As 2017 unravels, many Nigerians will be eager to see how it turns out at least economically. As President Muhammadu Buhari gave a speech at the National Assembly last December on the 2017 budget, it revealed his economic philosophy.
Buhari’s 2017 budget
According to a Business Day Online opinion, his philosophy might lead to the failure of Nigeria economically. Here are some reasons, why the opinion felt, it might fail:
1. His idea of patriotism
President Buhari talked about “those patriotic Nigerians who believe in Nigeria”. But who are in this category? Well, according to the president, they include “manufacturers who substituted imported goods for local materials.”
So, by inference, any manufacturer in Nigeria who uses or wants to use imported raw materials is unpatriotic! What a strange thing for a president to say!
All over the world, manufacturers are expected to procure cheap and quality inputs from whatever source(s) globally in order to produce quality goods that can compete internationally. Of course, if cheap and quality inputs are available locally, economic rationality demands that manufacturers should use them.
But it defies economic logic for any government to insist that manufacturers should, willy-nilly, use local inputs.
READ ALSO: Presidency lists Boko Haram defeat, rural economy boom, more as Buhari’s 2016 successes
2. Forex
The central bank’s misguided exclusion of 41 items from access to foreign exchange is another reason the budget might fail to revive the economy.
Last year, the minister of industry, trade and investment, Okechukwu Enelamah, admitted in a BBC interview that the discredited CBN forex ban has had “unintended consequences” because the 41 items include essential raw material inputs.
As a result, manufacturers have suffered gravely because they can’t obtain foreign exchange to import these raw materials.
3. Devaluation of the naira
When a country’s currency is too strong or overvalued, it makes imports cheaper, and, of course, when most things become cheaper, people tend to buy more of them.
Over the years, a strong naira encouraged cheap imports, which were paid for with scarce foreign exchange. Now, let’s be clear, imports themselves are not the problem, but a pegged naira.
And the solution is not to ban or restrict imports, which is counterproductive, but to float your currency so that its value can adjust and
For instance, since the government partially floated the naira, imports have reduced, because the weak naira has made imports more expensive.
Yet, the government has refused to allow the full flotation of the naira. Indeed, recently, Buhari said: “I will resist the devaluation of the naira”.
But the president can’t command the markets as he can order the military. Markets react to incentives, and one of them is a flexible, market-determined, exchange rate.
READ ALSO: National Assembly prioritizes passage of 2017 budget as session resumes
4. Imports
Let’s face it, President Buhari has some strange ideas about imports. For instance, he said in his speech: “By importing nearly everything, we provide jobs for young men and women in the countries that produce what we import, while our young people wander around jobless.”
First, this is cheap populism, because, as the Nigeria Industrial Revolution Plan makes clear, even the public sector doesn’t patronise Made-in-Nigeria products! Ignore the hypocritical publicity gimmicks by key public officers who are sudden converts to Aba-made goods.
The president’s statement is also self-contradictory. The same Buhari who so hates imports also said in his speech that “We must take advantage of current opportunities to export processed agricultural products and manufactured goods.”
So, if imports destroy jobs in Nigeria, won’t Nigeria’s exports cause job losses in other countries?
5. His past
Yet, President Buhari said that the “underlying philosophy” of his government’s economic recovery and growth plan is to use monetary, fiscal and trade policy instruments “to promote import substitution”.
Essentially, this means exchange controls, import bans and prohibitive tariffs; it means a closed economy! These, you will remember, dear readers, were the same policies Buhari pursued as military head of state in 1984/85.
They failed woefully then; they are unlikely to succeed now! Worryingly, President Buhari said in his speech: “I will stand my ground and maintain my position”. Clearly, the president doesn’t understand the power of economic incentives and the danger of economic distortions.
360naze
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