On May 1, our country celebrated Workers’ Day. This occasion presents an opportunity to consider the situation of the common man in our country, the role of the labour movement in our political economy, and the undoubtedly weak state of the Nigerian economy.
Congratulations to labour and the Federal Government on the introduction of a new minimum wage. While the new minimum wage of N30, 000 will help tackle poverty, we must do more. Ninety five per cent of Nigerians still live below $ 5.5 a day (approximately N170 or N49, 500 a month) while 90 million (nearly 50 per cent of our 200 million population) live below the “extreme poverty” line of $2 a day.
Employers and labour should increase labour productivity. Together with broad-based growth across different sectors of the economy, this is what creates inclusive economic growth. The emphasis should be on creating a skilled workforce, and dramatically increasing available electricity, in order to increase the productivity of labour, which in turn can support higher wages.
I call on the labour movement in Nigeria to support necessary and fundamental economic reforms in our country, reforms that will ultimately improve the living standards and economic opportunities for Nigerian workers. Labour should hold federal and state governments accountable for their performance on economic management, based on rational factors.
Economic reforms in Nigeria should be anchored on the following factors: achieving the right balance between the role of the state and the private sector; an understanding of what drives the wealth or poverty of nations– the presence or absence of skilled human capital, strong, independent institutions, property rights, a culture of innovation that is the basis of wealth creation as opposed to reliance on natural resources, capital and affordable access to it; an understanding of the difference between GDP growth, human development and structural economic transformation.
Sadly, none of these factors exists adequately in the Nigerian economy today. One of the most important reasons for the absence of these foundations is economic populism – a false appeal to the hopes and fears of the common people, set against the interests of the elite. Economic populism can be exaggerated where political expediency leads, as it does in Nigeria, to a tendency to “admire the problem” while taking no real action to address it in a fundamental manner.
In Nigeria, this doctrine has led to the huge cost of governance (astronomical salary costs – including ‘ghost’ workers — for civil servants, politicians and their aides). This phenomenon results in massive recurrent expenditures (currently 70 per cent of the federal budget) that divert resources that should be invested in human development, as well as massive corruption.
The temptation to populism is a universal one. When the industrial revolution began sweeping across the western world three centuries ago, a wave of populism resisted the phenomenon out of fear that machines with far greater efficiency and productive capacity would put men assured of manual labour jobs out of employment. Had the populist streak prevailed, poverty would have been the lot of today’s wealthy industrialised world. Fortunately for these societies, their leaders could see the longer term benefits of industrialisation, and parted ways with the old ways.
For several decades now, for example, successive governments in Nigeria have maintained a wasteful and corrupt petrol subsidy regime in the name of the poor. But these subsidies have favoured the rich far more than the poor, who do not own petrol-guzzling vehicles. Nigeria has spent an estimated N10trn over the past decade in petrol subsidies. Many petroleum importers have got wealthy on the basis of fraudulent invoices. Subsidies may be used to stimulate production and export of value –added goods, as the Asian tigers did decades ago, but when applied to consumption they are often a monument to corruption.
The Federal Government should therefore bite the bullet, remove the petrol subsidy and completely deregulate the downstream petroleum industry. It should move quickly and decisively towards the (at least partial) privatisation of the Nigerian National Petroleum Corporation. No more dissipation of effort in dictating fuel prices practically impossible to enforce nationwide. The role of the government is an important one. That role is to be a strategic enabler for market economies to create inclusive growth. But government cannot successfully replace the markets as the allocator of the prices of goods. It can intervene strategically and occasionally to moderate any observed excesses of market behaviour.
Nigeria’s oil industry ought to be liberalised (but not without strategic provisions for the interests of the populations and the environment of the oil-producing states). That is not because the state cannot run corporations, conceptually speaking. That is a position of classical neoliberalism. It is only partially correct to the extent that deregulation and a level competitive playing field will help achieve price equilibriums and remove corrupt arbitrage and the worst kinds of crony capitalism.
More accurately, the Nigerian state should not run businesses because as a matter of factual contemporary experience, it can’t. The track record is there, from Nigerian Airways to NITEL and the Nigerian National Shipping Line. But state owned or state-invested companies have succeeded in some jurisdictions such as China, France, Germany and Japan alongside the more dominant private enterprises.
The Federal Government must develop and articulate a comprehensive plan to move Nigeria away from oil dependence over the next seven years. The plan should have timelines, including a short-term three-year plan to 2022, with concrete deliverables and accountabilities. The plan should be inter-sectorial, demonstrating how a linked-up combination of policy and private sector actions in areas such as trade, industrial, fiscal and infrastructure policy will deliver a diversified revenue base. It should have specific targets for revenues from the non-oil sectors. The Economic Recovery and Growth Plan in its present form does not rise to the level of such a plan.
Saudi Arabia, a much wealthier oil-dependent country, has developed a four-year national transformation plan to prepare it for a world beyond oil. The plan’s specific components are known: the country has ended petrol subsidies and will build a new $2 trillion sovereign wealth fund that will be the largest in the world. It will privatize Aramco, its national oil company and turn it into an industrial conglomerate, making its shares part of the new sovereign fund. The whole point of the plan is to make investments by the sovereign fund, not crude oil, the main revenue earner for the kingdom by 2020.
There is little evidence of such an intellectually and programmatically well-articulated economic diversification strategy in Nigeria today. We cannot grow on a diet of good intentions. It is not too late for the Federal Government to create a better economic future for us all.
Our foreign exchange policy is essentially subsidising a massive import economy that prevents the structural transformation of our economy. The equilibrium exchange rate (price or value) of the naira is determined mainly by purchasing power parity, the strength or weakness of our productive and export economy, the price of oil, and the quantum of our fiscal savings. The price of crude oil, which gives us 90 per cent of our dollar revenues, is subject to external factors beyond our control. Today’s oil price of above $70 notwithstanding, the oil price will drop again. We do not have a “hedging” policy to manage this risk. The exchange rate of our legal tender relative to others will naturally deteriorate when this happens, especially if external reserves are spent to stabilise the naira. We have no fiscal savings as a buffer, having wiped out our Excess Crude Account for “populist” reasons.
We should reposition by engineering our economy to benefit from this scenario since importation will become more expensive. We ought to shift to a productive economy based on exports not of other raw commodities or crude minerals, but of value added products. The absence of such multi-sectorial policy action is why past devaluations did not help our economy. Yet, despite not having a strong manufacturing and export base, we erroneously believe that an artificially strong currency is ‘better’ for the purchasing power of ‘the masses’. So we ‘must’ maintain the naira’s artificial strength in the face of all logic as a matter of ‘the national interest’. In doing so, we are, in effect, protecting the ‘national interest’ of the vested interests that have access to and profit mightily from subsidised dollars.
Leadership is the antidote to populism. Rational, evidence-based economic policy is essential for economic transformation. This is where the role of labour comes in. Labour can work with a competent government to sequence and manage difficult reforms that will yield fruit for workers, citizens and the economy at large.
Prof. Moghalu is the presidential candidate of the Young Progressives Party
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