President Buhari’s Socialist welfare leanings could be shaping Nigeria up to become the next Venezuela.
In his second stint as president, Muhammadu Buhari is still not realizing that mere will-power or ‘body language’ will not win against the force of free market.
His preference for sticking with controlled markets, rather than accelerating reforms towards freely determined markets show that he is not quite the messiah that Nigerians have come to expect. These controlled and distorted markets, with their artificial prices are bringing Nigeria’s economy down to its knees.
A key feature of a distorted market is the existence of two prices and two markets for one product, which create arbitrage opportunity. People buy in one market (often the lower-priced govt controlled one) and sell in the other, for a higher price.
The second market often exists because supply and demand at the original market does not match. It doesn’t match because there is either way too much demand because price is low, or supply is too little because price is not competitive enough.
Although petrol prices have been pegged at N86 (or 43 cents) a litre, consumers have found it increasingly difficult to get the commodity at that price. Over the last few days prices have hovered at between N150 and N200, more than double the price fixed by the government.
Norway, the 3rd largest energy exporter in the world sells petrol to its citizens at $1.63, almost 4 times what is sold in Nigeria. The US sells for 66, cents nearly double that price.
Nigerian petrol marketers would often happily hoard the product whenever the opportunity arises, and wait for better conditions to sell at a higher price.
The smarter ones take products destined for Nigerian market to sell to neighboring countries where prices are higher.
Because of Nigeria’s distorted market and pricing system, the country is suffering an incomprehensible scarcity of petrol, while the rest of the world is drowning in too much oil.
In the same way a black market for foreign exchange was strengthened after government tightened its grip on the exchange rate, the black market for petrol is now taking over the streets.
Somehow, the government still thinks that the way boost supply of the product is to interfere even more and squeeze the independent/private suppliers out of the market, rather than release its chokehold on the product’s price. It now plans to allocate 78% of import quotas to the state oil company. A move that has irked the independent marketers.
Right now, there is a tussle for market share in the petrol distribution industry between the government and private individual suppliers which has further constricted supply. The consumers who continue to suffer scarcity as sellers refuse to sell, are the only victims in this fight.
The effect of controlled markets is having even more dire consequences for the country.
Nigeria has remained in perpetual darkness as gains in the amount of electricity generation steadily fall.
Independent electricity generation and distribution companies are refusing to produce more power because the prices at which they can sell their electricity has been fixed by the government. An attempt to increase the prices to make them more economically viable met with resistance and a summon to the senate.
The price for gas, an indispensable input for power generation is also fixed. Gas producers are pussy-footing with regards to capacity expansion even though the potential market is humongous, and the business case for investment in gas is as clear as sky.
As much gas as they already produce is snapped up by gas hungry plants and manufacturing companies seeking to reduce costs.
Although the gas companies can expand and sell much more, they are hesitating because there is little incentive.
There is also a lack of investment in electricity transmission because it is still being fully controlled by the government. Meanwhile, the blackouts linger.
Last Thursday, electricity generation at the main grid fell to zero due to system collapse that has become a rathe regular occurrence.
All these mean that productivity is plunging, fuel queues are longer, frustration is rising, companies are shrinking, and unemployment is rising.
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Socialism is not the problem in venevuela.it’s mismanagement and clear leadership.socialism will stifle human freedom,socialism have been the norm of European countries.winston Churchill a war hero was defeated by the labour party,and the british labour party with it’s progressive programme (1)free and health delivery scheme from birth to grave.(2)war on hunger and ignorance,poor housing.w hich the british commentators call it consensus,they nationalized every thing private hospital, they nationalzed the bank of England,they nationalized some key industries.
They adapted lord baverige report.they created a welfare state,british population was about 10 million in the year about 1900.in the world war 1,the british lost about 900,000 soldier,so the is no family that have not lost somebody close,a brother,an uncle,an in-law.with this welfare system,the british govt was able to recover from this 2 wars(,about 2 million foreigher served in the british,there are about 900,000 Indians soldiers serving in the 2 british wars).
This welfare system enable the british triple their population within 30 yrs,and this system have existed since.but Mrs Thatcher tried to dismantle the system completely but was betrayed by those in her party,her successor Mr John Major did little to continue with dismantling of socialism,maybe Mr john major had a working-class background,his successor mr Tony Blair with middle-class back-ground,his father was a medical doctor.he tried to continue with this Thatacherism,but half-baked.
This is the success of Jeremy Corbyn winning the labour leadership last year,his idea for the british have an nationalinvestment bank,to re-nationalizes the railway,increases company taxes by 1 % to fund the free university fee, and restores the grant system,that is why he won by more than 50 % in votes.some from other parties joined his bangwaggon.
Readers should not forget Germany received about 12 billion dollar from U.S in loans,grants.named after the Marshall aid after George Marshall the u.s sec. of state. u.s gave aids to most European countries after the second war.without these aid Europe could have not recovered quickly,SOCIALISM IS A REACTION IN ECONOMIC OR SOCIETAL ENDEVOUR.COMMUNISM IS A DERIVATION OF SOCIALISM..this is what happen in Russian 1917 revolution.