Buharinomics: Is 1983 About To Repeat Itself?
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As PMB gets set to reveal his ministers, we muse on what the economy under the president and his new cabinet could be like.
As
the saying goes, history is the best predictor of the future. But if we
look back to history to catch a glimpse of what we should expect, we
might not be too pleased.
The reason is that firstly, from
precedence, President Buhari appears to be a strong believer in a
state-led economy rather than a market-oriented economy.
This is
evidenced in his mulling of a National carrier; maintaining state
welfare programmes like fuel
subsidy even when they have been proven to
be wasteful and non-impactful to the rural communities outside of Lagos
and Abuja; and holding on to the refineries.
The problem with
holding onto a national air carrier and the refineries, rather than have
them completely in private hands is that, they are low-margin
businesses, and will require utmost competitiveness for them to perform
acceptably.
If government will dabble in to them again, it can
only result in wastage of resources, as the organizations will pile up
losses till they fold up again.
His statement during his visit to
France all but confirmed that the CBN’s defiant stand on the currency
was somewhat inspired by him.
It is clearer now that his economic stance is strikingly similar today, as it was 32 years ago.
During
the 1980s, oil prices had also fallen by more than half, but the
government refused to listen to calls for devaluation. Rather it banned
goods, and restricted access to foreign exchange.
In 1983,
according to The Economist, the Nigerian government under P Buhari
rationed forex assigned for importation to $380 million a month, about
30 percent less than the already tough limit set by his predecessor
Shehu Shagari, and less than 50 percent of what was spent the previous
year. Also, the government tried to impose price controls, which were
too low and caused traders to hoard their goods.
As a result, essential goods became scarce.
Thirdly,
judging from his previous stint, handling corruption and national
security issues appears to be his forte, for which he was known in the
past and not for his economic record, on which he has been notoriously
silent, according to according to a London-based political economist,
and visiting fellow at the London School of Economics, Olu Fasan,
In his recent analysis, Fasan writes that:
“The
Buhari regime … frowned on privatization, opposed the removal of the
petroleum subsidy and rejected trade liberalization but, instead,
adopted strong trade restrictions. It refused to adopt pro-market
reforms. Inevitably, it lost credibility with the international
financial system, with foreign investors and the multilateral
institutions refusing to do business with Nigeria.
Reasons for the lack of enthusiasm (as inspired by Fasan’s work) are:
Trade
restrictions, as in the past, is once again becoming a policy tool,
with the Central Bank’s refusal to grant foreign exchange for the import
of 41 goods.
The use of administrative measures, and governmental
powers to determine the value of the currency, rather than having the
market determine it.
Buhari has expressed his strong opposition to
the withdrawal of the petroleum subsidy, thereby perpetuating a welfare
system that has already been usurped.
Buhari’s stance towards privatisation, which is showing up to be statist, rather than market-oriented.
The
above points would have been irrelevant if his cabinet is pro-market
and if they are allowed to function independently. But, his hands-on
governance style could undermine their effectiveness as ministers.
An
un-named ministerial prospect that was reportedly approached but was
reluctant to accept, said, “you will only function as an adviser,
irrespective of the portfolio one is assigned.”
Source: Nairametrics.com
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