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By Charles Onunaiju
In the overview of its 47-page report titled “Staying the course: progress amid pressing challenges”, the World Bank claimed that “Nigeria’s improved economic policies have resulted in difficult adjustments and are starting to show results”.
Mr. Wale Edun, minister of Finance and Coordinating Minister of the economy could not agree less, disclosing at a recent event, that the World Bank inspired “difficult adjustments”, which includes removal of fuel subsidy and adoption of market-based pricing for foreign exchange has put an estimated 20 billion U.S dollars in the country’s coffer through savings.
However, no matter in what garb, the current reforms of President Ahmed Bola Tinubu is dressed, it has no prospect to produce result of economic growth and sustainable development in both the short and long terms. It is a monstrous exercise in futility, with added toxic consequences to further structurally disarticulate and distort the Nigeria’s economy.
The assumptions, fundamentals and projections of the President Tinubu economic reforms are wrongheaded and will lead to nowhere except for its implication to foster, deepen and entrench fragility in Nigeria’s socio-economic and political fabric. These delusions of the authors of the so-called economic reforms including the World Bank will sooner or later be too obvious and apparent in a not distant future. Both the prognosis, trajectories and potential outcomes of the economic reform measures outlined in the World Bank report on Nigeria Development Update” published last October is contextually problematic because it engaged all the analytical tools, rationally applicable to a formal economy in which principal or key political actors are not the central distorting factors.
The strategic economic category of fiscal discipline, central to any project of economic reforms is a costly distraction to a political process in which, a sense of entitlements, privileges and rent-seeking are the pervading culture of the governing elite. Without shaking up the political infrastructure built on the pervasive sense of entitlements and privileges, classical supply-side economic shock therapy that the World Bank has prescribed and which the Tinubu presidency has adopted in its entirety, would be mere exercise in futility, whose fanciful rhetoric at the moment, would soon fall into disrepute.
So much has been made and put out on the issue of the unsustainable fuel subsidy that was summarily removed in a single stroke and of course, the market reflective exchange rate, both of which are canonized as having such ethereal impact as to vanquish all the structural distortions that bedeviled Nigeria’s economy in the past.
The fundamental structure of the Nigeria contemporary economy speaks otherwise to the assumptions of the current economic reforms of the President Tinubu administration. The decline over the years of the core or real economic sectors; agriculture and manufacturing in favour of a dramatic shift to the extant financialization of the economy have created a deep hole and left a substantial lacuna that cannot be easily remedied by shock therapies that narrowly leverages macro-economic tools, without building an integrated economic framework that engage synergies across key and strategic sectors.
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Any meaningful and suitable economic reform measures would most certainly undermine traditional elite behavior of rent-seeking, freeing up resources for efficient allocations to value creating endeavors with implicit ramifications for commensurate rewards to productive activities and critical innovations in an era of world-wide rise in knowledge economy. The current reform measures of the Tinubu administration is not only structurally incompatible with the imperatives of the value creation and addition stimulus of the current economic challenge, but exacerbates the fragility of the economic landscape by feeding scarce resources to the perfunctory game-play of macro-economic shenanigans. Operators in what remains of the cannibalized real sectors; manufacturing and industries, medium and small scale businesses, farmers and others in the agricultural value-chain lament vociferously in aguish of how the current economic reforms is pushing them to bankruptcy yet managers and authors of the economic reforms choose to indulge in their own whims which is far removed from the existential realities of the current economic clime.
Two key planks of the government economic reforms which the world bank report hailed as “major reforms to restore macroeconomic stability are moves towards market-based pricing of gasoline (removal of fuel subsidy) and “CBN initiated major foreign exchange policy reforms that resulted in a unified, better regulated and market reflective official exchange rate (floating of the Naira and its continuous loss of value).
We shall take these two pillars of the government reforms and how it has so far worked and whether it has had any impact on the real sectors of the economy. Every average Nigerian knows that while the subsidies of fuel may constitute a fringe factor in the perennial crises of the petroleum industry, the real culprit is corruption and the intransigence of vested interest , which created and maintained the country’s well known paradox of a world leading crude oil producer but notoriously unable to build capacity for domestic refinery. The constant smuggling of petroleum products and stealing of crude oil are all elite malfeasance which are often times protected by state institution. Despite that these issues constitute the real distortion in the petroleum sector, the removal of subsidy or what the world bank called “move towards market based pricing of gasoline”, it however, remains fragile, disconnected and currently rancorous on account of in fighting by vested interests desperate to outdo each other. Government has acknowledged humongous revenues accruing from subsidy removal but the question remains, where the money has gone to. The largesse which have been substantially shared among other tiers of governments and MDG’s have mostly gone to fuel the binge in the demand for foreign exchange, triggering precipitous fall in the value of Naira. The policy of floating the naira and leaving its value to be determined by its supply and the concomitant demand for foreign currency, both generated and sustained momentum of its collapse. If the expansion of Naira supply through revenues accrued from fuel subsidy removal has, through efficient fiscal allocations, remained circulated in the economy, it would have stimulated local productivity and enhanced domestic consumption with a consequence for price stability.
Rather, the market reflective foreign exchange rate, simply encourage excess liquidity of the Naira achieved through subsidy removal to be more profitably invested in buying the foreign currency, whose value continue to rise because of bullish demands. In the current atmosphere of economic reforms, it is more rationale, and profitable to invest in buying foreign currencies, not for any purpose but to hide under the pillows and sceptic tanks. While manufacturers, industrialist and owners of small and medium businesses struggle to cope with the humongous spike both in the value and demand for foreign exchanges, speculators across the political chain of the governing elites and their fronts freely access and buy up foreign exchange to keep in reserve to fund the next political battles and maintain ultra-pleasurable lifestyles.
Against current reality of the social landscape and the impact of the reform measures, a realistic outcome is the enthronement of a predatory economy in which competitors are not rational economic agents but hounds of privileged speculators with strategic access to the collective and common patrimony from which they distort and disarticulate the already fragile and fractured economy. World Bank report insidiously either by whim or ignorance or both refused to countenance the vital anomaly that has historically vitiated the re-normalization of Nigeria’s economic landscape.
Despite the effusive rhetoric of the President Tinubu administration about the prospects of the economic reforms, it is headed to the rocks, without reforms to the behavioral dispositions of the government and its hangers-on. The President Tinubu lacks discipline in the use of foreign exchange for his numerous foreign trips and even holidays and tge humongous pay for a brand new aircraft questions his integrity to foster economic reforms and rationally allocate resources to most needed areas of the economy with prospects for value creation and additions.
Just like others, before him, the rhetoric about better days ahead will soon expire and blow back in the face of government jolting to the reality that prosperity cannot simply be willed or commanded. The resilience of the civic bond that has traditionally held the country’s social s fabric together in the face of constant governments let-down is fraying so badly and no one can tell how long it could carry on.
The economic reforms of the president Tinubu backed by the Bretton Woods institutions, itself need a critical re-appraisal and urgent reforms, such that would re-impose discipline among State actors, allocate resources more efficiently and stimulate the real sectors, outline and integrate the value chain of productivity, with express incentives to shift it to the mainstream of the economy, while reining in the excessive financialization of the economy.
Any reform policy without express punitive consequence for rent-seeking and speculative economic behaviors is a mere momentary art of political correctness doomed to economic failure both in short and long terms.
