Unintended Consequences of Economic Policies in Nigeria
Historically, the Nigerian economy has always needed to be more responsive to all the book definitions of good and sound economic policies. Ever since I started paying attention to the financial/economic trend of the nation, it has always been that one good policy or other manifests negative unintended consequences that would overshadow honest and good intentions. It is not only the economic policies but public policies in general.
Let us start with public policy in general and use the education sector as an example. Many state governments took over private and mission schools. Where are those schools today? Suppose we travel across the nation to look at the campuses of primary and secondary schools taken over by various state governments. In that case, we will see that it is regretful that it ever happened. It did not work. It failed. The administration of then Governor Bola A. Tinubu returned some mission schools to the former owners, who were ready to take them back at a time. Those are doing better today.
Let us go back to the economic policies, the focus of this essay. One thing is critical: no matter how brilliant a monetary/fiscal policy is, the execution matters. To my understanding and as an observer, a small business owner, and a concerned person, profligacy and flagrant disregard for accountability have always been at the center of failed policies. Also, the focus is always on the formal sector, whereas the informal sector’s contribution to the economy may be more impactful than admitted officially. Civilian administrators in Nigeria are yet to realize that they are civil servants and, as such, see themselves through that lens and serve without lavishness.
During the Murtala / Obasanjo administration, there was less extravagance in terms of office perks. We saw a kind leanness and modesty. Then came the Shagari administration with flamboyance, big spending on government structures, and an insatiable appetite for foreign goods. In that era, even an average Nigerian would brag about what they owned as “imported.” Politicians turned their back on Nigerian products, from exotic wines to fabrics and cars. The Chairman of the ruling party at that time, Chief Adisa Akinloye, had his face on a bottle of Champagne, typifying affluence and exotic tastes. The lavish structure of the government and the social lifestyle of people in government was an enormous economic burden to the administration. How is this important and relevant to policy failures? Simple, it bred indiscipline, lack of focus, not following through or monitoring policies, and less infrastructure funding, which had started decaying then. Midway through that administration, we heard of the oil glut, which lowered oil prices and adversely impacted the Nigerian economy. Chief Obafemi Awolowo wrote President Sheu Shagari, warning of possible economic problems for Nigeria down the road. What happened a few years later is still part of our problems today.
Then came the era of Import licenses, which did not work because of intermediary’s syndrome. The manufacturing companies that needed the import license to buy raw materials and spare parts did not get it directly. At a point, the Buhari/Idiagbon administration had an essential commodities policy where people would go and line up to buy products considered essential commodities. The administration refused to devalue Naira as recommended by the IMF. All the economic policies like counter trade and others implemented with military fiat did little to improve general economic well-being. It brought so much hardship that when there was a coup that removed Buhari and brought Babangida, people jubilated.
General Babangida started with populist programs and massive spending. He floated the National Orientation Agency headed by Professor Jerry Gana, the Directorate of Food Roads and Rural Infrastructure, and the National Directorate of Employment, among others. These institutions were supposed to take developments to the grassroots because of the significant funding they attracted in the budget lines. Today, we can say that those programs failed. We all can ask ourselves the rhetorical question of why they failed.
General Babangida came up with the Structural Adjustment Program or SAP. It was meant to effectively alter and restructure the Nigerian economy’s consumption and production patterns and eliminate price distortions and heavy dependence on the export of crude oil and imports of consumer and producer goods (Anyanwu, 1992). It came with the devaluation of Naira, which the second-tier foreign exchange market heralded. The idea was to make imports more expensive and exportation more attractive. It did not work because there was insufficient infrastructure to kick-start local productions. Thus, the policy was a prescription for disaster that quickly destroyed the foundations of the Nigerian economy, and we have not recovered from it to date (Anyanwu, 1992).
Throughout the military administrations of Babangida, Shonekan, Abacha, and Abubakar, Nigerians ignored economic policies and their effects. However, they paid attention to the return of power/governance back to the civilians. At the same time, things started getting complicated, and people always responded with hostility and resistance without looking at the merits or agreeing to work and support policies. I remember the May Riot of 1989 against the reduction of petrol subsidies. The Nigerian economy suffered a severe blow during the prolonged years of military rule of Babangida, Abacha, and Abubakar’s regimes. Life became miserable while opportunism and greed thrived in the country’s socio-political and economic environment (Adabonyon, 2001), and we are still paying for it today.
By the time the civilian administration of President Obasanjo came in in 1999, Nigeria was in huge external debt with a low foreign reserve. Decayed infrastructures like bad roads and run-down university systems and hospitals were down to mere buildings, to mention a few. Under Obasanjo’s first few months in office, the inflation rate came down to about 6%, a reduction of about 70% compared to previous years (Adabonyon, 2001). Also, the Naira exchange rate was stable. The dollar exchanged for N92.00 to a dollar in the last quarter of 1999. However, in the later part of the year 2000, we experienced a drastic increase in the exchange rate; up to the second half of the year 2000, a dollar was exchanged for NI35.00. This shows a decrease of about 50 percent in the value of the Naira (Adabonyon, 2001). Obasanjo did not get bashed as BAT then because of the immense goodwill he brought into his government and his seeming support from Nigerian power brokers.
Fast forward to the present economic situation and the policies of President Bola Tinubu, the idea of complete petroleum subsidy remover has merits and demerits. Most economists agree that such a subsidy is unsustainable on a balance of scale. It must go. Nevertheless, who will be the bad guy? President Tinubu decided to be the bad guy. Unfortunately, he seemed alone as the governors who are raking in record levels of monthly allocation are yet to hit the ground running with these vast funds. No matter how brilliant economic policies are, if they bring untold hardship to the citizens, it is terrible and worthless unless they start yielding benefits.
The current situation is messy, clumsy, and frightening. However, it is not without redemption. The Federal Government will need to work harder to communicate with Nigerians regularly. They will need to bypass the State governments as much as the constitution permits to reach the citizens directly with relief measures. Work hard to ensure that local refineries work, expedite the actions of road rehabilitations nationwide, and work towards a steady power supply.
We all need to continue to think about why our policies always manifest unintended consequences and perform less than expected. There is a need for sincerity of purpose, discipline, monitoring, evaluation, periodic assessment, and timely reversal as and when needed.
Oluranti Ladapo, MBA February 20, 2024
References:
Anyanwu, J.C. (1992). Babangida’s Structural Adjustment Programme and Inflation in Nigeria. Journal of Social Development in Africa (1992), 7,1,5.24 retrieved from: http://digital.lib.msu.edu/projects/africanjournals
Mudasiru, S. & Adabonyon, O. (2001). Nigerian Economy Under Obasanjo. Development Policy Management Network Bulletin Vol. VIII, N° 3, September 2001 pp. 10-13