On Nigeria’s current economic reforms
Some people in the current government, including the Senate President, want to blame the last government for the current hardships. I think that’s unfair. What’s even sadder is that the current government is behaving just like the last one that they are trying to demonise. For example, Buhari’s lack of transparency with Nigerians when it came to things like subsidy “removal”: claiming it was removed, when in fact it was not.
Furthermore, I have personally advocated for subsidy removal as well as the unification of the foreign exchange (FX) markets. However, this government is going about it the wrong way. And because they are not doing it right, it might be impossible in perpetuity to remove subsidies or unify the FX markets.
If I were in the government’s shoes, I would not remove subsidies without at least a coherent strategy. This plan would involve truly removing it and not only saying so but keeping paying even more for it. Some of the ways of going about it include the need for Nigeria to be self-sufficient in refined oil. Secondly, all gains from subsidies must be directed towards comprehensively tackling the most basic needs of the Nigerian state, like agriculture, security, infrastructure, education, and health. Remember SURE-P, right? Something like that, but grander and deeper. Just ploughing the gains of the removal into FAAC to be shared as usual does not cut it, in my view.
Besides the attainment of self-sufficiency in refined oil, I would also fix the FX market. This would help with imports of things we do not have a competitive edge in. It would also mean killing two birds with one stone, as that would help with the problem of sufficient refined oil domestically as well as the FX markets’ unification.
Nigerians have a penchant for demonising imports. Even some economists do that. But there’s nothing wrong with importation. Imports are as important as exports. Those vilifying imports must belong to the long-discarded school of mercantilism that predated modern economics. Those doing that must be living in the middle ages. Since Adams Smith’s magnus opus in 1776, “An Inquiry Into the Nature and Causes of the Wealth of Nations,” there has been a consensus that for a sound economy, imports are as important as exports. And the truth is that Nigeria is under importation. Yes, we do! So imagine how some of us get nonplussed when the government and others demonise imports. We are equally under export. So, we need to increase both appropriately.
We must focus on our comparative advantage and import anything that we cannot produce competitively until we have developed the capacity to locally produce it. Remaining laser-focused on Nigeria’s comparative advantage is the watchword. This would be our ticket to economic prosperity. And we must, as a matter of urgency, stop demonising imports
Fix the FX markets, would require: beating oil theft as well as listing NNPC to encourage transparency in running it; attracting all the diaspora remittances we can attract; making Nigeria the easiest place to do business, hence attracting foreign direct investments (FDI), foreign portfolio investments (FPI), and other forms of investments; boosting exports generally, most especially for our MSMEs, etc.
Nigerian MSMEs are underperforming when it comes to exports. While its contributions to Gross Domestic Product (GDP) are half of the Nigerian economy, its contributions to exports are a tenth of its contributions to economic activity. Juxtapose that with China. MSMEs are punching above their weight. They contribute 60 percent to GDP but contribute almost 70 percent to exports. If I were to boost Nigeria’s exports, I would prioritise that sector.
Of course, all these things cannot be done overnight. However, have we even taken the first step in the right direction? I doubt much. For now, it’s about chasing shadows. Sadly
