By Adiasa Adeleye
MANY analysts of the economics and politics of developing countries (Nigeria included) have agreed to the simple fact that what is needed for success is simple – sensible politics and common sense economics, to be backed by sound administration.
The understanding is that if politics is played in such a way that political differences are based on issues and economic policies are directed towards the goal of prosperity. Thus, the aims of a progressive government would be avoidance of disruptive tendencies in politics and preventing division of the country into the Affluent and the Poor.
In many developing countries with Nigeria as a special example, the enlightening political norms and wise economic imperatives have been sadly neglected over the years giving rise to political upheavals and the incursion of the military into civil administration.
Nigeria, for a period had witnessed political turbulence leading to the undesirable civil war between 1967–1970. Most of the destruction and dislocation of the war years are yet to be finally restored.
Also, the infrastructural damages and poor maintenance after the civil war have now become the present-day economic challenges.
Nigeria of today could be likened to ‘a sleeping giant‘ which refuses to wake up or a curious toddler who at the age of 52 would refuse to walk. The politics of today is that of bitterness and thereby, unproductive. The nation has refused to taste the lotion of egalitarianism but rather chose the path of social cleavages. Simply put, the country portrays the wonderful lifestyle of the RICH and the miserable living of the POOR.
It also shows the struggle of the middle class to form the barrier between the upper and the lowest social classes. The sorry state of class division was recently noted by a visiting British Footballer (Ferdinand of Manchester United Football Club) who said in an interview, “In Lagos, I was struck by the extreme of wealth; it’s embarrassing to say you came from a ghetto in England, once you have seen some of the poverty there.
He added, “But then we visited someone who had Plasma TVs hanging off every wall in the house. The opulence is unbelievable. There is a lot of money there, I just don’t know if it’s shared the way it should be but then that is everywhere, isn’t it.”
The picture painted by the British Footballer is not exaggerated but a true reflection of Nigerian economic predicament where extreme wealth mixes with extreme poverty.
And yet life goes on without any qualms.
The economy we are told is alright with (GDP rising by 6.2% last August), with foreign exchange reserve reaching an appreciable figure of $40 billion mark (with hope of $50 billion by the end of the year). Thus, to some people, the economy is stable with tolerable exchange reserves, high exchange rate and the expected 3 million additional jobs from agriculture; the era of undue optimism is on.
However without being unduly pessimistic, the economy could not be stable in an era of high inflation (about 11% official but about 30% felt by consumers), high cost of borrowing from the banks by small-scale industries and unfavorable foreign exchange rate (N156/$). Some analysts believe that the past President Olusegun Obasanjo, whom has been described by the CBN Governor Sanusi Lamido as a poor economist, is a better applied economist than the classical economists of the Central Bank.
As former President Obasanjo rightly pointed out, the CBN‘s monetary stance in pursuit of inflation would affect production and growth. If CBN Governor Sanusi feels that inflation is a monetary phenomenon, it is also a function of supply and demand to others. The answer to shortage of commodities is increase in production to avoid price rise.
The theoretical assumption that increase in money supply would lead to prices is ‘classical‘ in nature and does not reflect modern thinking that increase in money supply would stimulate effective demand and most likely cause increase in production.
Their assumption is that in a situation (where full employment condition is not reached), effective demand for goods would lead to increase in supply of such goods through activities in the manufacturing sector.
It may not be possible to have real economic growth (not paper growth) under condition of high unemployment, with ready and capable hands kept idle when they should be producing goods for home consumption and export.
It is assumed that if the economy is pushed-up to a fair level of full capacity, a satisfactory growth will be ensured. Experience has shown that a dormant economy might not respond positively to a policy of tight spending being pursued presently by the economists (of yesteryears) of the present Central Bank.
While the fiscal policy of expansion is to “let as much money as possible fructify in the pockets of the citizens, rather than to fritter it away on government activities not absolutely necessary, the monetary policy should complement this by provision of easy money.
Since the present Nigeria is a nation of extreme wealth and extreme poverty with a struggling middle class, far more radical measures are needed for improvement.