Nigeria’s Political Economy & the Implication for Sustainable Development

The 2006 British White paper on good governance opens with a bold assumption, stating that good governance is about good politics, period! That good governance is predetermined by the nature of politics (good or bad). Politics is central to reducing service delivery as it shapes and influences policy making. In other words, politics determines who gets what. Furthermore, underlying politics are elites who fund campaigns; making money the most essential tool in politics.

What this means is that economic and political elites are a recycled small group of people who determine who gets into what public office and for how long. As such, governance is driven by loyalty to the elite, paying back loans and ultimately mostly serves these elites, leaving many behind. Public office holders are neither elected nor appointed based on capacity but on the ability to buy votes. After which the elected officer ignores the needs of the poor to satisfy those who got them into office. This drives the huge disparities that exist between the elites, struggling middle class and Nigeria’s most vulnerable group; the poor.

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As such, money itself has become a dominant factor in African politics. Money seems to have taken the centre stage in the political process in most countries and even more so in Nigerian politics. It is, sadly, now playing an increasingly critical role in determining who gets elected and who the beneficiaries of such governments are as political financing makes economic elites powerful and the main beneficiaries of government, in the case of a military government; political elites play this position. Presently in Nigeria, political parties’ formation and financing create room for economic elites to hijack government for their benefits.

The argument is be reducing the role money plays in politics, but making politics work for the electorate regardless of such role. Money is an essential part of political processes globally, and even more so in many developing nations. Howbeit,  money continues to take a back seat in the discourse on creating incentives to drive better governance; a governance that works for the benefit of the majority.The role that money plays in politics by all accounts creates an uneven playing field and an unequal access to the office.

The implication of this is that in the longer term; it bred a huge threat to Nigeria’s democracy. Upon closer inspection, Nigeria’s political structure disempowers the electorates and makes it impossible for the government to be held accountable to the citizens.

Expert explanations about bad governance, poverty and inequality in emerging nations such as Nigeria is often the disregard for key factors such as but not limited to the lack of long-term planning. In Nigeria, this is even more so the case.

Such reasoning often fall for the fallacy of a single cause; “Nigeria is poor because of oil curse and falling prices” or more popularly, “Nigeria is poor because of corruption”, yes these points are valid but are merely created by the vacuum left by poor governance and lack of tangible planning for development. For example, in 2016 forward-thinking China launched their 13th five-year education plan; The plan encourages the cultivation of students’ entrepreneurship and innovation capabilities and practical skills. It also emphasises the need to strengthen exam and recruitment reforms, promote higher education, develop internet plus education, and promote and regulate private education.

In terms of the economy, the self-induced recession via a scarcity of foreign exchange (FX) is a recipe for disaster in an import-dependent economy.  Also, the Nigerian Central Banks policy to restrict Nigeria debit and credit cards from trading outside of Nigeria in other to boost the “buy Nigeria” campaign makes no economic sense, because, in reality, the cost of manufacturing and producing “made-in-Nigeria” does not make the pricing competitive and affordable.

This single account has killed many Nigerian small businesses who depend on foreign goods or services to run their businesses. For example, two years ago, a Nigerian small business could purchase items online from China to run their businesses at a much cheaper rate, today, many other those businesses do not exist. The logic behind this policy is to control illicit funds, dismantle the black-market and combat corruption but the technicalities of what makes such policies efficient are lacking greatly, thus, causing more harm than the intended outcomes. If Nigerian banks have a scarcity of FX, it still leads Nigerians back to the black-market it was trying to dismantle; allowing the black-market so much power in setting the FX rates. While the blockage of Nigerian credit and debit cards isolates Nigeria from the global market from Nigeria and vice versa.

Recently, the acting president of Nigeria VP Yemi Osinbajo launched a 60 days national action plan to improve and create business friend environments in Nigeria. The main focus is on the entry and exit of goods and the entry and exit of the person into Nigeria to be improved,  as well as improving transparency and efficiency of the government parastatal. While this is a great idea, it is largely built on the assumptions that administrative challenges are the reasons why doing business in Nigeria are difficult. While this is true, technicalities such as lack of electricity, the reconciliation of state and federal taxation policies, custom high charges, bribery, bureaucratic processes and middlemen in the process of getting a license or business registration are much more urgent necessities.

The government needs to focus more on implementing the existing practical laws and policies that make doing businesses easier and cheaper. In Rwanda, a business registration can be done online without lawyers and other middlemen and gotten in less than a week. Making Nigeria work for the benefits of the poor majority requires the following;

Making Nigeria work for the benefits of the poor majority requires but not limited to the following;

  1. Free Markets: There is much more uncertainty now than there was two years ago and I think one of the main downsides of this dreadful financial slump is that it has raised the level of uncertainty that cannot be intervened by international recommendations but practical-context specifics with will only be discovered after many trials and errors. It is important that policy makers understand the Nigerian context and the market fundamentals in allowing market forces to work out the optimal scenario. Some economist argues that there are justifiable reasons for Nigeria to abandon the free markets mantra, however, I believe that as bad as things are, free markets is a reasonable way to jump-start a way forward.  Efforts as little as, moving away from trying to control and direct the paths of growth and a standard formula for such growth will make a huge difference.
  2. Good Politics/Good Governance; In 2015, Nigeria had a change in power when the fairly new All Progressive Congress (APC) unseated the People’s Democratic Party (PDP) that had previously governed the nation for 16 years. Two years later, the initial hope for change has vanished, leaving much disappointment and a certain level of hopelessness. There was a change in leadership but not a change in politics. The failures of government in Nigeria, as is in most emerging nations, is generally attributed to the primary assumption that the hindrances to better governance are predominantly economical, administrative and technical. Consequently, advancement can be made through improved or enhanced policies, capacity building, and civic participation and decentralised governance. The situation of the last two years in Nigeria challenges this assumption. What this narrative fails to address is that politics determines the capacity of the government to decentralize governance; politics determines the roles the electorate gets to play in the good governance process, but the electorate must take the bull by the horn and play their role in choosing better leaders and then holding those leaders accountable.

Nothing replaces planning for growth and development and following through; Nigeria’s population is estimated to be 200 million by 2019. What is the government’s ten-year plan for education, jobs, healthcare, food, water and housing? Nigeria’s population is often referred to as an advantage, but it is only an advantage for businesses as the population power drives demand, however, the government is not using such advantage to the nation’s interest, as there is no preparation to accommodate growth. In terms of inter-African trade and economic penetration, Africa has 31 francophone nations, how is Nigeria preparing to penetrate the francophone economies? Why is French not made a compulsory subject in Nigerian educational curriculum? What is the government’s plan to for trans-continent trade with other African nations? Nigeria needs a unified development plan that is tied to a ten-year plan across all the states in Nigeria, upon which policies can be developed and projects implemented in line with those plans and strategies.

In conclusion, the political economy of Nigeria requires a proper restructuring, one that enables active citizenship participation as the role that citizens play in good governance cannot be overstated. Further, citizens must move away from the passive role used only for campaigning and “winning” elections as assigned to them by political elites in governance processes and begin to see themselves as relevant participants in driving good governance in Nigeria. Secondly,  must be flexible with economic policies and be willing to try every and anything until something that works comes along. The free markets have its advantages and disadvantages but for this static economic stage Nigeria has found itself, it seems a viable trial option. Thirdly, making Nigeria business and tourism friendly should be viewed from a longer term perspective that goes beyond getting a visa in 48 hours but more in terms of making Nigeria as a country function, because getting a visa a business license quicker does not negate the challenges paying state and federal taxes and bribes in some cases to run a business, nor does affect the cost of running a generator. Nigeria’s rapidly growing population should be of utmost emergency to the government, the government cannot afford to carry on like this ticking time bomb will sort itself out and nothing will replace planning for this. Right now the unemployment rate is at a record high, schools are barely able to accommodate student due to lack of space and facility. And lastly,  as the giant of Africa, Nigeria needs to position itself to penetrate not just the English-speaking African nations but the francophone ones as well, and what better way to do so than making French a compulsory subject in the education curriculum.

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Is Nigeria Still in A Recession? Versus Reality

The economy contracted 1.5% consistently quarterly in 2016, based on the latest economic revision, Nigeria is no longer recessing, and is actually on the way to recovery and growth. However, as we know, a number of temporary factors including the CBN’s manual intervention of the FX have seen the Naira gain againt the dollar, in the last five weeks. The question of whether or not such intervention is a good idea or sustainable is a completely different subject.

With FX unavailability concerns somewhat out of the way, many leading indicators are signalling that Nigeria is out of recession and on the way to progressive growth as it were just before the recession.

Anecdotal shreds of evidence support the assumptions that consumer spending is rising, projects previously put on hold are picking up and Foreign Direct Investment (FDI) slowly recovering from a decline of  $4.5bn in 2016.

First, these assumptions do not take inflation into account. They are also not adjusted for population growth, unemployment rate and the number of businesses downsizing daily. Finally, and perhaps most importantly, the wealth gap in Nigeria is also near record levels of high, perhaps this is the most important factor; as steep inequality often bears the appearances of never-ending recession.

The wealth gap presents a very real danger moving forward. It makes moving up the income ladder more difficult, and it reduces the operational flow of the economy since the wealthy shield most of their income from taxes, while, those at the lower end of the spectrum can barely afford ongoing living expenses.

In my experience, the severe wealth gap underpins a critical misinterpretation of the Nigerian economy. On the one hand, it can misconstrue the reality of growth and expansion, on the other hand, it negates the fact that such growth is failing to carry the majority along.

I hear many economic experts claim that Nigeria is still in a recession, while indicators reflect the opposition; a recovery and on the way to growth. An individual’s view of the economy is primarily driven by their own unique circumstances, wealth, and prosperity, and that of their family and close friends. We generally take the microcosm of our own lives and deduce this out to the condition of the broader economy. It’s completely natural for many who are earning low wages or still contemplating reentering the workforce to believe the economy is in recession. I understand this and have harboured similar feelings at times.

However, from an economic and economic activities perspective, it’s very difficult for me to substantiate this assumption. Howbeit, in the next couple of weeks when the new window trades a bit and stability, is observed for a while, more concrete evidence will emerge based on the type of liquidity and pricing observed.

I believe that if we look at the data, the cause of the plight of many Nigerians is not the result of an economy in recession, but of the tremendous wealth gap, inequality and the fact that all government projects and investments are not geared towards the poor and “vulnerable middle class“.

 It is basic economics that in an economic recession, the middle class and poor are the most vulnerable, hence, should be the major beneficiaries of government interventions in restructuring the economy. The reversed is the case in Nigeria’s current economic recovery plans and interventions.

There is tremendous wealth in Nigeria, it’s just held by a select few, and not productively distributed across the population and there is no evidence pointing to the government’s plans to reduce inequality and make growth more visible in the lives of the majority. This is a very different problem, with very different solutions than having an economy that’s in recession.

If an individual doesn’t personally benefit from economic growth, such an individual is likely to think that economic growth doesn’t exist, especially if they are not in-tune with ongoing economic performances and growth indicators.

Nigeria’s economy has problems, lots of them. But are we still in a recession? The answer is NO. The unfortunate reality is that for many, this period of mild economic expansion feels very much like a period of economic contraction because they are not participating in meaningful employment, still struggling to gain employment or participate in the wealth creation.

Rising income inequality can also be detrimental to overall economic growth. The OECD suggested that “High and often growing inequality raises major economic concerns, not just for the low earners themselves but for the wider health and sustainability of economies. In other words, “rising inequality is bad for long-term growth”

Nigerian economic team and experts must become better at distinguishing what plagues our economy and differentiating the impacts of these challenges on various groups. For example, it is important to understand how the economic contraction of 2015/16- first quarter in 2017 affected and continues to affect small business owners, working high/low income middle-class and the very poor.   These challenges should not be grouped together and treated as the same thing, as that is the reason why out-of-recession indicators are failing to reflect the realities of the majority in Nigeria. To mistake the symptoms of a serious wealth gap for economic recession is to misallocate our frustration, energy and solutions.

These challenges should not be grouped together and treated as the same thing, as that is the reason why out-of-recession indicators are failing to reflect the realities of the majority in Nigeria. To mistake the symptoms of a serious wealth gap for economic recession is to misallocate our frustration, energy and most likely leads to inappropriate solutions.

I don’t know what the answer to sustainable growth and redistribution for Nigeria is right now, but what I know for sure is that a better widespread understanding of the situation is the first step in the right direction.

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Obession With Fighting Corruption Is Where Buhari is Getting It Wrong

The Buhari led-administration campaigned and won election purely on the basis of fighting and or setting the precedence on reducing corruption in Nigeria.

The challenges with Buhari’s understanding of tackling corruption is the assumption that corruption is a tangible that can be held and beaten down to a stand-still. Fighting Corruption is important but it is not as important as economic growth. Addressing the bogus-ness and wastage of resources by Nigerian public office officials, selective persecution of APC’s economic enemies and the lack of transparency and accountability of president Buhari’s administration; makes President Buhari’s quest a futile and vindictive exercise to uproot APC’s political and economic enemies and make Nigeria a one party state.

There’s absolutely no disputing the fact that if you compare advanced countries, which have achieved development and you look at their levels of corruption and you compare them with poorer countries like Nigeria who is neck-deep in the struggle with corruption and are poverty-stricken and so on, there is a huge difference in corruption between them. But there is a huge disparity in comparing how they made things better to how Buhari is doing it in Nigeria. If fighting corruption means killing the economy, increasing unemployment, reducing foreign investments, then Buhari is doing it wrong.

The challenge the economic team and the ministry of finance of an oil-dependent economy that produces nothing and depends heavily on FX  such as Nigeria, remains, pointing to specifics of what the preconditions for getting from poverty to prosperity as a result of focusing on corruption are.

Further, President Buhari upon resuming office should have done everything he did but leave the most powerful economy in Africa void of a finance minister and into the hands of a CBN governor whose only role should be regulating banks and supporting the finance ministry. At the time Buhari appointed a finance minister, the power-drunk-busy-body CBN governor had done such damages that that left the finance minister in a huge and complicated mess. This is really what the disconnect in Nigeria’s economic policy issue is really all about.

Recently, in the midst of the heated attention the Nigeria was getting as the president left the country on a sick leave indefinitely and is still yet to address the country, amidst hard times created by this government, the EFCC disclosed the recovery of $9.8M loot from former NNPC group Managing Director Andrew Yakubu and Nigerians are celebrating it.

A ploy which many see as a damage control to draw attention aware from the New Yorks Times’s article on the case of a missing president. But going by the way the current government is spending, such recovery does and means nothing to the benefit of the average Nigerian. But rather would be used to fund the padded budget and government’s excessive spending.

President Buhari is not necessarily doing anything to fight corruption but rather recycling the loots from one hand to new sets of hands. Former CBN governor Sanusi Lamido Sanusi referred to it as “creating a new system of corruption”.

There are vital differences in some aspects of corruption, there are other much more important political-economy differences which President Buhari has failed to consider, which can only identify things that are considered in perspectives of our historical process of transition and how simpler countries who have been being Nigeria’s reality now had to pass through. This process cannot be skipped and where there is convergence we need to find out why such convergence exists. Nigeria needs to understand these processes of tackling corruption in a broader context that goes beyond loot recovery.

The big historical picture is a reason why China is developing and parts of India are developing and Korea developed before that is not just that their leaders were slightly less kleptocratic. How you measure kleptocracy is itself is important to the conclusion you can draw.

The Chinese or South Korean government in absolute amounts made more money than any African leader can ever imagine. They understood what Buhari does not today; fighting corruption should not kill the economy. The thing is they generated these by actually developing their economies and not by focusing on fighting corruption. Corruption has no tangibility to it. It is not a thing you can hold and fight. If you want to fight corruption, fight the things that enable corruption from a top-down approach, but focus on developing the economy to benefit from a bottom-up approach.

Perhaps, President Buhari should broadly consider why elites in Nigeria make their money by destroying the economies and comparing it to the reversal cases of developing and functional developing economies such as Rwanda or as it is in Botswana.

The problem is that Buhari is not looking at successful transitional economies who reduced corruption. History is repeating itself and Buhari is doing exactly what he did in 1984 as the head of state that created the exact economic mess Nigeria is going through right now.

 

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Nigeria’s Lack of Economic Recovery Plan

Nigeria’s bid to secure international bailout loans to fund the 2017 budget deficit has hit a deadlock because the economic team is yet to submit the economic recovery plan as requested by the World Bank and African Development Bank.

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The government has been in loan bidding and negotiation with the World Bank for over a year. The government had promised potential lenders that it would present its proposed reforms to make the economy more resilient and attractive to investment by the end of December.

 

The reason for the plan submission delay by the government remains unclear. The finance minister Kemi Adeosun has reportedly refused to comment on this.

 

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This has serious implications and the possibility to cast a huge doubt on the claim that the 2017 budget is predicated on “intent to revived the economy” and the  much-needed infrastructure projects planned for this year, including new roads and improvements to power infrastructure.  Failure to secure these loans, and to present a reform program, could also deter some investors from Nigeria’s planned $1 billion Eurobonds sale in March

This could also deter foreign investments from Nigeria’s planned $1 billion Eurobonds sale in March.

Presently, Nigeria requires assistant in funding a budget deficit of 2.2 trillion Naira ($7 billion) for 2016 and to help fund a record budget of 7.3 trillion Naira for 2017 which is aimed at stimulating the economy.

Nigeria has also been in talks with China and other international banks and funding agencies to borrow more funds but apart from a $1 billion loan from the African Development Bank, at a rate of 1.2 percent. The figure of the amount Nigeria is seeking to borrow from the World Bank is not yet known; as no figure has been made public so far.

The African development bank has indicated it will not release the second half of Nigeria’s $1billion approved loan until the economic recovery plan is ready and presented. $600 million of the $1billion was remitted to Nigeria in November 2016.

The Central Bank of Nigeria as supported by President Muhammadu Buhari is adamant about its flexibility to allow a free fall of the Naira and bent on keeping the Naira rate to the dollar at 40 percent above the unofficial – or parallel – market rate, which has boasted the scarcity of the dollar on official channels. This action has placed the power to navigate the situation into the hands of the black-market; making a few benefit from the sufferings of the majority while shutting down the whole economy.

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This has also made investors reluctant to commit to new projects as they expect the central bank will have to devalue the Naira eventually as oil production has been hit by an insurgency in the Niger Delta oil hub.

The central bank has also imposed hard currency curbs making impossible the import of almost 700 goods, which has many plants and factories to close down. Just this week, the Dangote tomato factory was shut down due to a lack of FX availability.

There is no tangible evidence proving that the government is serious and making any effort to salvage the economy from plunging further downwards. Businesses continue to struggle to cope, organisations are continuing the massive worker layoff.  It is still unclear what the government hopes to achieve with it strict FX policies when things are already so bad.

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A look at the 2017 budget shows that president Buhari and his economic team are creating a new set of corruption for Nigeria.

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The budget is extremely bogus, lacks any reflections of the stated intent of restructuring the economy for recession recovery. The 2017 budget makes absolutely no sense.

A budget is a projection plan that is based on a strategic framework were the inputs has a direct correlation with the outputs to achieve an intended goal. This 2017 budget shows a clear mismatch between the inputs and outputs, thus, creating a lack of confidence that this government can achieve any positive outcome in the economy.  If the budget is ready and waiting for international loan approvals, yet the economic recovery plan which the budget was supposed to be predicated on is not ready, on what basis was this budget developed? img_6830

 

 

 

 

 

The only thing apparent in this situation is that Nigeria is acquiring loans to fund a bogus running cost of government and to continue the culture of looting.

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The North-East Crisis In Nigeria

As sanity and peace returns to the Boko-haram war-torn zones of north-eastern Nigeria, the struggles of war aftermath is getting out of hand while the government and Nigerians alike watch in indifference.

In the wake of recovery in these states is intense famine arising alongside all other components that accompany longer term displacements. The Boko haram crisis which started in 2009 has made millions of citizens in the north-east been displaced.

These states, as well as the federal government, seem helpless while people; Nigerian citizens are dying daily of preventable health challenges and hunger. According to Medicins Sans Frontieres, 6 children die daily in Bama, Borno state IDP camp. Nigeria is in the middle of a humanitarian crisis, yet chooses to carry on like nothing is happening.

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These states which are still struggling to rebuild from years of terrorism does not seem to have any tangible strategy or means to tackle the aftermath of the boko haram crisis.

The federal government’s intervention strategies lack clear and intentional directions and are mostly raid with bureaucratic processes that breed corruption.  The president’s initiative on the north-east intervention team has recently not been able to account for “N2.5b, however, N253M was used to fight plant invasion, N203M was used to cut grass, N50m was given to local non-profits while N2m was used to feed the Internally Displaced Persons (IDP)” – Remi Sonaiya.

Food and relive items donated to the IDPs are intercepted by corrupt officials, thus, never gets to the intended beneficiaries. In some IDP camps, little girls are raped while women are having to exchange sex.

Apart from hunger, the IDPs are in urgent need of access to clean water, basic healthcare, family planning interventions, shelter and warm clothing for the northern harmattan. However, food remains the most urgent need of the IDPs. The internally displaced are extremely vulnerable, however, women and children are the most vulnerable in the IDP communities.

Further, besides, women and children, there is a set of displaced people within the IDP community that are termed “illegitimate” by the government and are therefore not eligible for any form of reliefs. The “illegitimate” internally displaced persons are supposedly not Nigerians and are therefore not recognised as qualified beneficiaries. So besides overall population, there is a set of unqualified displaced persons within the IDP community that overlooked by government interventions and have to depend on private and individuals who know about them and how to access them for survival.

 

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Kay Lawal of Compassion Network with “illegitimate” IDP kids

 

In theory, combatting the aftermath of Boko-harm and resettlement of the displaced members of the north-eastern states requires a holistic plan that seems very complicated. In practice, overcoming these challenges requires multiple interventions that trade off of each other running concurrently in order to help these states rebuild and settle displaced people.

For example, interventions cannot just focus on feeding, it requires healthcare, education, livelihood and resettlement plans. The state government’s main role should be on rebuilding the states, while international communities, NGO, the private sector and individuals should focus on meeting the immediate needs to arrest the rising crisis; putting things under control.

It’s easy to feel helpless and overwhelmed and want to turn away from a story like this. The news is discouraging — and likely to get bleaker. But those of us with the good fortune to live in safety have a responsibility to do what we can to help.

And there are ways to help;

  1. Support Local Non-Profits: most involve donating to local organisations that are on the ground in or around north-east. I know not everyone has money to spare, but if you can make it work; donate food, medical supplies, deworming medication for children, contraceptives- to control alarming birth rates in the IDPs and clothing items,  providing much-needed funds to local and community-based initiatives is the most efficient way to assist at a crucial moment like this.
  2. Support Doctors Without Borders: the global, nonpartisan medical relief organisation is active providing local medical facilities but there are not enough of them and the demands for medical attention in the IDP camps far outweighs availability and accessibility. The majority of medical assistants in the NE are international while the local medical interventions lack equipment, supplies, administrative funds and volunteer personnel.
  3. Start and Keep the Narratives Alive: The local media for some reason are not covering the crisis in the NE. Howbeit, it is imperatives that we all keep the narratives of the realities of the IDP alive as that is the only way to ensure that people are not dying in silence while the rest of Nigeria lives in delusion and denial.  If you a story teller or a journalist, use social media to keep the narrative alive, if live in cities areas the IDP camps, it is your responsibility to demand action and better treatment of the displaced from IDP local officials. Organise protest effort where you are to ensure awareness of the realities of the internally displaced persons in the north-east.

More importantly, call your senators and various ministries that should be in charge of managing this crisis to demand accountability and transparency of the monthly IDP fund allocations.

Borno state has a total of 5.5 million population out of which 3 million are displaced. The longer term effect of displacement in this northern state is that, if interventions are not holistic and timely, a state like Borno may never be able to recover.

The north-east crisis is beginning to look like what happened in Rwanda post-war. What is happening in the north-east isn’t just a humanitarian tragedy, it’s a moral crisis. It’s a time to put aside our denial of reality and indifference, to get real, and to act as best and as effectively as each of us can because the Internally Displaced Persons are human beings who are Nigerian citizen, whose government failed to protect- leaving them vulnerable to the menace of Boko-haram for over six years.

Boko haram and the Fulani herdsmen are already recruiting children from these camps, if things continue how they are, more terrorist groups will emerge from northern Nigeria. And soon the monster which our indifference created will hold Nigeria hostage in ways we never thought possible.

If we continue to do nothing now, five years from now we’ll never stop asking ourselves why we didn’t.

 

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Is Nigeria Cursed or Just Incapable Of Better Policies?

“The worse decisions  a fragile economy like Nigeria with no concrete evidence of why it grows other than its population size can make is price fixing and market control” Rebecca Enobong Roberts, 2016 🙂

In September, African Development Bank (AfDB) president Akinwummi Adesina at a Nigerian businesses forum in Abuja said Nigeria was too big to fail. Noting that similar oil exporters such as Angola and Equatorial Guinea faced similar challenges.

The AfDB President said it was important for the private sector to take advantage of the incentives that should accompany the devaluation of the local currency, the naira, to boost production, especially in the agri-industrial sector.  In theory, the right direction for Nigeria will be what the AfDB president suggested, but in practice, taking these advantages require incentives only the government can create.

From FX stringent policies, data price increase, passport taxes to price fixing, everything the Buhari administration is doing is going in a direction opposite of where an economy in crisis should be. If the government had allowed the inevitable; the Naira free fall since last year September, the Naira would have been on its way to recovery by now.

 

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Is Nigeria curse or Buhari incapable of sound policies?

 

It is no rocket science, FX of a consuming economy is solely dependent on demand and supply. If oil income is low, businesses are struggling to cope and foreign investment is the decrease, restricting the flow of FX of a country that produces nothing but reliant on imports is an unintelligent and dangerous decision.

The first rule of managing an economy in crisis is creating incentives for free markets. Presently, every step this government is  taking at this critical moment is self-destructive and rent seeking. Which leads me to ask; Is Nigeria curse or is the Buhari administration  just incapable of backtracking from the economic mess it is creating and making better choices?

Africa and the world cannot afford for Nigeria to fail. Howbeit, that is exactly the direction Nigeria is headed; failure and it is Nigeria’s fault. The economy is at a 1.7 % shrinkage, unemployment has more than doubled the rate of the last two years, inflation is the highest its been in the last 11 years.

Empirical Problems and Implications

It is obvious that although the Naira was eventually devalued in June 2016, the president is still obsessed with defending a factor (Naira) he has no control over and allowing factors (policies) he has control over to be shaped by the directions a chaotic economy. Further exposing Nigeria to extreme economic vulnerabilities.

The president through the CBN is manipulating the exchange rates, restricting banks access to free flow of FX. As a result, discouraging foreign investment, FX shortage, killing businesses that depend on importation and feeding the FX black market.

As things get out of hand, instead of creating an FX open market, the government through the Department of State Services (DSS) is forcefully clamping down on the same black market monsters it has created. More stringent control at play.

Relinquishing control of Nigeria’s foreign exchange will doubtless cause at least a short-term rise in inflation , yet from a holistic perspective, it is exactly what needs to happen urgently. Doing so will not only draw foreign investments back into the country but it will also make the economy more productive and competitive, but also cut off a conduit for corruption.

Further, the Nigerian Communications Commission’s (NCC) announcement that the cost of data will triple from December 1st makes no sense for a country that people are already struggling to survive with pay cuts and increasing unemployment rate; sending more middle-class back to the poor demographic. The danger of creating pro-poverty policies is that on the one hand,  it falls on a desperate need to reduce poverty now and on the other hand, making the challenge even harder to overcome.

What the government should do instead is shield the middle-class  and cushion the blows for the countries’s poorest and most vulnerable by seeking other means to raise funds internally; curtailing the cost of running the government, cut senator’s bogus allowances and making better usage of returned loots until the economy kicks off again.

In this hard times, it should be a priority to keep more businesses afloat and create shocks to hold things together from getting worse, as recovery becomes harder if the situation keeps deteriorating.

It is better for more businesses and individuals to pay taxes than for more businesses to shut down and for government out of desperation seek to increase taxes. This same framework could also shield the poor from the regressive impact of an increase in Nigeria’s value-added tax — which is relatively low and should remain low until governances and services delivery improves, but a potentially valuable source of additional government revenue.

The saddest part about NCC increase in data tariffs and taxation increase proposal is that such revenues will be used to pay the salaries and allowances of incompetent civil servants and their bogus and unnecessary special advisers. It is callous and abusive for the Nigerian government to seek to increase tax rates and data tariffs for a struggling population who benefit nothing from the government.

Evidently, former president Goodluck Jonathan’s style of managing the economy meant that things were inevitably bound to get worse.  Yes, Buhari inherited a Nigeria that although was prospering, oil price declines, looting and corruption meant that a recession was a matter of not “if”, but “when”. However, his controlling and rigid method of handling the economy has made the economic crisis harder to manage and solve.

In conclusion, things are already at a climaxing bad state, the only way 2017 will be a better year economically for Nigeria is if Buhari sees the need to relinquish control, create better policies that allow the market a free flow and back-tracks on trying to sacrifice the poor so that government can generate revenue.

 

 

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Five Reasons Why Buhari’s Unemployment Benefit Won’t Work

In the usual Nigerian politics manner of making idealistic promises during election campaigns and going back on it after the win, president Buhari or the ruling party APC (depending on personal understanding of who said what and what it meant at the time), a promise was made that all unemployed youths will be paid N5000 monthly. In April, the President said in an interview, that the promise to pay unemployment benefits was his party APC’s idea and not necessarily an idea he agreed with.

 

Street Trading in Lagos

The president said “the largesse N5,000 for the unemployed, I have got a slightly different priority. I would rather do the infrastructure, the schools and correct them and empower agriculture and mining so that every able bodied person can go and work instead of giving N5,000 monthly to those who don’t work”.  

Looking at Nigeria’s current economic state, the monetary policies are feeding more job loss, states are being bailed out by the federal government to enable civil servants salary payment. Clearly, the country has more pressing priorities. However,  not to throw away the baby with the bathwater, unemployment benefits can be a good has the capacity to improve livelihood. But the question is even if Nigeria had the financial capability, is it still a good idea? Does Nigeria have the capacity to target the right beneficiaries and a system that maximises benefit schemes to achieve intended goals (improving livelihood)?. What are impact indicators?

 

Nigeria’s unemployment rate has been on a steady increase since 2009. Then, the rate of unemployment was 19.9 percent, but it hiked to 21.1 percent in 2011, and 23.9 percent in 2012. However, from 2012 to 2014, there was a significant decline in these figures; unemployment rate plunged to 9.7 percent from 23.9 percent. Nigeria with the average age of 35 years, has a large youth population, this means that the youths are most affected by the issue of unemployment. It is therefore, no surprise that the current rate of unemployed youth stands at over 50 percent, a situation that is clearly detrimental to the country’s economic growth and overall development.

During a press conference late last year, President Buhari stated that the fulfilment of his campaign promise of a  N5, 000 monthly stipend to every unemployed Nigerian citizen was in the works and that the implementation of the unemployment benefits scheme would begin early this year. He also said that the country had in the past, wasted its resources, and it was time to focus on investing in the most important resource of any nation – human resources.

Currently, the number of unemployed people in Nigeria is stated to be 25 million. But with the recent increase in job loss, coupled with the government’s inability to create jobs, this statistic does not seem an accurate reflection of reality. The unemployment benefit scheme will cost the Nigerian government N125 billion monthly; that is N1.5.trillion annually. Considering the current economic uncertainties, and the static nature of the economic policies by the present administration, is Buhari’s N5, 000 monthly stipend feasible? How will it be funded? And is there an interim exit plan for when the project term expires?

The cost and other restraining factors of this project do not negate the positive impact it could have in enhancing the livelihood of the millions of Nigerians living in absolute poverty. But from all indications, it does seem like the Nigerian government is ill-equipped to handle this sort of project. Moreover, the complications surrounding the 2016 budget begs the question of priority and provision for this project right now. The nature and framework of such benefits are such that it is practicable and most efficient in functional societies, as it can only be successful if it is built around a long-term goal.

Countries such as Sweden, Denmark and Norway, pay unemployment benefit to people who have worked for over 52 weeks within the last three years. This payment is made for six months while the beneficiaries are actively seeking employment. In Switzerland, beneficiaries get paid full benefits for 8 months, as long as they can prove that they are registered with job centres and are actively seeking employment. In these countries, the framework for these schemes is market driven, as they involve voluntary enrolment and are funded by taxes and government subsidies.

The intricacies of unemployment benefits are such that their planning, implementation, and success are highly data driven and funded by labour, insurance taxation policies, or both. For example, in Denmark, all workers contribute $700 annually to cover social programs for which unemployment funds are part of, but not all workers are eligible to claim the benefit should they be out of employment.  

In South Africa, the unemployment benefit is paid through the Unemployment Insurance Funds to people who lose their jobs and are unable to get a replacement. These persons are allowed to apply within 6 months of becoming unemployed and are able to receive payment for up to 34 weeks. They must also undergo various stringent methods of self-identification. This process of identification still poses a challenge in advanced economies, how much more in a developing country like Nigeria.

In December 2015, the Nigerian senate voted against this scheme on grounds that it was open-ended, and that the government had no concrete means of screening and identifying potential beneficiaries of the scheme. The senate argued that such a scheme was susceptible to abuse due to the country’s constant struggle with data and biometrics. Also, this sort of project is grassroots-driven; the government’s inefficiency at this level could also pose a major challenge to its success.  

Here are five reasons Nigeria has no business embarking on such projects.

In addition to the country’s present state of economic uncertainties, here are reasons why the unemployment benefit scheme is not feasible for now.

  1.    Sustainability:  It is common practice for the Nigerian government to copy foreign initiatives that are at work  in the US, the UK, or China, without proper thought and analysis based on the country’s realities. Because Nigeria has no tangible long-term goals; a sectionalized 20 years development plan, there is usually nothing to measure these irrational decisions against. While imitating these western countries, some of the basic questions the government should ask is; is this an investment or a liability? How will it be funded? If it’s an investment, what are the expected outcomes, and how will these outcomes be measured? There is also the question of the project duration and its interim exit strategy.
  2.    Increased Debt: The controversies surrounding the bloated nature of the 2016 budget, and the lack of other alternatives, will see the government having to incur more foreign debt to finance the unemployment benefits scheme. For Nigeria’s continued growth, it needs to enhance its capacity to grow; this involves human capital contribution to economic activities. However, it appears that the implementation of this scheme would breed liabilities – dependency on handouts. The last thing the country needs is incurring debt to create liabilities.
  3.    Lack of a National Database: Presently, Nigeria’s total population is uncertain; how many children are born daily? How many out-of-school children are there? How many people are actually unemployed, or underemployed? And what is the difference between underemployment and unemployment? Some statistics quote the unemployment rate at 25 million, while others place it at 30 or 40 million. How does the government plan to cope with this varying statistics? And how will unemployment and underemployment be differentiated?
  4.    Population Politics: The unemployment beneficiary scheme will breed room for corrupt practices such as the creation of ghost citizens; there is a general assumption that many states in Nigeria have ‘ghost citizens’ used for political and budget manipulation. For example, there is an argument that Lagos state is the most populated in the country, while others say it is Kano state. Again, this reinforces the irregularity of the country’s data statistics, which appears to be based on speculation. If the government cannot ascertain the population of states in the country, then the unemployment scheme is doomed to fail.
  5.    Lack of functional smaller governments: Another challenge to the success of this project is that it will leave many behind as the Nigerian system has major efficiency challenge at the local level. Initiatives of this nature often thrive when it is driven and implemented at the grassroots, and by the local government. However, the framework of the Nigerian government and politics is such that the authority of the local government is restrained and therefore has very little capacity to handle a capital-intensive project of this nature.

Analysis of the possible reasons that aided the reduction of unemployment rates between 2012 and 2014, what quickly becomes apparent is that during this period, the Nigerian economy witnessed the birth of new industries, with a quite a number of new and emerging entrepreneurs. This sheds light on the power of free market economies and its capacity to birth alternative or informal sectors in Nigeria. 

Howbeit, recently in Lagos state, governor Ambode endorsed the enforcement of criminalising street hawkers. Global experts have projected the informal sector to be the new driver of Africa’s growth. For Lagos state, what this means is; rather than ban street hawking, finding ways to regulate and license makes more sense.

That way, the government is not pushing uneducated and vulnerable Nigerians into the unemployment market when graduates are struggling to find jobs.  The logic is that street hawking is not an obstacle  to overcome in building a mega-city but  an intricate part of keeping poverty level low. Also, until a government can provide for itself people, the basic needs, it has no right to take away their source of livelihood. Doing so obstructs the balance of reducing  the absolute poverty rate in Nigeria. 

Further, in an economic crisis such as Nigeria without the availability of basic human needs, it makes no economic sense to kill any form of informal income earning activities.  A meaningful step for the government to take is to build structures around the alternative sector and render its maximum support through intentional policies. For obvious reasons, the current economic realities require prioritising investments as well as supporting and maintaining all forms of economic activities to boost the economy and not create more liabilities.

The Nigerian government must avoid the trap of breeding dependency and focus on harnessing human capital, which in turn will contribute to economic growth. The government should harness investment opportunities for better policies that support growth by removing all obstacles to all income generating activities and the free market. 

 

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