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Posted by seunfakze in CHANGE, ECONOMICS, POLITICS.
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In April 2016, I had taken to Twitter, the microblog platform, to express my views concerning Nigeria’s ailing economy under President M. Buhari. Amidst persistent calls to salvage Nigeria’s economy had been the most unsettling (for me) but widely perpetuated wisdom: devaluation. On twitter, I had argued that the dangers of allowing peddled economic panacea for struggling African economies without reason were incredibly high.

Unfortunately, given Nigeria’s economic sustainability strategy (over-dependence on oil), and serious financial dilemma in Nigeria; the clamour to accept Western economic ideology – neoliberalism – as the panacea for economic quagmire was not hard to see. President Buhari chose (still choose) to ignore the IMF and instead, borrowed from China to address economic concerns.

It is not hard to see why Mr. Buhari believes devaluation could be harmful to Nigeria’s economy. Devaluation benefits, essentially, an export-driven country, much-developed economies. It hurts importation. It improves the viability of export and also increases employment (as export-based companies sometimes have to add labour to meet export demands in the international scene.) Besides, owing to international capital flight, Nigeria currency is already depressed with the reserve base suffering with the pegged exchange. There seem not to be much to gain from much devaluation, except intense hardship!

Nigeria’s exports are few, besides the negligible agri-products and of course crude, which we end up importing in a refined form (more cost if we devalue.) It is a tough choice to be President at this point, seeing the hard choices and the severe trade-offs between pluralistic economic policies.

I had written a paper on International Political Economy, analysing the impact of International governmental organisations (IGOs) in Africa in the past decades. I had stated the mixed outcomes overall but categorically, criticized the failures of the IMF and the World Bank in Africa.

The crises of the 1970s plunged most African countries into financial doldrums, and the conditionalities set by the IGOs included (amongst other things) austerity measures. In Africa, this was part of the Structural Adjustment Program (SAP)

The IGOs, by many standards, brandished western policies which were not essentially suited for African societies; given the weak institutions, lopsided political leadership as well as the stringent conditionality upon which most of them were based. With their bowls, African countries approached the International community; and remember, beggars cannot be choosers!.

Many of the African insolvent nations, poor countries in short, suffered from wide-ranging economic challenges. These challenges were not meant to be addressed with the generic solutions or applied at the same time. But African leaders, challenged by logical thinking, their greedy self-interests or an eagerness to soothe western conditions of globalisation (to save face from domestic crises and uproar) accepted the band-aid. The panacea was the same: just open your markets, lower your tariffs, and cut spending; and everything will be alright!

I had written this paper in-depth based on wide research. Agricultural tariffs and manufacturing exports were the source of many African economies. I had looked at many cases for my arguments; certain that the IMF and its sister organization, the World Bank, were fully aware of these shortcomings too.

I had seen the weak infrastructural mechanisms of African states, the uncompetitive manufacturing standards and manufactured products, the weak or failed institutions, and the bad managers: African corrupt leaders and bureaucrats. The IMF’s policies, needless to say, came upon heavy criticism because of the terrible outcomes. Africa is not alone in this post-mortem regret. The IMF had applied the same band-aid during the South East Asian crises of 1997.

I had also argued about FDI and the implications of MNCs with green and brown investment conditionalities, evasive tax mechanism for host African countries, or the wildly touted selective success stories of privatisation. Ironical, global financial liberalisation had both helped South Asian economies to boom and also led to its eventual plunge.

The IGOs argue for openness, yet proposing for expenditure cuts at the same time (austerity). They ask African states to open its fledgling economies to the dictates of foreign capital flow, a weak manufacturing base, and the high risk of premature capital withdrawal when markets fail.

I had argued, not against free markets, but against the unwholesome acceptance by African leaders without thought on the local economy, without consideration for its markets, without regard for its manufacturing base or industries or its competitiveness standing. I had written this paper for my respected IPE lecturer, Razeen Sally. I expected the worst!. Writing a paper essentially against the band-aid of free markets was/is not going to bring many friends. Not even Paul Krugman got away with such!

Very few dispute the benefits of profitable trade. However, African intellectuals today still think or mostly believe this strategy, that unconditional open markets/liberalisation are the best way at stirring and improving ailing economies. Through their selective arguments, they canvass for devaluation, austerity, conditionalityity of trade, financial liberalisation (FDI without conditions), amongst many other liberal ideologies as the way towards economic growth and development. A short revisit of history about markets will perhaps do us justice.

The pre-war (first and second) growths of the hegemons have been on the precondition of manufacturing and heavy protectionism, with occasional trade in-between. Japan, South Korea, U.S.A, Britain, Finland, Germany, to mention a few; were economies whose advancement came at the exception of this much-touted ideologies. Today, having achieved economic sustainable stability; the hegemons canvass and advocate liberalism as their magic wand for economic growth, the IGOs as their tools.

Neoliberals explain China’s growth by virtue of its open economy. I daresay partly true. Despite its openness, China’s economy would most likely not experience such growth were it not for years of building skills, and achieving competitiveness through selective economic strategy, and opening gradually too.

China’s manufacturing prowesss is because of its selective approach towards neoliberalism.  Today, it is still the world’s most mercantilist nation, with preconditions for FDI, skills transfer and severe protection in many cluster sectors. It simply copied and applied the same handout through which Japan, South Korea, Taiwan, and others grew.

The IMF recently came out with an article highlighting what seem as a mixed evaluation of austerity, a liberalism tool of the IMF. In this report, the IMF research economists, cloaking the failure of IMF policies, weighed the exaggerated application of neoliberal agenda in the spate of economic shocks the world over.

In castigating the overplay of austerity, the report downplays the impact of other liberal economic measures that were proposed and sold to Africa, and which have played devastating role in African economies over the years. The IMF even challenged George Osborne‘s view for austerity as a panacea for the UK’s struggling economy in 2010. The same austerity championed for Africa!

For African states to truly grow, they cannot rely solely on the panacea espoused by the West and its “seasoned” economists especially when it does not work for Africa’s own advantage. It is high time African leaders stopped being the puppets of ill-concieved ideologies. For this to happen, there has to be a new thinking, or a thorough way of looking at policies that have failed (and still fail) to bring economic growth. This will require new-found courage and desire to be the exception.

This is where I support Muhammadu Buhari. I hope the painful steps towards economic growth can be smooth and quick; and that through the 2016’s budget, expansionary spending  in the productive parts of the economy (tapered with other economic policies) to can ease the ecomomic hardship. Truly, for me, the most important point is to identify what the obstructions for growth are and address them with laser precision, rather than apply the band-aid that appeals but truly ineffective.

With a population boom incoming (400million by 2050), I also believe this is the time for Nigeria to start getting serious with a compelling blueprint for its economic strategy: skills for the future, and a diversified economy based on manufacturing and not just export of commodities.

Will this happen?

Oluwaseun Fakuade


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