…the challenge for a government that wants to return its economy to the path of growth is clear ― turn this circle virtuous! Government, as part of this process, may not employ every labourer in our space. Indeed, it cannot. Better, therefore, to make it easier for private persons to invest in the new capacities needed to support both consumer spending and business investment.
There’s a vantage from which you look in on the state of the Nigerian economy, today, and those who’ve been complaining about the incumbent federal government’s policy thrust are allowed to say, “But we told you so!” The latest numbers on the health of the economy are startling. The National Bureau of Statistics reports a 400 basis points increase in the national unemployment rate to 27.1 per cent in the three months to end-June 2020 from 23.1 per cent in the same period two years ago. Given that the working age population also rose over the same period, it’s a fair assumption that much of the unemployed were new entrants into the labour market. Which again explains why the unemployment rate among young people (15-34 years) was 34.9 per cent in the quarter ended June 2020, up from 29.7 per cent two years ago. And even for the thinning number of Nigerians who had jobs to go to in the second quarter of this year, the cohort that was working at tasks far below its competence touched 28.6 per cent.
Over the same months, the naira continued to depreciate, the balance on our gross external reserves dried up, domestic prices reached for the skies, and the central bank continued to post cash reserve debits to the accounts of banks that were far in excess of the regulatory minima, while keeping interest rates depressed. Despite all these, those who make the argument that our rising misery index owes something to the COVID-19 pandemic are not entirely on slippery grounds. The lockdowns implemented by the federal government to contain the spread of the coronavirus had the unintended consequence of smothering both consumer spending and business investment at a time when a highly leveraged sovereign was gasping for its financial breath. Our external environment was no less kind, truth to tell. As economies around the world contracted as part of mankind’s defence against the coronavirus, the demand for just about every product/service, including energy (and hence for our main export) nosedived.
But as with most persons who have succumbed to the pandemic, our economy has struggled over the years since the Buhari government came into power. The reforms to the economy, which we all seemed to agree were urgent after the Goodluck Jonathan years, have lacked lustre when they’ve been implemented. And have been completely absent in those sectors where we had thought they were most needed. We have, thus, seen concerted efforts to improve the ease of doing business that have completely ignored the burden that poor infrastructure, incompetent regulation, and poor policing and an incompetent judiciary, impose on entrepreneurial activity in the country.
But by far the bigger worry is a little observed economic mechanism. Take the COVID-19-induced lockdown, for instance. One of its effect was to keep workers away from work. Without a paycheque support programme, this meant the loss for most such workers of their monthly pay. Shrunken monthly paycheques meant that they were no longer able to afford many staples.
One symptom of the policy malaise is that rather than improve the efficiency with which private sector entities can ratchet up or dampen their supply of goods and services in response to changes in household spending, government has applied itself to rectifying the economy’s infrastructure deficit with far more passion than competence. Accordingly, we are seeing a stupendous increase in both the stock of our public debt and the costs of servicing these; all at a time when sea-changes in the global energy market have eroded the selling appeal of our major foreign currency earner, output contractions across the world are impinging on our diaspora’s earnings (and their remittances matter), and emigration by our most qualified compatriots may no longer be the safety valve that it once was.
Facing a burgeoning balance of payments gap, we are cap-in-hand, making the rounds of multilateral agencies in search of bridging loans. Despite all these, you still find parts of the local commentariat bristling at the terms that our would-be creditors are demanding of the economy. In the light of this, you cannot but ask which one of us would, approached for a bridging loan by a Lagos socialite who’s recently fallen on hard times, not insist that he rolls back his presence at the innumerable “owambes” that were the high watermarks of his social calendar “when the going was good”?
Yes, Nigeria has binged on the proceeds of oil exports: From an obsession with pharaonic projects, the abandoned hulks of some which still point accusing fingers at us all, through a plethora of subsidy regimes designed to democratise some of the oil windfall, to make-work schemes masquerading as the country’s civil service. But by far the bigger worry is a little observed economic mechanism. Take the COVID-19-induced lockdown, for instance. One of its effect was to keep workers away from work. Without a paycheque support programme, this meant the loss for most such workers of their monthly pay. Shrunken monthly paycheques meant that they were no longer able to afford many staples. In turn, facing attenuated demand for their products, the makers of these staples would then shrink their production. Smaller production volumes mean a smaller workforce. Smaller workforces translate to smaller demand. And so on.
True, not all of us will leave the market with enough to live off. And a responsible government ought to be loth to see that happen. But then, why not, instead of the scattergun interventions that we have pursued for so long, build a safety net strong enough to catch all who fall…
Put this way, the challenge for a government that wants to return its economy to the path of growth is clear ― turn this circle virtuous! Government, as part of this process, may not employ every labourer in our space. Indeed, it cannot. Better, therefore, to make it easier for private persons to invest in the new capacities needed to support both consumer spending and business investment. Largely, this will involve government, well-intended as this might seem, refraining from seconded-guessing the markets. Allow prices (including for foreign exchange and money) freely determined to drive business decisions/models.
True, not all of us will leave the market with enough to live off. And a responsible government ought to be loth to see that happen. But then, why not, instead of the scattergun interventions that we have pursued for so long, build a safety net strong enough to catch all who fall, but not soft enough to keep them cushioned for too long?
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
