Deregulating Poverty Alleviation: Obasanjo's Quagmire!

 Tuesday, January 18, 2000

 Ibibia Lucky Worika Ph.D.
 [email protected]

It is on record that one of the corner stones on which the Obasanjo campaign was based is to alleviate poverty in the land, which had become endemic under the over fifteen years of military misrule in Nigeria. The reasons for the massive and debilitating poverty, which at this time had become something of a national embarassement are too well known to be recounted here. It suffices to say that, the lack of a well articulated and coherent economic policy by the various military regimes especially under the Abacha administration, the fact that those in government were not ready themselves to be subject to the rules, the general level of corruption in the land, exceptionally perpetuated by the top military brass as demonstrated by the looting of our national treasury and other forms of mismanagment, including political thuggery have been identified as some of the root causes of our national economic malaise.

Against this backdrop, most Nigerians heaved a sigh of relief when the Obasanjo administration seemingly identified these ills and resolved to tackle them head-on. In this regard, even the President's political opponents gave him much credit for the political will with which the Federal government went about its first one hundred days in office - globe-trotting the entire earth and calling on Western nations not just to reschedule, but to cancel Nigeria's debt, while calling on them to invest in the country; sacking the retinue of top-heavy military establishment in the country that has been partly responsible for our economic predicament in the first place; investigating, arresting and prosecuting hitherto sacred cows of the Abacha administration, who had contributed in no small measure to the sorry state of the nation; declaring a war on corruption; and signalling its resolve to further liberalise and deregulate the economy.

There is a Nigerian proverb of the Ijaw-speaking tribe to the effect that a good dancer knows when to reduce the vigour with which s/he dances after an ovation. Otherwise, s/he might end up with a back pain. The federal government should not have the kind of back pain that may end up in crippling the administration. No one doubts the sincerity with which the federal government intends to tackle Nigeria's economic problems that have been wrath by several decades of military misrule.
It is the last of these moves that has rung the alarm bells of right-thinking and well-meaning Nigerians, not least the President of the Nigerian Labour Congress (NLC) and Dr. K. A Familoni, a senior lecturer in the Economics Department of the University of Lagos a recent interview with Tempo. Details of the latter interview are well posted on the internet and do not need to be recounted here. The recent workers' demonstration in Abuja, their ensuing confrontation with the police and the fact that the National Assembly has called on the Presidency to halt its plans have all further underscored the sensitivity of this subject matter. Sadly, the Presidency appears hell-bent on going ahead with its plans as the utterances of the President and his Chief Press Secretary suggest.

"Deregulation" is an acronym for government ridding itself of a tangled web of economic activities. In a more general sense, it is synonimous with decontrol, demonopolisation and commercialisation. It is an off-shoot of economic liberalisation, the antithetical philosophy to the economic centralism and control of the then Soviet Union and its satellite Central and Eastern European States. In the Nigerian context, deregulation is based on the overwhelming proof that government is less suited to run certain areas of the economy - the peformance of the National carrier, the Nigerian Airways and the sporadic and intermittent power supply in the electricity sector, just to mention these, are eloquent testimonies of governmental mismanagement and inefficiency.

In all fairness, deregulation of the petroleum sector will not necessarily lead to inflation that is, if market forces operate in a fair system to allocate resources efficiently. But, in Nigeria, neither the system nor resource-allocation is fair or efficient. Herein lies the probability that deregulation (as per removal of petroleum subsidies) in Nigeria will invariably lead to inflation. Let it not be easily forgotten that following the partial removal of petroleum subsidy sometime in December/January 1998/1999, the cost of transportation went up tripple-fold. This was subsequently reflected in the increases in consumer prices of goods and services all across the entire country.

I left Nigeria in 1995 when the price of coca-cola was five Naira per bottle in Port-Harcourt. A month ago, upon a brief trip home, I noticed it had jumped, so to speak, to twenty naira per bottle. The popular "Okada" or motorbike tranport used to be five naira per drop about the same time, it is now twenty naira per drop. With the federal government's proposal to further reduce petroleum subsidy, which would tantamount to an increase in the pump price of a litter of petrol from twenty naira to twenty five naira (that is an increment of 25 per cent), no one knows to what extent prices of goods and services would rise. But, they would certainly neither be stable nor be reduced. On the contrary, there is every reason to believe that there would be hyper-inflation resulting into a considerable erosion of the purchasing power of the average Nigerian consumer's wages and salaries.

The reasons for this are not far fetched either. The wages and salary of the average Nigerian consumer/worker are not progressive, or adjusted in a dynamic sense to reflect the level of inflation in the land. Consequently, the recently hard-earned increments in public sector wages would have been wiped out. The band-wagon and geometric inflationary figures on the prices of consumer foodstuffs and feedingstuffs, transportation, housing and medicare (in the absence of a national health insurance scheme) would imply the further marginalisation of the already pauperised masses. We only need to take a cursory look at the Russian Federation to warn ourselves that the result of any further removal of petroleum subsidy could lead to considerable tensions and stresses in Nigeria's already fragile policy, having been assaulted further in recent times by growing ethnic tensions, civil strife and the Sharia controversy.

The emphasis here has been on the average Nigerian in contradistinction to the foreigner in Nigeria. Western businessmen, tourists and investors would evidently be having a field-day as the strength of the the Naira further depreciates against the U.S. dollar and British pound. In some sense, this might seem good for attracting the much needed foreign investment into the Nigerian economy. But, it could be counter-productive as, the average Nigerian as in Russia might have a dislike and, perhaps, hatred for foreigners, who would inevitably be blamed for our country's economic woes, rightly or wrongly. Although the federal government may, in fact, be bowing to the pressure of international financial insititutions like the IMF and the World Bank and some Western governments, the same Western press would in the final analyses be amusing themselves by depicting pathetic pictures and reporting gut-wrenching stories of disease-stricken and poverty-afflicted masses of Nigeria on their Television screens, thus giving the impression that the same government, which sort to implement their universal prescriptions, in the first place, do not really care about their own peoples.

It would be recalled that over the years, the impression has always been created that removing petroeum subsidies would free up more monies for the federal government to provide the much needed social services. Subsidies have, therefore, been incrementally removed, but with nothing to show in terms of social services over the years. In one's humble view, the government is correct by reducing its stake in economic activities generally. It has done the right thing by signalling its intention to reduce its stake in hitherto inefficient governmental parastatals and liberaling such sectors to encourage private investments. Privatisation of some of these parastals, if it has the political will to do so, would inevitably free-up the much needed monies to execute government projects and provide social services.

The Swiss government's prosecutor has just given a deadline within which the Nigerian government should make a formal request for the millions of dollars worth over $500 million U.S. dollars hidden away in Abacha's bank accounts. This and other stolen or siphoned monies should be studiously traced by the federal government and returned home for economic rejuvenation. While this may take a while, the government should demonstrate positively, its resolve for prudent economic management from the very top. A situation where legislator's can in the twinkle of an eye be given 3.5 and 2.5 million naira for furniture allowances, while university lecturers have to go on strike to force government to heed to a May 1999 Agreement clearly sends wrong signals and is not demonstrable of government's resolve to manage the economy prudently. While fiscal discipline should be the connerstone of Nigeria's economic rejuvenation policy, other economic instruments such as improved taxation and, perhaps, increased taxation of Tobacco and other alcohol related products could, in all fairness, raise part of this much needed revenue.

There is a Nigerian proverb of the Ijaw-speaking tribe to the effect that a good dancer knows when to reduce the vigour with which s/he dances after an ovation. Otherwise, s/he might end up with a back pain. The federal government should not have the kind of back pain that may end up in crippling the administration. No one doubts the sincerity with which the federal government intends to tackle Nigeria's economic problems that have been wrath by several decades of military misrule. Some might counter argue, to use the very words of the Tony Blair, the British Prime Minister, that "hard but, realistic decisions have to be taken". This is certainly correct in a welfare state like the U.K., where institutional safeguards are already there to cushion the effects of such hard but realistic decisions. The unemployed in Nigeria does not rely on the state for social security benefits, there is neither a National Health Insurance scheme as in the U.K., nor Council Flats for the vast majority of Nigeria's teeming and ever-increasing population. Consequently, it would be futile to apply macro-economic policies of Western industrialised countries in a Nigerian setting without necessary adjustments.

A word, they say, is enough for the wise!

Ibibia Lucky Worika Ph.D.

Consultant, International Environmental and Comparative Energy Law and Policy,
Centre for Energy, Petroleum & Mineral Law & Policy,
University of Dundee, Dundee, Scotland, United Kingdom.