As PMB gets set to reveal his ministers, we muse on what the economy under the president and his new cabinet could be like.
As the saying goes, history is the best predictor of the future. But if we look back to history to catch a glimpse of what we should expect, we might not be too pleased.
The reason is that firstly, from precedence, President Buhari appears to be a strong believer in a state-led economy rather than a market-oriented economy.
This is evidenced in his mulling of a National carrier; maintaining state welfare programmes like fuel subsidy even when they have been proven to be wasteful and non-impactful to the rural communities outside of Lagos and Abuja; and holding on to the refineries.
The problem with holding onto a national air carrier and the refineries, rather than have them completely in private hands is that, they are low-margin businesses, and will require utmost competitiveness for them to perform acceptably.
If government will dabble in to them again, it can only result in wastage of resources, as the organizations will pile up losses till they fold up again.
His statement during his visit to France all but confirmed that the CBN’s defiant stand on the currency was somewhat inspired by him.
It is clearer now that his economic stance is strikingly similar today, as it was 32 years ago.
During the 1980s, oil prices had also fallen by more than half, but the government refused to listen to calls for devaluation. Rather it banned goods, and restricted access to foreign exchange.
In 1983, according to The Economist, the Nigerian government under P Buhari rationed forex assigned for importation to $380 million a month, about 30 percent less than the already tough limit set by his predecessor Shehu Shagari, and less than 50 percent of what was spent the previous year. Also, the government tried to impose price controls, which were too low and caused traders to hoard their goods.
As a result, essential goods became scarce.
Thirdly, judging from his previous stint, handling corruption and national security issues appears to be his forte, for which he was known in the past and not for his economic record, on which he has been notoriously silent, according to according to a London-based political economist, and visiting fellow at the London School of Economics, Olu Fasan,
In his recent analysis, Fasan writes that:
“The Buhari regime … frowned on privatisation, opposed the removal of the petroleum subsidy and rejected trade liberalisation but, instead, adopted strong trade restrictions. It refused to adopt pro-market reforms. Inevitably, it lost credibility with the international financial system, with foreign investors and the multilateral institutions refusing to do business with Nigeria.
Reasons for the lack of enthusiasm (as inspired by Fasan’s work) are:
- Trade restrictions, as in the past, is once again becoming a policy tool, with the Central Bank’s refusal to grant foreign exchange for the import of 41 goods.
- The use of administrative measures, and governmental powers to determine the value of the currency, rather than having the market determine it.
- Buhari has expressed his strong opposition to the withdrawal of the petroleum subsidy, thereby perpetuating a welfare system that has already been usurped.
- Buhari’s stance towards privatisation, which is showing up to be statist, rather than market-oriented.
The above points would have been irrelevant if his cabinet is pro-market and if they are allowed to function independently. But, his hands-on governance style could undermine their effectiveness as ministers.
An un-named ministerial prospect that was reportedly approached but was reluctant to accept, said, “you will only function as an adviser, irrespective of the portfolio one is assigned.”