Some times


A wash in the great tide of politics, we must not forget why politics
can be a noble endeavour. It leads to governance. When done
correctly, governance can reform a nation and improve the lot of the
people. In the hands of the ignorant and the mean, governance cast
abundant misfortune upon a nation and upon the welfare of its
citizens.
This commentary concerns governance and policy more than it does
politics. I offer it to generate debate on an important economic issue.
No matter who is in power, we must do whatever is in our capacity to
steer the nation away from economic woe. The people have suffered
too much hardship already. Neither side of the political divide should
seek to purchase transient advantage at the high price of dousing the
people in greater economic calamity. Thus, I suggest this
progressive’s position on how best to shape economic policy during
this period of falling oil prices. I state this hoping those in charge will
take pertinent advice from any quarter. My prayer is that they are not
so stubborn as to adhere to a strategy that will deepen the economic
misery of our people even when better policy measures are proffered.
I confess to writing this also for a reason essentially political but
non-confrontational. It accentuates the distinction between the
conservative Peoples Democratic Party (PDP) and the progressive All
Progressives Congress (APC). The nation faces momentous elections
when next year turns to its second month. The choice is a stark one;
but many people do not believe as such. The differences are vast
especially regarding economic policy. On the one side, the PDP
champions a conservative, elitist economic model based on the theory
that wealth money must first go to the already rich and well-heeled
who shall determine how small a fraction of it will trickle down to the
rest of society.
On the progressive side, we believe government can fillip economic
growth and development in such a way that brings the fairness of
prosperity to all of society. We don’t seek to penalise those who
already have but we will do our utmost to remove from the clutch of
poverty the bulk of our people. We seek to turn the hungry suffering of
our poor and working classes into a dignified livelihood that provides
a dignified existence for all.
Global oil prices have fallen from over $100 a barrel to approximately
$80 per barrel. This slide has caused a corresponding drop in
government’s dollar revenues. With this, the federal government
claims it has less money at its disposal and the paucity of dollars
necessitates austerity measures. Most people accept this position as
gospel; debate about its correctness has been nil. Yet, the stakes are
much too high to assume this subjective position as an economic
certitude or uncritically accept its propriety. What they proclaim as
policy is not based on any unassailable economic principle. It is
statement of economic bias that beckons to the wealthy while
auguring unnecessary hardship for most Nigerians.
Look at jobless and poverty levels as well as the diminished status of
our middle class. After viewing these statistics, most objective
economists would conclude Nigeria is mired in a long-term, secular
depression. Forget the rosy GDP numbers. They signify a great
economic and financial segregation between those who have and
others who have not. If we continue with the policy preferences of the
current administration, the haves shall become the “have–mores” and
the “have-nots” shall become the “have even less.”
The vast majority of the claimed GDP growth has fallen into the laps
of those already enjoying obvious luxury. The rest of the people are
left to gaze at the enormity of the income and wealth chasm
separating them from the cabal orchestrating the discordant political
economy. While a small group flourishes, the rest of the nation
subsidises their economic bounty. A tight confederacy rides an
economic skyrocket while the bulk of the people languish in the
swamp. For one group, the economy is effervescent. For the other, it
is catatonic. Nigeria is one nation with two economies.
For this government to speak of austerity is to further enrich the
affluent while casting the average Nigerian into greater hardship and
deeper socio-economic depression. As with the Euro zone the past
five years since the global financial crisis, austerity has not solved the
dire economic weakness of the nations that employed this sickening
remedy. All austerity has done is tighten the grip of the wealthy on
the economy while weakening the position of the middle class and the
poor.
Austerity weakens aggregate demand, deflating an economy already
fatigued and against the ropes. Those with hefty portfolios, profit as
the value of their holdings appreciates by the very dynamics of
deflation. Those who don’t have, find money even dearer to come by.
Jobs and commerce disappear. Debt climbs. Deflation turns a noble
but poor household into a committee of beggars and street urchins.
The austerity that the current administration offers is an insensitive,
myopic policy that lends primacy of favour to meaningless accounting
figures instead of the material wellbeing of the people. Austerity
undermines our economic pillars and breaks the spirit of the people.
Austerity is the merchant of pessimism and hopeless futility. If you
desire a nation of thralls, by all means continue this bleak path. If we
want a nation of prosperity and economic justice, a different course is
our due.
Listen carefully to the position of the Goodluck Jonathan
administration as articulated by the finance minister and you shall
collide into the barricades of illogic and its weighty consequences.
The claim is that government is low on funds because the lower price
of oil means fewer dollars are being collected from oil sales. This
sounds logical but for one fundamental point. The dollar intake is
basically irrelevant to determining the amount of naira the
government commands and places into the political economy. This
fundamental point reveals the government’s position to be the
antiquated relic of a past era. It is the way of the gold standard which
ceased to exist over 40 years ago. As such, government’s stance is
based more on superstition than on the actual functioning of modern
economy with a sovereign fiat currency of its own.
The last I looked, Nigeria operates a naira-based economy not a
dollar-based one. There is no legal or moral restriction strictly
limiting the amount of naira in the system to match the amount of
dollars collected via oil sales. More importantly, there is no economic
justification for the close linkage implied by the government. If we
take its position at face value, the Jonathan administration is
advocating that we effectively place the naira and thus our fiscal
policy on a “dollar standard”. The world jettisoned the gold standard
in 1971 because it proved unworkable, reducing the policy space in
which governments could pursue fiscal programmes promoting full
employment and social welfare. We should likewise reject this
government’s imposition of a dollar standard on our nation’s fiscal
operations.
Under the gold standard, a national government took pains not to
incur budgetary deficits that exceeded the dimensions of its gold
reserves. This was because the currency had no value by itself. Its
value was based on the convention that the currency was backed by
the nation’s gold holdings. Those governments that ran deficits had
to pay those debts in gold. Given that gold supplies were always and
everywhere finite and exhaustible; a nation had to keep its deficits
within the confines of its ability to pay debts in gold. Because of this
straitjacketing effect, nations would abandon the gold standard during
harsh economic times in order to give them the fiscal freedom to
rejuvenate their economies. This was the case during the Great
Depression with the major economic powers. This should be the case
with Nigeria today since the bulk of our people live in conditions
redolent of the Great Depression or any other depression for that
matter.
Our government persists that it must limit fiscal outlays to the
amount of dollars the nation holds. Similar to the operation of the
discarded gold standard, following this path is to strap ourselves to
austerity and the chronic deflation of austerity produces.
Worse, it serves to enthral the fiscal policy of our sovereign nation to
the monetary policy of another country. That nation plies monetary
policy to serve its interests and not the economic interests of Nigeria.
I am baffled why this government would give such power over the fate
of our economic wellbeing to another nation that does not
incorporate our interests into its decisional processes. This
government makes our nation the economic servant of another so
that government may turn about to make the Nigerian people its
economic servant. While there is a certain logic to this dynamic, it is
a perverse and debilitating one.
Because we operate a sovereign fiat currency the federal government
issues at its sole discretion, the federal government can never be
rendered insolvent in naira. This means it can run naira fiscal deficits
indefinitely. The only outer bound is to ensure the fiscal expansion
does not incur damaging inflation rates. There is no logical reason to
peg the flow of naira into the economy to the flow of dollars received.
The correct perspective is not to mechanistically restrict naira
expenditure to dollar intake. This would be tantamount to those
crippled with economic blinders forcefully leading those who can see
we are heading for disaster. It points to deflation, recession and
worse. The better methodology is to ascertain, then achieve, the level
of naira expenditure needed to expand the economy and create jobs
without causing inflation to rise to dangerous levels. This is how
broadly-shared prosperity is generated in a sustainable manner.
In this way, the nation’s economic engineers should focus primarily
on allocating value and opportunity to our underutilised labour force
and our idle, yet potentially productive capital in a way that promotes
wealth creation and expansion of aggregate demand. It is this
sustainment of aggregate demand that empowers the nation to rescue
itself from the whirlpool of economic contraction. This avenue is more
benign than the one the federal administration now advocates. Their
way calls for us to forget growth and for government to preoccupy
itself with allocating economic misery among those segments of the
population too poor and weak to contest the immiserating actions of
government against them.
In the face of recessionary headwinds, government should run
countercyclical fiscal policy by using its naira sovereignty to fund
fiscal deficits. The deficit is not simply for the sake of running a
deficit; the funds cannot be spent on non-productive matters. It must
be used to fuel infrastructural and other projects that not only employ
great numbers of people but enhance the overall productivity of the
economy. The funds must be used to backstop state governments in
a nonpartisan manner so that each state government may continue to
pay salaries and pursue projects essential to that state’s economic
critical path.
To accomplish this, the federal government needs to reverse the
inimical “dollarization” of the national economy in two ways. First
and most importantly, it must abandon the out-dated peg of fiscal
policy and expenditures to the dollar intake. The one actually has no
correspondent nexus to the other. Any commanding connection we
give it is an artifice not an economic necessity. Related to this, we
must reverse a trend that has gained momentum under this
government. Among government-aligned elite, the fad has been to
conduct domestic business transactions in dollars. Policy must
“nairasize” the economy by requiring all domestic transactions occur
in our legal tender. As this is done, the government’s infinite ability
to issue naira will come to outweigh the limitations inherent in the
overuse of the finite supply of another nation’s currency for
transactions wholly internal to our domestic economy.
Inflation is the major risk of running budget deficits to spur growth.
We can contain inflation to acceptable levels by ensuring additional
government expenditures are for items that can be supplied
domestically, particularly labour. Naira paid to poor and working
class people mostly circulates in the domestic economy, spurring
additional local commerce and production. This is because their
consumption patterns do not approach the level of import
expenditures associated with their wealthier compatriots. Related to
this, we must decrease our level of superfluous imports.
These measures will place downward pressure on the naira.
Devaluation will not be destructive but it will be noticeable. For most
nations, such devaluation would be welcomed as it would make
export industries more competitive, thus creating jobs and export
earnings in the process. However, this will not be the case initially for
us because of the moribund state of our industrial sector. Here,
government would need to initiate crash programmes aimed at
enhancing those domestic industries perched on the borderline of
international competitiveness.
In the end, the policy I propose is not without risks, inflation being
the chief concern. Yet, if wisely prosecuted, the rewards of job
creation and economic growth allocated among the bulk of the
populace outweigh the inflationary risk. More to the point, the policy
now pursued bears no risks at all. It is certain to toss the average
man’s economy into a stagnation that will resemble the onset of a
major recession. Saving the people from this unnecessary plight is
sufficient imperative to eschew the policies of old and embrace the
progressive course.
I offer this advice, this warning, because the people have suffered
enough hardship. I offer this advice in the slim hope those in power
will ignore the messenger and objectively weigh the quality and
humane nature of the message. If so, they will spare the people the
grief visited upon a vulnerable people when their government blindly
imposes last century’s policies in a modern setting inappropriate to
the old strictures.
Regardless of our partisan affiliations, let us consecrate this land by
dedicating ourselves to the betterment of the poor, weak, and needy
members of our national family. Let this moment not pass like so
many others where we have demanded that the most vulnerable
among us bear the greatest weight of the national burden. Let us give
them the hope, change and dignity they deserve and human decency
demands. This is how we make the nation great. When I speak of a
common sense revolution, this is what I mean.
• Tinubu is a National Leader of the All Progressives Congress (APC)