THIS DAY

Yar’adua and Obasanjo’s Voodoo Economics

Tunji Bello In The New Republic, 09.11.2007

What is President Umaru Yar’Adua’s economic plan for Nigeria? This is yet to be fully articulated. Yet, we do have glimpses of some of his plans. He has recently told the nation that his government would aim for 13 per cent economic growth annually. He has also recently declared an emergency in the energy sector which in itself is expected to impact the economy profoundly.

But a word of caution here. Every student of economics knows that growth is not synonymous with development. Neither is it synonymous with improved standard of living. In fact, growth does not necessarily lead to economic progress. After all, former President Olusegun Obasanjo and his so-called economic team often declared increase in economic growth when in fact the majority of the populace was looking so famished with our cities in decay.

During Ibrahim Bababgida’s years of the locust, his economic ministers kept declaring increased growth rate in an economy that thrived on speculation. Recently, Robert Mugabe spoke of increased economic growth in his country when the whole world knows that Zimbabwe is today the international headquarters of famine. Both Obasanjo and Mugabe’s economic postulations are a reflection of what President Bill Clinton often describes as economics of statistical recovery.

On the other hand, declaring an emergency in the energy sector could signal a move towards real development. After all, electricity since its discovery remains the greatest catalyst to industrialisation.

However, before the President’s economic vision gets into full flight, it is important for us to remind him of where we are coming from, of how his predecessor wasted eight years in the economic wilderness at the end of which he only impoverished the nation and how he can avoid such a pitfall.

The first four years of Obasanjo’s presidency were wasted years of opportunity. There was no clear cut economic agenda for the nation. Rather, it was an era of romanticism as the then President was always lecturing and romanticising about how he left 26 aircraft for Nigeria Airways, 22 ships for NNSL, 3 or 4 working refineries in 1979 as if that era could be reincarnated. While lamenting, he also got consumed by the political intrigues and the battle to get re-elected as President in 2003. Before he knew it, four years had passed him by. It was not until his second term that he got really serious on the economy. Even then, the way and manner of his reelection, “a rigged landslide” had made him so politically omnipotent and sooner arrogance became substituted for knowledge. Obasanjo had no economic vision. What he had was passion for Nigeria and this he confused with vision. Because of this vision deficiency, he was easily captured by neo-liberal economists and theorists that eventually constituted his economic team and he soon began to celebrate how he regularly met with them twice weekly in order to give “direction” to Nigeria.

Obasanjo’s neo-liberal economic advisers were not original thinkers. They were all products of what Francis Fukuyama, the famous author of the “End of History” has described as “Washington consensus”. That is IMF designed economic formula for all nations. To them, money supply is at the root of every economic problem. Therefore, when you control money supply, you control every other economic variable and sooner than later, the result begins to trickle down and eventually, there will be economic growth and stability. It is an economic voodooism anchored on illusion of money as sole determinant of economic progress. And this explains their emphasis on ‘Consolidation’, ‘Bouyant External Reserve’, ‘Debt Reduction’ and of recent ‘Naira Redenomination’.

And before Nigerians knew what was happening, they had packaged everything under a document called ‘NEEDS’ and this soon became a clichi they bandy about to hoodwink governments at all levels in Nigeria. And the media too began to celebrate and popularise it. Planners at both States and National levels turned it into a theology and a yearly budget was not complete without the last word “our budgetary goal is in consonance with NEEDS”. Yet NEEDS was just a one country solution to its own currency crisis which may not necessarily apply to Nigeria or any other country for that matter. NEEDS was invented by Malaysia in 1995 as a solution to its own currency crisis. And because of its relative success, the “Washington Consensus Builders”, i.e. the IMF, soon repackaged it as a standard dose that solves all developing world economic problems.

Look at the most celebrated of Obasanjo’s financial miracle for instance, the banking consolidation. One of its benefits was the need to support business particularly the real sector through lending at a reduced rate. Through such mechanism, even small and medium scale industries were expected to benefit. But what do we have today? The real sector has not benefited in anyway. Rather, more money is daily being diverted for speculative trading at stock market which explains the current bullish capital market. Yet with all bank vaults awash with so much idle money, you still find seductively dressed lady bank executives and officers harassing government officials and businessmen, soliciting more deposits and more deposits. This is coupled with illegal COT deductions the bank creamed off their innocent customers to balloon their unmerited profits.

Last year, a Nigerian in England had designed a leather bag. A Japanese bag manufacturer wanted to buy him off the patent. A bank in England would not allow that. They called the Nigerian up by saying they would finance the bags production. Were he to be resident in Nigeria, our consolidated banks would find him too risky to be invested upon.

Similarly, Obasanjo celebrated buoyant currency reserve as another miracle of his. And foreign reserve became an end in itself. Then, we began to hear how Nigeria would soon rival China in terms of reserve. It was a rivalry without Chinese economic substance of good industrial and infrastructural base. Obasanjo and his neo-liberal thinkers were celebrating reserve at a time when industries were dying, infrastructure collapsing and unemployment going out of reach. It reminds one of the foolishness of a father who celebrated his having so much money in the bank while his family had no food at home and his children were out of school. On the whole, it is important to stress that Obasanjo’s economic policy was nothing but voodooism of the worst social order. It was anti-people, anti-production, anti-real sector, anti-employment, anti-infrastructural development, anti-economic development and anti-national security. At best, it was pro-bankers, pro-speculators, pro-cronyism, pro-select businessmen and pro-corruption as we have seen with the abuse of duty waivers.

This is why it is important for President Yar’Adua to make a major fundamental break from Obasanjo’s economic blunders. And the point of departure for the President will be first to borrow a word of advice from Henry Kissinger’s phrase that the ‘economy is too important a matter to be left in the hands of economic experts’. He must drive the economy himself. He must articulate a vision of economic development and then design a road map with him as the Chief Driver and not leave it to theoreticians in borrowed robes. Secondly, this President must avoid being bogged down by imported clichis or formulas being bandied about by the so-called experts.

Our attitude to economic revival has always been too exogenous. Past successive administrations were mostly imprisoned by such borrowed economic formulas such as SAP and NEEDS. And once the leaders are hoodwinked, the lower public officials became enslaved and every single memo in government begins and ends with the formula. This kind of attitude stifles capacity for independent thoughts. And for our economy to make progress, our business and economic thought processes must be dynamic.

In concrete terms, this government must see itself as the most fundamental catalyst to economic growth and development. It must dispense with the invisible roles the neo-liberal advisers of Obasanjo assigned his government. The recent reversal of Soludo’s Naira redenomination armanda is a good step in this direction. Much as the government should not interfere with the rule of the market, it must not view growing a market economy in absolute terms. All today’s vibrant market economies whether in Asia, Europe or America were products of state interventions at one time or the other. Nigeria is not yet a full market economy. It is at best a rent economy that thrives mainly on speculations and cronyism. And it will not become a full market economy until the government does the right thing by being a catalyst through massive investments in five major areas. These are security of lives and property, public infrastructure, agriculture, education and institutionalisation of the rule of law.

For any economy to thrive at all or for any investment to pour in, there must be efficient policing system. This explains why cities, regions and localities in United States and Europe take issue of security serious and have invested so much in their police systems. Unfortunately here in Nigeria, we use police for private ends, underfund, dehumanise the entire force when it should be an instrument of confidence in an economy. Next is the heavy funding of public infrastructure such as roads, rails, air and waterway travels, power, communications, water supply, irrigation networks, among others. What is the use of keeping so much money in reserves when our entire infrastructures are in terrible state? Yet we want to revive and grow the economy. We must also revive agriculture for raw materials input into industries as well as for food production and employment.

One of the major contributors to industrial and economic success of Asia was also the heavy investment made in education particularly in sciences and engineering. Without such an investment in our youths and educational institutions, no economic success can be sustained. And no vibrant middle class can be created. All industrialised economies thrive on the sweat of highly educated and creative middle class. Lastly is the core issue of institutionalisation of the rule of law which must permeate all facets of our socio-political and economic lives. Commitment to rule of law should not be restricted to just obeying court order. It must be an article of faith in every institution that is supposed to energise economic growth and development.