My Layman's View

May 22, 2015

Change for political unity and economic devt



By Adisa Adeleye

It is just another week to the change-over to a new administration following the unexpected defeat of the ruling party, the Peoples Democratic Party (PDP).   The victorious party, All Progressives Congress (APC), under the leadership of a former army general and dictator, Muhammadu Buhari, who appeared to have become a born again into a world of enviable and delightful democracy, looks fully ready.   The assumption is that Buhari could turn out to be a genuine democrat.

It should be a moment of happiness for those who have clamoured for a ‘change‘ (which has happened) to express themselves in a fruitful re-examination of past political and economic policies which seemed to have hampered national unity and rapid economic development.   In that context, re-appraisal should not be interpreted to mean a wholesale condemnation of previous accomplishments of the previous governments.

PDP-APC-logoOf recent, Dr. Ngozi Okonjo-Iweala, the Coordinating Minister for the Economy and Minister of Finance, has been busy defending the record of Jonathan government in building a virile economy and leaving a sound legacy behind.   There is no doubt that the present administration has tried its possible best, and that the Finance Minister has been outstanding in managing a very difficult but stubborn economy.   If positive economic results are paltry, the fault may necessarily be somewhere else.   The idea of a change, it is generally assumed, may be a way to find the missing link between abundant mineral and human resources and prosperity.

Some observers point out always that there should be no direct link between Nigeria and poverty since the country is blessed with all factors that make for economic development.   Since 1960, various governments (military and civilian) have promised a glorious era of political and economic stability, but that goal is elusive and fastly receding. There is that necessity as an under-developed (developing) nation to escape from the old vicious circle of low level of income, low level of saving, low level of investment, low level of output and low level of income.   It therefore, would require a combination of prudent fiscal and commonsense monetary measures to move away from poverty into an amazing prosperity.

An observable mistake of the outgoing government is its pathetic failure to integrate the monetary and fiscal policies to pave the smooth way towards economic development and prosperity.   However, it is often claimed by the supporters of the present government that the goal of macro-economic stability has been achieved with price and foreign exchange stability recorded.

In fairness to them, Dr. Okonjo-Iweala has piloted the state of the economy towards a level of stability with a tolerable growth rate of about 4 per cent, inflation rate of less than 10 per cent and stable exchange rate of N165/$ in 2014.     However, in 2015 the year of the elections, exchange rate worsened to about N200/$ in the black market (official rate is N197), inflation rate rose to 8.7 per cent (from 8 per cent in 2014), and unemployment figure was configured at about 29 per cent (worst among youths).   It could be said that yes, there was a period when macro-economic stability was achieved in 2014, but at a huge cost of high unemployment, electric epilepsy, closure of manufacturing plants and general insecurity. In the pursuit of price stability, the monetary policy of the government has created great distortion in the economy and affected steady growth.   It is necessary to allow prices to rise in order to allow for economic growth – a tolerable price rise would be necessary in some cases.

A more glaring fault of the economic policy of the present government has been its failure to adhere to one of Dr. Heller‘s fundamental principles of economic development – to reduce, where they exist, the extreme inequalities in wealth, income and consumption standard which undermine productive efficiency, offend justice and indirect political stability.   There is no doubt that Nigeria today, is that of extreme wealth and abject poverty – where lush green and lovely estates lie side by side with slums and shanties (abode of many Nigerians).   That description does not fit in nicely with the dreams of many citizens as at Independence in 1960.

The dismal picture painted above is to show vividly that beyond the glamorous chant of “change” (which has now happened), there is responsibility of action, to be followed later by accountability.   The searching light has been luminously beamed on the social and economic misfortunes of the outgoing administration, which means that the next administration will not be clueless.

In an era of dwindling oil revenue to the federal government, the new administration will face the risk of reducing expenditure in the face of ceaseless demands (as promised during election campaigns). The false policy will be that of reducing capital expenditure, thereby, deepening recession and increasing unemployment and poverty.   The right policy is that which tailors expenditure to income by reducing wasteful spending on governance.