If given the mandate to lead in 2011, IBB pledges to ‘do more to open the economy...... (to) ensure that it is private sector –driven ...in such a way that there is less government.....’  (Sunday Trust: July 25, 2010, p7). This of course is the all too familiar orthodox, Washington-Consensus type thinking that ‘big governments’ stifle rather than promote growth. Based on this thinking, an ‘open, private sector-driven economy’ with ‘less government’ is in itself one of the many indicators of a ‘healthy’ macro-economic environment and is considered a pre-requisite for economic development. Simply put, the basic thrust of this economic agenda is to allow the market mechanism to allocate resources by: liberalizing the economic space to create a level playing field, privatizing ‘ailing’ state enterprises and ensuring macro-economic stability. And IBB confidently asserts: ‘once you do that you will get the maximum’. 

These policy prescriptions are not new, having featured as the key specifics of IBB’s IMF-imposed Structural Adjustment Programme (SAP) and OBJ’ ‘home grown’ economic reform agenda- NEEDS. Indeed, the Nigerian version of ‘small-government-market-activism’ was started by IBB (1986-1993), shunned by Abacha (1993-1998) and reincarnated by OBJ (1999-2007). SAP and NEEDS are ‘co-joined twins’. Both regimes had sought to implement these ‘reform measures’ with disastrous consequences. The outcomes of their relentless pursuit of a ‘dynamic, private sector –propelled’ economy are clearly at variance with announced policy intentions. Nigeria simply fails to take-off!

Consider their cocktail of policies and policy intentions. First, IBB and OBJ completely trusted the ability of the market mechanism to allocate resources and to determine ‘realistic’ prices and ‘appropriate’ rates. They therefore jettisoned development planning and opted for what Professor Aluko once described as ‘trial and error economics’. IBB’s SAP abolished marketing boards, which hitherto determined/regulated agricultural commodity prices, eliminated internal price controls, promulgated the SFEM (later IFEM) decree of 1986 to liberalize foreign exchange dealings, deregulated interest rates and allowed banks to fix deposit and lending rates in line with ‘the dictates of the markets’. They sought to promote the growth and diversification of the economy - and reduce over dependence on the oil and gas sector in respect of foreign exchange and internal revenue earnings. Whereas IBB simply wanted the economy ‘back on track’ with healthy balance of payments, OBJ had a more ambitious vision:  to grow the economy at double digit rates to enable Nigeria catch up with the likes of Brazil, India, Russia and China  (the ‘BRICs’) and possibly become one of the 20 most influential economies in the world-by 2020!

Second, to curtail what the policy makers perceived as the ‘pervasive’ influence of the state and enlarge the size of the private sector, IBB’s Technical Committee on Privatization and Commercialization (TCPC) and OBJ’s Bureau of Public Enterprises (BPE) embarked on large scale sale of public assets. The envisaged outcomes were two: a more efficiently run and globally competitive privatized enterprises- with lasting impact on incomes, employment and poverty; and a leaner public sector which would be more responsive to the needs of the larger and preferred private sector.

Third, a key component of the ‘open economy’ agenda was the liberalisation of trade and payments system. SAP ‘adjusted’ the value of the Naira to, ostensibly, increase domestic firms’ export orientation. It opted for a uniform tariff structure, did away with all non-tariff barriers to international trade and abolished concessionary duties on inputs for approved users. The expected benefits of ‘openness’ were improved competitiveness of local industries, greater access to foreign direct investments and to modern technology.

Finally, the IMF had determined that ‘macro-economic stability’ was a crucial economic performance indicator. IBB and OBJ acquiesced, adopted it as a new religion and embarked on a cocktail of extremely poisonous policies to achieve it. They cut spending, especially on social infrastructure, removed fuel subsidies, curtailed credit and adjusted the exchange rate- all in an effort to reduce deficit and fight inflation.

Neither IBB’s SAP nor OBJ’s NEEDS got the ‘maximum’ in spite of the intensity and wide scope of ‘economic reform’.  OBJ’s economy achieved macro-economic stability and grew faster than IBB’s, but remains structurally defective and unstable with uncertain future. Diversification has failed to be achieved and the economy remains dependant on the oil and gas sector in respect of foreign exchange and internal revenue earnings. 

The manufacturing sector’s journey to the abyss began with IBB’s blind pursuit of trade and payments liberalization policy-which exposed domestic enterprises to unfair competitive practices from foreign firms. IBB’s ‘market forces’ decided that our currency was over-valued and our interest rates low- and proceeded to determine their more ‘appropriate’ values. The Naira was battered beyond recognition: it depreciated against the US $ by 2367% between 1985 (US 1$=89K) and 1993 (US 1$=N22). Interbank rates soared to 50% and lending rates were unquotable! The sector was denied access to inputs-whether imported or domestically produced-and to commercial bank credit. It was difficult for the sector to withstand such sudden, excruciating shocks. IBB’s private sector shrank!

Indeed, outside the oil & gas and telecommunication sub-sectors, OBJ’s reform initiatives have had limited impact on private sector growth, efficiency or global competitiveness.  Very few of the privatized enterprises are doing well. The rest are ‘wobbling or lagging behind’.  The private sector’s ‘rent-seeking and unproductive culture of over-dependence on government patronage and contracts’ has not abated.

Neither IBB’s nor OBJ’s pro-market reform agenda impacted positively on incomes, employment or living standards. Nigeria is today ranked amongst the poorest countries in the World, with  more than  54 million people -36% of the population- living in extreme poverty and many more living on less than a $/day: and therefore barely able to meet the basic necessities of food and shelter. NEEDS’s numerous promises of new and improved social & economic infrastructure (10,000 MW of electricity, for example) and its target of 7 million new jobs by 2007 could not be delivered. On the contrary, unemployment has increased significantly and basic public services have collapsed-because of decayed and dysfunctional infrastructure. 53% of the population do not use improved source of water and access to electricity is even more constrained. Only 50% of school-age children attend school- many of which are lacking in basic facilities. Millions are forced to roam the streets as beggars, child labourers or hawkers of re-charge cards and ‘pure’ water. Life expectancy is below 50 years and probability of not surviving to age 40 is nearly 38. Maternal, Infant and Child Mortality Rates are just too depressing to quote freely!

Clearly, in renewing his pledge to revisit ‘the market strategy’ IBB appears not in tune with the contemporary realities of the Nigerian society or the dynamics of the global economy. Yes, the private sector is important and needs to be supported on a sustained basis-especially where it shows willingness to give up its rent-seeking behaviour, and engage in productive, pro-growth activities. The CBN’s current pro-private sector ‘activism’-referred to as ‘developmental economics’ by Issa Aremu- is certainly commendable. But for an under-developed economy, with severe structural defects, a private sector that is weak and meek is not a viable alternative to a strong and progressive government in economic transformation. A ‘small government’ as is being canvassed by IBB cannot be the foundation upon which the conditions for rapid growth and development can be erected.

IBB must read the lips of world leaders from North America to Europe and Asia:  The ‘market mechanism’ lacks the discipline or the coherence and orderliness to ensure a stable and efficient economic system. A big government with efficient institutions and appropriate infrastructure is the key to economic growth.

©  EsinIslam.Com