By Adisa Adeleye
There is little doubt that the present Nigeria owes its fragile existence to the amalgamation in 1914 of the Southern and Northern provinces by Lord F. Lugard. It appears like a miracle that of all the world‘s painfully contrived associations of multi-ethnic groups in the 20th century, Nigeria alone remains superficially united. Soviet Union, Yugoslavia, Czechoslovakia and other mature societies have dissolved themselves into smaller, but independent countries.
Several times in the past, Nigeria had perched on the precipice of disaster, but saved only by Providence. The disastrous civil war had been forgotten easily in an atmosphere of rosy life and prosperity associated with oil bonanza of the subsequent decades. The Nigerian society became more gluttonous with sharper taste for foreign goods and foreign currencies. The foundation of subsequent economic decline was laid during that period of conspicuous consumption of imported luxuries.
The long period of military rule seemed to have encouraged the mood of laziness, mental lassitude, depravity and painful brain-drain. In the country, many reasonable citizens were cowed and others became cunningly quiet in the face of threats of sudden disappearance or incarceration by the authorities.
In an attempt to survive by all means, some Nigerians became money lusting – veritable hustlers and a laughing stock in the comity of nations. Civil strife was apparent when that divine intervention stopped the abysmal political descent in 1998.
The dreary political conditions of the 1990s under military despotism were compounded by the distress of economic stagnation of the period. There was mass unemployment, productivity declined and industrial capacity utilization was at its lowest point. Poverty bred hunger, and crime rate soared. Citizens became more violent and ruthless and mob punishment assumed its own form of savagery in the hopeless scenery of lawlessness.
The return of democracy at the tail end of the century brought a sense of relief and a ray of hope, even if there was a good ground for pessimism. While it is true that multi-party system could breed political reforms, the experience so far has shown that there is little or no difference among the parties on issues that affect the pockets of their members.
Their legislators, unfortunately, fought with one salient voice on the moral justification for their juicy allowances instead of becoming the defenders of the poor and harbingers of hope for the future. Of recent, some legislators are accused of becoming bribe takers with sticky fingers and insatiable appetite for good things of life.
There is no doubt that the last two years have witnessed the intensification of economic reform program under President Goodluck Ebele Jonathan. The reform is anchored on the principle of “Economic Stability and Poverty Alleviation” which is necessary for political stability and prosperity of Nigeria. It is however surprising, if not really painful, that several attempts by the previous governments (military or civilian) have not been successful as expected. The realization of economic stability (with full employment) has become very elusive.
What are the factors that have militated against the previous attempts? Many analysts have always pointed to the “Vicious Triangle” – Bank Lending Rate, Foreign Exchange Rate, and Inflation Rate. Instability in any of these could undermine any economic policy.
The main problem of the previous governments including the present one is the inability to reconcile the policy of cheap lending (cheap money) with those of rising prices (inflation) and falling value of the national currency (depreciation). The conflicts of reconciliation have resulted in observable distortions and instability within the economy.
According to the stand of the present government, macro-economic stability has been achieved through increase in Foreign Exchange reserves (about $48b); GDP growth rate of about 6.5% and stable exchange rate (about N159 to 1US$), but with heavy unemployment rate of over 20% of the work force.
What is yet to be evaluated by the government and its advocates is the consequence of high unemployment on the political and economic stability of the country. As observed, heavy unemployment in the country has bred poverty with its associated criminal acts of armed robberies, kidnappings, and wastage of human lives. These are heavy prices to pay when compared with elegant statistical figures. It is possible to allow a moderate rise in price level (inflation) to achieve economic growth with rising employment.
There is no doubt that a policy of low lending rate by the bank to the real economy would tend to encourage domestic production which needs higher effective demand to sustain it. A rising effective demand needs ejection of more funds to create higher purchasing power for the consumers. Higher liquidity in the system should not be mopped by the Central Bank but rather, should be channeled to higher expenditure on consumer goods and infrastructural developments.
However, there is the justified fear of the Central Bank that if the excess liquidity in the system is allowed (unchecked) to operate as basis of Banks‘ credit, the volume of loans would become so huge and the purchasing power so expanded as to cause a boom and consequent disaster (hyper-inflation).
The foreign exchange mechanism is an intriguing one for the Nigerian economy which relies on foreign imports (essential raw materials, all types of capital equipment, spare parts, and food) for its survival. A depreciated currency leads to increasing cost of locally produced goods and rising prices of locally produced goods in both domestic and foreign markets. Though a strong naira might induce high imports of foreign goods which might affect the country‘s balance of trade, but the constant inflow of foreign money and some fiscal measures should take good care of this fear.
The ideal solution for a lasting prosperity is the resolution of conflicts within the inter-dependent relationships of “The Vicious Triangle” to achieve the desired macro-economic stability and tolerable rise in employment.
As I have suggested before, this resolution depends on sensible politics, common sense economics which is aided by good administration (less corruption).