salaries and entitlements, massive devaluation of the Naira, stagnant housing market, shrinking household incomes, haemorrhaging stock exchange and sundry complaints are all one hears these days. Why are these happening now, and why has the Government failed in addressing these issues after […]

Rising unemployment, galloping prices of food and other consumer goods, delayed or unpaid salaries and entitlements, massive devaluation of the Naira, stagnant housing market, shrinking household incomes, haemorrhaging stock exchange and sundry complaints are all one hears these days. Why are these happening now, and why has the Government failed in addressing these issues after over a year and a half in office?
On its part, the Government insists, and rightly too, that the mess it inherited was horrendous but that it has started taking the right steps to turn things around, and that things will soon improve. The critics, led by the PDP and other discontents, believe that it is neither doing enough nor is it even on the right track. The citizenry seems divided between those who support President Buhari for his successes in fighting Boko Haram, dealing with massive corruption, and for ongoing changes in the way public institutions are run, and are thus willing to give him some leeway on the economy, and those that expected sudden changes for the better who are angry that food and other prices are getting too high. Money is harder to find, and so are jobs.
In between, and even among those who have taken sides, are several that simply want to understand what exactly is going on. Unfortunately, all we hear is a cacophony of noises by the “experts”, the ignorant and the attention seekers, each trying to out-scream the other, to tell his or her own version of what is wrong with the economy, and what should be done about it. Even the trained economists seem to shy away from explaining much, and keep suggesting that the way out is to bring them into managing things, as if both the explanations for, and the way out of the economic quagmire, are trade secrets. Surprisingly, this includes the Nigerian Economic Society, which ended its Annual Conference last September without adding much to our understanding.
The biggest obstacle to a meaningful understanding and debate seems to be the bunching of all the issues together, and addressing them as if they are one and the same. We seem to be conflating economic crises (structural, fiscal and others) with recession, while the Government (especially Buhari himself) is adding an “institutional” dimension to the debate, arguing, quite correctly, that corruption, if not rooted out, will make established institutions not to work properly, and everything else would be meaningless.
We are facing two separate but related issues; a crisis and a recession. When the wealth being produced in a country (GDP) declines for two or more successive quarters (six months or more) that country is said to be in “recession”. Depending on the actual cause or causes, this is easier to reverse. When the whole economy is entering a phase where it cannot meet the consumer goods, services, infrastructural, education, health and even security and administrative needs of that society, then we have a “crisis”, a turning point when painful decisions must be taken to bring about long-term necessary changes. If it is only the governments that cannot raise enough taxes to carry out even their normal functions or pay salaries and other obligations, we often talk of a fiscal crisis. When all these combine, a recession would seem like a child’s play because even the very legitimacy of the state and those running it will be questioned, not just by the likes of Boko Haram, the Niger Delta Avengers and common bandits but even by ordinary citizens.
Structural weaknesses and rigidities causing a crisis must be addressed with much higher priority. The benefits will be more employment, inclusive development, self-reliance and a healthier economy, but these outcomes take longer to achieve. The Government is right to prioritise this, and try to get us to produce more, export more and reduce our dependence on imports. Hitherto, the system has benefited only a few. While businesses were doing well, they were employing less and less, and paying starvation wages. The oil money was being stolen by politicians, “subsidy” swindlers and their cronies. Things could not continue unchecked; even the treasury was empty. Structural and other changes are needed, and we need well worked-out approaches, policies and programs for our own long-time prosperity and survival. Changes often come with painful costs, but we must find ways of minimising these.
Recession has more immediate impacts however. Interestingly, those who had hitherto turned a blind eye to joblessness, poverty, inequality and misery around them, are now pretending to be champions of the poor, exploiting the hard times the masses are going through. It still does not matter, because the complaints are real, and we must look for short-term, immediate palliatives to soften the burden on the common people.
While addressing the solid structural changes that need to be put in place for longer-term health of the economy, we need to fight the current recession, and get back to positive growth. When an economy is stagnating, and prices are spiralling we have stagflation (stagnation plus inflation) which can only be checked by massive new spending and making it easier for businesses to access credit. By reflating the system, getting the real sector to reorganise, re-tool, provide more goods and services, we create more jobs and incomes. However, we must be careful not to worsen inflation. Economic crises and recessions are not the same, so we must have a two-track, but coordinated, approach so as to simultaneously address both.
Yes, money supply and government spending must go up. But how? We have devalued indirectly, but the extra Naira is just an illusion. Only the salaries and wages suffer; everything else is more expensive. The avalanche of foreign direct investments we were told to expect did not materialise. Only crooks can do business with the current rates, while the Central Bank ignores capital control. Some are saying we should sell our assets, for today’s benefits. But what of tomorrow? External borrowing is a way out, if used judiciously for infrastructure and the productive sectors.
Whatever happens we must not be tempted to go back to the old ways of corruption, massive importation and lack of long-term plans. It is also necessary to define our categories clearly, and specify our proposals. While our diverse positions may all have valid underpinnings, and the need to address the issues raised are also valid, we must distinguish between them and devise proper approaches to each, in a systemic manner. There are no magic solutions, and we must not prioritize the present at the expense of our future. Too many are just complaining but do not give concrete alternatives. If you have answers, say them. Democracy can only survive with vigorous, informed and open public debates. It is your nation as well.

This article, designated for Tuesday column (backpage), was not published in its usual space due to technical glitch.