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Boldness and recklessness in policymaking 10 Jul 2023

Within a day of his disputed presidency, President Bola Ahmed Tinubu removed petrol subsidy and caused the price of Premium Motor Spirit (PMS) to rise from N184 per litre to N540 per litre. He followed this within a few weeks with the floating of the exchange rate. Market responded by exchanging N700 to US$1. Within a month, electricity utilities have scheduled a 40% increase in electricity tariffs across all customer groups, partly in response to the exchange rate volatility. All these are happening in a country with less than N30,000 as minimum wage in most states, 133 million people as multidimensionally poor, over 90 million citizens falling below official income-based poverty line, and all citizens with no real social protection – whether for food security, energy security, access to education, or healthcare.

Supporters of the government have hailed the courage and boldness of the President, who has barely taken over the saddle and has commenced difficult reforms. To them, this shows that the President is prepared for leadership and has the character to take bold actions. Many are worried at how these audacious reforms will further throw millions into poverty and constrain productivity growth. The World Bank, the cheerleader on proper pricing, has responded by noting that the rise in energy costs will results in millions dropping into poverty.

These events raise concern about the social psychology of leadership. When a country is trapped in underdevelopment, even retrogression, like the Nigerian state, it becomes captive to too many dangerous anxieties which could become socially pathological. In such context, people will associate good leadership with toughness, that even bothers on recklessness. We saw similar social psychology in the events that enthroned Hitler and his Nazism. The humiliation of German after the First World War and the failure of the political class to lift the morale of the nation prepared the way for the cataclysm of Nazism. As leading political scientist, Adams Przeworski, observes in his book, The Crisis of Democracy, the failure of the Reichstag to effectively deal with the economic crises resulted in granting Hitler extraordinary power to take ‘bold’ actions to save the country. Those bold actions ended with the most senseless and whimsical leadership that almost destroyed German and Europe.  

Looking back at those actions, we now see them as unwise and reckless, not bold. When a leader takes actions that seem to draw blood or impose additional hardship, then it is interpreted as ‘bold’ reforms needed to straighten the country. There is no doubt that boldness is required in leadership. It may be true as Johann Wolfgang von Goethe puts it: “boldness has genius, power and magic in it”. But bold does not necessarily mean wise. It could mean reckless.

One can classify the series of actions taken by President Tinubu as mostly reckless, if not in the nature of the action itself, but in the manner of implementation. Of course, we know that subsidies are economically inefficient. But a modern economy existing outside textbooks is not always efficient. The theory of an efficient market, in its substantiation, needs to account for realities. The energy market cannot be a perfectly competitive market. This means that its pricing does not have to be completely left to the so-called ‘market forces’. For one, energy security is critical to the wellbeing of citizens, which is the fundamental objective of government. It is also very critical to the economic productivity of the country. The lack of access to energy should be a major security and economic concern.

Every nation ought to subsidise access to energy and food as a cornerstone of social security and economic development. The challenge is to find the most economic manner to administer such necessary subsidy and ensure it does not lead to deep fiscal crisis and reinforces economic growth and productivity.

Recently, Germany planned to spend $4.40 billion to subsidise electricity for its citizens. It plans to keep the subsidy in place till 2030. This will cost close to $30 billion. Meanwhile, minimum wage in German is $2,095 while it is less than $50 in Nigeria. Germany wisely understands that a people living with more than $2,095 a month, with plenty social protections, still need to have subsidised access to electricity. Nigeria, a country with the highest number of the poorest people in the world, with the world’s lowest minimum wage, in one week exposed its poor citizens to over 200% increase in the price of petrol, without cash transfer.

The boldness exhibited by the government in recent weeks is either a result of poor understanding of the social dynamics of policymaking or a pandering to a political narrative of toxic masculinity in public leadership. It is important to emphasise that the real strength in leadership is wisdom not boldness. It was wisdom, not bold action, that created the Asian economic success. The failed leaders of Latin American countries adopted more traumatising and cataclysmic policies to usher in market economies. These policies were not well considered and adapted to the local socioeconomic contexts.

The history of economic reforms and their failures in Nigeria, especially as it relates to economic development through privatisation and free market policies, illustrates the difference between boldness and recklessness. The jump from state ownership of electricity utilities to full privatisation without corporate and regulatory reforms epitomises such boldness that is recklessness. Egypt is taking a different approach in the reform of its electricity industry, an approach defined by caution and social realism.

Unlike Nigeria, Egypt is not suffering incessant power outages. It is continuously increasing capacity to match industrial growth. But Nigeria’s electricity market is dying under the financial bankruptcy made worse by hurried, and in some cases, reckless reforms.  

Sam Amadi, PhD, a former Chairman of the Nigerian Electricity Regulatory Commission, is the Director of Abuja School of Social and Political Thoughts.