Why Buhari’s Old Buharinomics Is Faulty, By Charles Soludo
Nigeria desperately needs the moral force/spartan discipline and leadership of President Muhammadu Buhari to fight corruption, terrorism, and hopefully begin to reconstruct the values of a people gone astray, former Central Bank of Nigeria (CBN) Governor, Prof. Charles Soludo said, yesterday.
On the economy, it is not going to be an easy transition for the President. Igbos have a proverb that one does not learn to use the left hand at old age. But, my prayer is that for the sake of Nigeria, he would have to do so and quickly too. Many great world leaders have had to undergo this personal transformation to adapt and exploit the levers provided by how the real world economy actually works in order to prosper their people. The former socialist/communist regimes of China and Russia are making tremendous progress on the move to competitive market economies. Many of us started off differently, and I actually made a career (with several books and articles) as an unrepentant critic of the IMF/World Bank’s Structural Adjustment Programmes (SAP) in Africa even while doing my hard core economics work. But we have remained pragmatic intellectuals!
When Buhari first came to power in 1984-85, the nation was as well in crisis. He did so much within the short time especially on anti-corruption and restoration of national discipline. He inherited a command and control economic policy regime and deepened it (capital, exchange, and price controls; import licensing; indiscriminate ban on imports, rationing of essential commodities; government ownership and control of so-called ‘commanding heights of the economy’ – banks and insurance, telecommunications, airline, refineries, roads and transport and even manufacturing companies among others). I recall that it was something like a criminal offence then to be in possession of foreign currency. Exchange rate, interest rate, petrol price and several other prices were largely fixed. In the face of continuing shocks, especially the fall in oil prices (in the face of huge debt service payments), relative prices were not allowed to adjust to restore internal and external balances. Rather, even more controls were imposed with all the gargantuan distortions in the economy (and industrial capacity utilisation was largely below 20 per cent) and as government could not pay salaries, massive retrenchment of workers was undertaken, but the economic crisis worsened and Nigeria was on the brink of bankruptcy. The economy imploded big time. Unemployment and poverty worsened. It did not work. The successor government faced little choice but to liberalise the economy under SAP and Nigeria began the journey to a modern market economy. Of course, the journey has been chequered, and naturally is still a work in progress.
Since 1986, Nigerian economy has changed a lot and my reading is that there is a broad consensus on continuing progress towards a competitive (probably also compassionate) market economy framework. From the snippets of policy since the new government came, there is a growing perception of nostalgia, reminiscing of the ‘old good days’ pre-1986. There seems to be a growing tension between a tendency to return to the past versus a progressive match to the future. I am not sure how the new wine will fit into the old bottle.
Let me illustrate with a few examples. First, there is this sense of ambivalence as to whether to remove petrol subsidy or not; and whether government is going to run refineries in competition with the private sector under a subsidy regime or deregulated pricing. I am convinced that President Buhari has the moral authority and legitimacy to quickly remove the subsidy and privatize the refineries. The fundamental case against subsidy removal is not economic: it is the fact that the citizens do not trust government to optimise the use of the proceeds for their welfare. If the President does not deal with these issues now, I wonder when, if ever. Now that private refineries are coming up, it is time to privatise public ones. It should have been done years ago. The huge benefits are not only economic, but also an anti-corruption move. Let government produce a credible agenda of reforms for the sector and let us have another focused public debate on this subject. You may be amazed that even the so-called ‘man in the street’ now understands that it no longer makes sense. The fiscal cost of keeping it is unjustifiable and unsustainable.