…we need to find better managers for our economy. Persuaded that “under current policies, the outlook (for the economy) is challenging”, the IMF suggests a grab-bag of solutions. However, whether it is exchange rate reforms, the need to make it easy for the private sector to plan…the goal of the reforms that our country so direly needs is to let the market do more of the resource allocation within the economy.
Of the many dimensions of commenting on the Nigerian economy, none is more disorientating than the feeling that “all of these have been said before”. Over the decades since the first oil crisis in the 1970s, our economic trajectory has mimicked the diverse circumstances of a junkie, intermittently alternating between a high and the painful symptoms of withdrawal. If the International Monetary Fund (IMF)’s press release on its 2020 Article IV Mission to the country suffers from the commentator’s curse, this explains why its conclusion that Sisyphus’ boulder is back at the bottom of the hill is a familiar one.
For some time now, the main problem with the Nigerian economy has been that we’ve run out of supply of our main narcotic. True, by constraining global demand, the new coronavirus hurt the global market for our main export earner. But even before the virus and its attendant consequences, several trends had begun to threaten our oil outlook. First, there was the shale revolution in the U.S. Not only did it rob us of a major market for our oil exports, but it also introduced a highly-credentialled competitor for our light sweet crude. The Iranians then threatened worse ― advertising a capacity to produce a wide variety of oil blends. For a while, both China and India held great promise ― rapidly industrialising and energy-hungry, they held out the possibility of new markets for our exports. Ultimately, it was far cheaper and faster to serve both economies from the Middle East, especially via the cat’s cradle of pipelines that had been built across the region. All of these, of course, was just as renewable energy sources’ promise to ameliorate mankind’s carbon footprint looked like leaving vast oil reserves stranded in the earth.
Published over the weekend, the IMF’s press release pointed to several new vulnerabilities. Rising headline inflation ― the highest it has been in 30 months as at October, this year. Rising unemployment. Supply shortages ― exacerbated by a rash of economic nationalism, which led to the closure of our land borders, even as we signed up to the African Continental Free Trade Area (AfCTA). Falling income-per-head, in the face of worsening inequalities. The depletion of fiscal buffers and increasingly opaque monetary policies. Structural bottlenecks. A deteriorating balance of payments position. The list goes on. Yet, this dreadful-sounding litany has long lost its capacity to frighten. The Nigerian business cycle is incomplete until it has flirted with near chaos. Except, you’d sometimes hear that the current stage of the cycle shows new traits. For one, oil sales and a new spike in prices may not help us any longer. And from peak to new trough, the cycle shortens.
…Sisyphus’ accursed task looks far easier than it would be to persuade current managers of the economy to let go of their choke hold. Not many willingly give up power so immense and the influence that comes with it. Eventually, therefore, our balance of payments difficulties will matter in making the needed arguments. By which time, hopefully, it will not be too late.
So, what to do? Without any question, the immediate challenge is to roll the boulder back up the hill. And we have managed this on each upswing of the pendulum in the several boom-bust cycles that have characterised our economy. The collateral challenge, then, is to ensure that unlike Sisyphus’ curse, our boulder does not settle at the bottom of the hill by sunset. Put differently, we need to find better managers for our economy. Persuaded that “under current policies, the outlook (for the economy) is challenging”, the IMF suggests a grab-bag of solutions. However, whether it is exchange rate reforms, the need to make it easy for the private sector to plan, boosting social spending while reduce fiscal risks and debt vulnerabilities, the goal of the reforms that our country so direly needs is to let the market do more of the resource allocation within the economy. A left-wing communist distrust of the markets has left us ready to entrust much policy making to the goodness of our elected politicians and the bureaucracy. But we cannot have failed to see how this has only allowed our better-offs hoover up the gains from successive policy changes.
Nonetheless, Sisyphus’ accursed task looks far easier than it would be to persuade current managers of the economy to let go of their choke hold. Not many willingly give up power so immense and the influence that comes with it. Eventually, therefore, our balance of payments difficulties will matter in making the needed arguments. By which time, hopefully, it will not be too late.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
