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Eggs and omelette advice for Buhari’s ministers 11 Nov 2015

This is unsolicited advice for the honourable ministers of the Buhari administration. It is a piece of advice I am convinced you need, because ministers before you didn’t seem to realise the point. And there are indications already that you, too, might not realise it. But nothing can be more indicative of change in policymaking in Nigeria, if you take on board this wise counsel.  

During her ministerial screening by the Senate, Mrs. Kemi Adeosun (now Honourable Minister of Finance), was asked if the Treasury Single Account was an appropriate policy for the country. In her response, she admitted the TSA is a bitter pill. Later, President Muhammadu Buhari himself acknowledged that the TSA might cause temporary inconvenience. Without prejudice to the stated merits of the policy, Nigerians could justifiably kick against it on certain grounds.
 
The first ground for objection is that if a house is on fire, you don’t pour an accelerant on the house in order to quench the fire. Similarly, when an economy is on a downward spiral, it is bad economics to increase the momentum for a hard-landing. Instead, policies should be geared towards preventing a crash or providing a soft landing, at worse.

It is anomalous to implement a policy that would create further inconvenience in a slump. The appropriate response is a stimulus package.

The second ground is that once a government policy requires hapless Nigerians to (temporarily) tighten their belts, there would hardly ever be an opportunity to relax them again. For instance, the perennial increases in the prices of petroleum products were supposed to create temporary inconvenience. This belt-tightening measure was supposed to ease as government raked in additional revenue to fund pro-poor policies, including investment in infrastructure and social amenities. The state-owned refineries were also to be fixed to support broader job-creation and to reduce importation of refined products.

But what is usually realised is one side of the bargain: belt-tightening by hapless Nigerians. Government typically never fulfils its own part of the bargain. Therefore, as the price of petrol increased from N0.60k per litre in 1989 to N65.00 in 2004 (current price is N87 per litre), the percentage of paved roads to total fell from 30% in 1989 to 15% in 2004 (Trading Economics). Even so has access to quality healthcare fallen, while the current unemployment rate is much higher than it was 22 years ago.
 
The third reason why we might justifiably resist swallowing another policy bitter-pills is that Nigerian governments and policymakers hardly seem to understand the full implications of their policies and prescriptions. Let me use a true life experience of the implementation of the Treasury Single Account to exemplify this problem.

The implementation of the TSA resulted in months of delay in paying businesses that offered products and services to government’s agencies. Some of the affected businesses have no capacity to mobilise bridge financing to meet matured credit obligations to suppliers or bankers or both and also pay salaries. The businesses consequently lost their credit ratings, and some staff had to go. As the delays wore on, some of the businesses became so crippled they had no choice but to fold up. In frustration, some of the entrepreneurs and technical personnel decided to emigrate.

In the immediate term, computation of the GDP would reflect either lower productivity growth or a contraction of the economy. But this problem does not end there. Future productivity growth would lag when we begin to see the positive effects of the TSA because of the negative adjustments would have caused. Economists describe this malaise as hysteresis effect.

There have been a number of hysteresis effects in the annals of policymaking in Nigeria. One can readily cite the Structural Adjustment Programme that President Ibrahim Babandiga introduced in 1986 and his policy decision to emasculate the labour unions, especially the Academic Staff Union of Universities. Both measures exacerbated brain drain. Since then, the quality of teaching and research in public universities have progressively declined. The resulting poor manpower development accounts for the mediocre labour performance across the private and public sectors as we have it today.

Alternative to giving policy bitter-pills was what the fiscal and monetary authorities did in the United States in response to the last global financial crisis. The Federal Reserve introduced aggressively an unconventional, loose monetary policy that brought the anchor interest rate near zero percent. The Obama administration also came up with a fiscal stimulus programme. The combination of the two policies was aimed at enabling Americans to continue to spend in other to quickly facilitate economic recovery. Europe has lagged behind the U.S. with positive economic data since then, because it first flirted with austerity measures – a sort of bitter pills or inconvenient policy – before learning that it is the welfare of the citizens that would lead to the desired recovery.
 
I have no doubt that people-centric, welfare programmes for Nigerians are the only way out of the present economic slump. The details of such programmes are your responsibility to fashion out now. However, I am very much aware that the programmes must relate to our specific country-realities. But people-centrism is a policy shift without a viable alternative.

The ministers before you framed economic problems and their solutions often without a human face. It is the reason you might define the current oil price slump as affecting government revenues. You might choose high language to say we have fiscal policy shock which has brought about the depreciation of the currency. But another way to state it is that Nigerians now have less money to spend, and the little money that we have cannot buy as much as it used to buy. This means Nigerians are falling into lower standards of living and into extreme poverty. If the problem is framed in this way, government’s policy at this time cannot reasonably be about creating temporary inconveniences.
 
It is now your responsibility as ministers to help President Buhari to chart a more credible and people-centric policy path. The policies Nigerians expect now are not the ones that would make us swallow bitter pills. What is expected are policies that would ease the economic burden ordinary Nigerians currently bear. We expect programmes that would make Nigerians survive the current economic difficulty that is eroding our quality of life by the day.

There would be no legitimacy for policies that would create temporary inconveniences at this time. One more reason is that government officials who make the prescriptions don’t bear the inconveniences. But, where there is need to break eggs, the omelette must be served immediately. Every conceivable government policy must have a salutary effect on the people; not as a promissory note, but as an integral part of its implementation. Nigerians are too weather-beaten to be able to wait much longer to feel the welfare essence of government.

It is not true that the struggling masses have infinite capacities to cope with economic adversity. We don’t. Because policymakers seem to think we do, they further stack policies against our interests. Indeed, one of the easily observable traits in President Buhari is lack of empathy. We see it in his single-minded commitment to his personal reputation as opposed to the needs of individual and corporate Nigerian entities. Your policies should now make up for this.

Your performance can help validate President Buhari as a viable leader. We have waited long for you to be appointed and for you to start working to restore the dignity of Nigerians and investors’ confidence in our market. I wish you the very best.

Yours truly,

Jide Akintunde
Managing Editor, Financial Nigeria magazine, and Director, Nigeria Development and Finance Forum