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Festus TokunboFriday, June 3, 2016
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POLICY PRESCRIPTIONS TO AVERT THE COMING ECONOMIC DEPRESSION IN NIGERIA

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t is evident that Nigeria is in economic recession and if correct economics measure is not taking to address the crisis; Nigeria would be in a full-blown economic depression by December 2016. The economic-cycle has dropped drastically because of lower oil prices that started in 2015 from about US$580 billion to about US$485 billion because the economy is oil based and the successive governments since 1960 had failed to develop other sectors of the economy despite the fact Nigeria has one of the largest consumer-economies in the world.

The last economic depression in human history was the Great Depression of 1929 that crippled the global economy. In a depression, every sectors of the economy would collapse. Most investors and savers would lose all their savings and investment in the financial institutions. There would be insufficient purchasing power among the middle class and the working class to sustain high level of production. Economic Depression would have devastating effect on both the rich and the poor. Personal income, tax revenue, profits and prices would all dropped drastically. Nigeria need to take drastic economic measure to avoid a full blown depression within the next few months. It is not time for the central bank or policy makers to be gambling with the Nigerian economy. A calculated and well-articulated economics plans is needed to save the Nigerian economic from further recession that may lead to economic depression. These are policy recommendations that can rescue the Nigerian economy;

1. A SHIFT TOWARDS "NIGERIAN MODEL OF DEVELOPMENT"

According to the Mercantilism Economists; "Developing countries must industrialize to catch up with the developed countries; that catching up cannot be left to the market forces. It called for political measures to protect and developed local industries"

If Nigeria policy makers want to save the economy from a further recession that may degenerated to a depression; Nigeria need to develop its own economic model of development. Most developing countries lost control of their economics through the structural adjustment program of the 1980s introduced by the IMF, that limit State roles and advocate larger roles for the market; market dominated majorly by the western multinationals companies.

Today, the fastest growing economies in the world are not totally committed to the Washington consensus economic prescriptions or neo-liberalization of the west. Economics success of the East Asian countries have been accomplished by a strong, commanding role for the state than the market in promoting economic development. In China, Singapore and Malaysia, the government played a very comprehensive role in the economic development of these countries. They were state-led economy rather than market-led economy. The Nigerian model of development should focus on;

A. Reviving of state corporations.

B. Export -oriented strategy.

C. Reduce roles for the market.

D. Drive towards State independent through economic productions.

E. State led aggressive agricultural expansion.

F. Infrastructural development.

G. Moderate interest rates.

H. State regulations on consumption.

I. Revolution of the energy sectors through coal, gas, nuclear and green energy generation.

J. Tax reform.

2. AGGRESSIVE DRIVE TOWARDS LOCAL PRODUCTION OF PRIMARY PRODUCTS.

Nigeria need a comprehensive plan to produce at least 50% of its primary consumption locally. Every State in Nigeria should become a productive economy by processing their farm and mineral produce and resources into finished products for Nigerian consumption. If Bayelsa State for example invested N1 billion into aggressive fish pond farming and the federal government banned the importation of fishes from Finland and other European countries, Bayelsa state would generate more revenue than its monthly federal allocation and these would boast the economic activities in the state and create employment for the Bayelsa citizens.

In October 2015, Nigeria becomes the world largest consumer of champagne. Nigeria consumes 1 million bottles of champagne daily at an average price of US$3 per bottle. In order word, Nigerians spent about US$3million on champagne daily and US$90million dollars monthly. Delta, Rivers and Edo States have the mineral resources to produce 1 million champagnes daily. If these three states would combine their resources and begin to produce these champagnes and the federal government banned the importation of champagne from abroad. These states would generate more revenue than they presently receive as federal allocation and these would boast the economic activities of these states. Every state in Nigeria has the farm produce and mineral resources they can process to finished products for the 200 million Nigerian markets.

Nigeria has one of the largest consumer economies in the world. 50 million Nigerians buy a pair of shoe and at least a piece of clothing on a monthly basis at an average price of US$4. Nigerians spends more in consumption than the government generate from the oil sales, but the Nigerian government have failed to tapped into this great source of wealth. Nigerian can borrow a leaf from the East Asian countries to transform its economy. East Asian economic success is largely due to state-led industrial policy. The first stage of the policy promoted labor-intensive light industry such as textiles and other consumer durables. Today, Nigeria imports over 95% of its primary consumption, most of what can be produce locally and boast the economic activities, create employment and reduce demand for forex and thereby strengthened the Nigerian currency against the US dollars. To stimulate the Nigerian economy on the path of development and growth, every state must aggressively become productive by processing their farm and mineral products to finish products for Nigerian consumption.

3. REVERSE TO THE PEGG MONETARY SYSTEM.

After listening to the democracy day speech of President Muhamadu Buhari on May 29 2016, it is evident that the CBN is gambling with the Nigerian economy. A floating monetary policy maybe an idea policy for an export based economies like China, India or Germany but not a smart monetary policy for a major import based economy like Nigeria. Economist generally agreed that governments cannot simultaneously achieve the economic objectives of exchange-rate stability, capital mobility and monetary policy autonomy, so there must be a trade-off. By allowing it currency to float through market forces, the Nigerian economy would be subject to short term volatility and longer term misalignment and sacrifice exchange rate stability. How can the Nigerian central bank allow its currency to be determine by the market forces that was largely dominated by the western multinationals? Economists agreed that though multinationals companies might increase world's wealth through their efficient use of resources; the benefits would go mainly to their home countries while the rest of the world paid the price of their monopoly profits. The truth is that there is no economic policy the central bank introduce that can strengthen the Nigerian currency against the US dollars other than reducing the demand for the US dollars dramatically and this could mainly be achieve by encouraging local production as this would reduce demand for the forex. So the smart policy would have been for the central bank to peg the currency and formulate policies that would reduce demand for US dollars.

4. SUBSTITUTE FOREIGN TRIPS WITH A COMPREHENSIVE ECONOMICS TRANSFORMATIVE DOMESTIC TOURS.

President Buhari has traveled more in the past one year than any other Presidents Nigeria has ever had. In defense of his frequent foreign trip; the presidency said President Buhari travel abroad to recover the Nigerian looted funds. The dominant theory of international relations in the past 100 years is the realist theory that emphasize that the international system is structured on international anarchy where strong states achieve their national interests at the expense of weak states. Frequent travels to the west will do little to develop the Nigerian economy. President Buhari cannot plan his government based on the billions of dollars looted and hidden in US, UK and Switzerland banks. The funds would not be returns to Nigeria until a minimum of ten years. At the onset of his administration in 2015, President Buhari met President Obama in white house and the American government promised to help recover the Nigeria looted funds in American banks. At the nuclear security summit in march 2016, the two presidents met and as usual, President Obama promised to help recover looted funds. These promises would continue from American successive president until about 10 years. Rather than traveling overseas, President Buhari should set up a transformative economy team that would develop a comprehensive economic development plan for every Nigerian states on how they can become a productive economy based on their farm and mineral produce. President Buhari should travel with this team to all the 36 States in Nigeria to encourage them to transit to productive economy. The Federal government can provide credit facilities for any of the states that do not have enough financial resources for transition into a productive economy.

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