In 2016 when the Buhari led administration embarked on the currency swap deal with China it was obvious that China, had the upper hand and this was doomed to failure at inception. The currency swap was never a deal for Nigeria because Nigeria realistically, Nigeria will not be better for it. If anything, this deal showed that the Nigerian economy under President Buhari has no directive and is driven by a “copy and paste” preconceived notions of the direction Nigeria should be taking. For a vulnerable economy such as ours, the bilateral trade works best with the cash and not swap because the Naira is not a convertible currency in the global scale of things and our oil earning is in US dollars. Unless Nigeria trades with China and collects their yuan anything else is unintelligent in its situation.
There are broad lessons that we can draw from Buhari’s failing economic model. Cutting a deficit economy off from the rest of the world by strict and corrupt FX policy is generally a bad idea. All nations urbanize but some plan ahead and don’t impose a path upon itself. It’s generally best to let your economy do what it turns out to be best at rather than forcing down a narrow path, however, when the need arises, the government can step in to support and not inhibit it back to recover. The idea of micromanaging economies are generally a disaster, particularly for emerging nations such as Nigeria.
One of the biggest mistake made by this administration’s economic team is the monocausal justification for everything. For example, asides oil prices dip, Nigeria’s economy is struggling because past administration was corrupt, yet the past administration met a deficit economy almost ruined by an ill President Musa Yar’Dua whose illness left the office susceptible to intense looting, yet managed to navigate an economic leap. My point is, reducing everything to simplistic explanations don’t work, and however, staying out of the way of economic activities, reducing heavy regulations and the singular exchange rate will do the economy better right now.
This has prompted so much uncertainty now much more than existed three years ago when oil prices were high, now the reduction in oil price affects government’s spending and not necessarily the economy in the real sense of it. I say so because government spending does not translate to the market wellbeing or economic growth nor can government spending induce a bottom-up growth, but sound policies that support the bottom, especially the bottom businesses and the informal sector will kick-start the economy.
That being said, one explanation to this assumption is that economist around the world have no straightforward formula for development, as such, the solution remains maximum free markets, maximum openness and support for all activities, particularly informal sector. The logic is that this will increase the chances of discovery of new opportunities and as long as new opportunities are supported the market will do well, thus, the economy. Somehow, the finance minister and the CBN find this difficult to grasp. What is obvious is, as usual, the Nigerian economy is designed intentionally to favour those it favours; the elites; as it is continually reinforced by the CBN and “bureau the change” through the multiple exchanges.
My main stance is that the government step up to see a role for – a bigger role as an orchestrator of a discovery process. Such process involves a stronger amount of government agencies supporting but not picking winners particularly those at the lower end of the chain by coordinating a kind and less stringent insider system of key business leaders, trade unions, and others in a long-term process of interaction about a national development strategy using markets.
Lastly, Nigeria has a trade deficits relationship with almost all the countries in the world; we import everything and export nothing but unrefined oil. Shutting down an economy that relies on import through the stringent FX access and multiple exchange rates makes no sense even to a first-year economic undergraduate. This single policy has created more poverty and unemployment than any other policy in Nigeria’s history in the last two decade.
By all indications, this administration’s economic plan is built on sheer delusional and ignorance of an economic illiterate team or purposely seeking to put Nigeria through economic hardship for reasons yet unknown!.