Modibbo Hammantukur Ribadu
Historically, any economy that emerges from war will face the crises Nigeria is facing. Post war economy suffers three major problems: Unemployment, Shortages and inflation. We all saw how the two wars in Iraq and Afghanistan pushed the global economy into recession. To solve the recession the U.S Government made three different quantitative cash injection called QED 1,2 and 3. In the case of Nigeria, Boko Haram wars contributed in destroying the economy because investing in war has no return on investment. But corruption, mismanagement and crises in and weakening of the criminal justice procedure also fast tracked the process for Boko Haram. But on the whole, its total waste of time to only sit and point accusing fingers without doing much to solve the problem. The situation might even be more fundamental than we see it. We should diagnose and understand our problem properly and then work to offer genuine and mixed solutions.
Monetary Economics
There was a time when our economy was good, especially in the early post colonial period and the post civil war oil boom. The economy was good because fiscal discipline and planning processes of the colonial regimes were not disrupted. WE NEVER GOT IT RIGHT ECONOMICALLY, at least not by universal macro economics terminologies and theories.
In monetary economics, which is part of macro economics, money in form of cash serves three different purposes; its a medium of exchange, store of value and unit of account. We all know this concept from the time of cowries. What many of us find very challenging, is knowing, how cash in circulation relates to real or applied economics.
The cash, called legal tender or currency denomination or paper money or bank note or Naira relates to the economy in direct value term. This relationship, globally, is categorized in to 3 levels. Its whether its narrowly, broadly or index aggregated in relation to over all economic activity.
If your currency is NARROWLY related to your economy, you will be struggling against the world’s leading bank notes. The contribution of your economy to the global production or productivity is not strong and may not even be stable. You may be subjected to currency printing not backed by value occasionally, foreign exchange frequent interventions,cash mopping periodically, cash shortages, ruinous economic expansion, emergency and un balanced production arrangements of goods, one sided or a single product economy etc. Currently this is where Nigeria is. And even quite recently the economy was injected with about eight hundred billion naira cash with no value propping done by the CBN.
If your cash is STRONGLY related to your economy, you have long term stability in inflationary rates, long term fixed foreign exchange rate, stable interest rate, hefty and stacked cash reserve in other currencies, favorable balanced of trade position (settlement and clearance). You also have good Foreign Direct Investment (FDI). You will have state of the art ARTIFICIAL friends, showing up for your hard currency. Countries in this category might be Saudi Arabia, Kuwait, Qatar, Oman, Brunei etc. Countries under this monetary condition hardly rose to enter the developed world club but they could come down from the HONEY TREE and join the down trodden depending on democratization and resource allocation or income redistribution structures that could cause social crises or lack of it.
In INDEX AGGREGATED there is estimation of cash to each of the complex objects of the economy. It may go cash for real or genuine economic value. Such economy might be a developed one. Product or brand name development, market entry strategies, competing for market share or competitive positioning, averaging in the industry, frequent shut down or market share surrender due to stiff competition and innovations heat up, shrewdness, cut throat and edgy competitive overthrows are the order of the day. Its the best economy in growth terms, its free, democratic and for survival of the fittest under rule of law and equal opportunity. You compete for your live to the next day and earn by your design and efforts strictly.
This monetary economics categorization is important for any country that is ready to level up in real economic growth. It is also important in addressing internal monetary policies and related areas such as inflation, devaluation etc.
Where We Missed The Points
Reward or compensation system using cash, in monetary economics, is guided by a theory called ‘aggregate demand for out put’. HERE ITS SUGGESTED THAT FOR YOU TO GIVE CASH TO ANY BODY, HE MUST EARN IT. If you are paying salary to an individual, you must make sure he produced that salary. If you invoke other theories in micro foundation like ‘economic rent and transfer earning’, you can pay the labor or the factor of production even higher. Its simply saying every staff must produce higher than his salary to the system for value to be created or profit made. So the mere fact in government workers are not paid salaries it means not all the workers produce their salaries in commensurate terms. Hence we keep excess or redundant labor. So to fix the economy Buhari should apply systematic mobility of labor to other corporations and sectors of the economy that need expansion. In this way we will also have skilled man hour optimization. We do not have to reduce employees.
Economic Miracle
It is expected, as usual, Buhari will launch a development agenda full of social projects in education, health, transport etc. But economic development is different from economic growth and one can not be sustained without the other. Economic development is totally about social infrastructure while economic growth is purely market driven and business environment development to maximize market share for entrepreneurship and prepare your local commodity for global competition as a subtitute or a monopoly. For long term strategy and policy sustainability, Buhari will have to perform miracles. At least that is what the situation is asking for. His circumstances and the country’s situation is calling for miracles to be done. There is no point listing problems since everything and every body are problems.
Japan once found itself in our shoes. Nigeria today is like Japan after 1945. Because of the expenses of the second world war and other vices, Japan then a developing country slumped into crises. But through endowed mixed policies, the Japanese adopted what was called ‘the Japanese economic miracle’ and emerged the second most developed economy in the world in the years leading to the lost decades of the 90s and end of cold war.
In comparable terms the Japanese Yen looks even like the Naira, despite all the differences in economic growth.
How Japan did it! There must be complete paradigm shift and strings of in depth reversal of long standing policies.
I do not think Buhari can be overwhelmed suddenly by the devastating condition of the economy. He can be nervous actually but he would have faced worse challenges else where since he fought in a war. I don’t know how he intends to bridge over to economic lime light. Different people suggest different approaches like subsidy removal, tax collection etc. But his eyes must be set on the long term solutions like the Japanese did.
Role of the International community: For many reasons the U.S helped in the reconstruction and the building of the Japanese Economy. Chiefly, both China and Russia were targeting the pacific with socialist/communists take over. So since Japan was ravaged by the war especially the nuclear bomb, the whole pacific region was to be shut down for the U.S. that is if Japan towed the line of Russia then. So America needed Japan. The U.S needs Nigeria today to win the terror war in Africa and the middle east. The U.S posture towards Buhari is very friendly unlike Yaradua and GEJ. This is the time to go with the shopping basket. 1, Start buying my oil temporarily, he can request the U.S. 2. Lets partner in Agriculture and market development. 3. Lets try medium and low scale joint investments. 4. Lets partner in ICT and anti corruption efforts. 5. Lets partner in low or semi skilled labor development and construction. The list can grow gradually. What a good start.
Role of Industrialization. Buhari, like Ikeda of Japan then, promised to migrate the economy to mining and industry. Its wonderful, provided technology and cost management can be imbibed. That’s the right way and the right replacement for oil based economy.
If we may adopt proprietary technology across board, our economy will witness a rapid rise. In 1965 the nominal GDP for japan was $91 billion but by 1980 it rose to over $1.2 trillion.
Yes! Buhari is overcrowded with huge challenges but if he can distinctively separate policies of government in economic development like roads, health, water, transport etc from economic growth of business development and global market share promotion and adopt rational monetary yardsticks, like the miracle of japan, Nigeria will emerge a strong force to reckon with world wide and our problems might be finally over.
–– Modibbo Hammantukur Ribadu, lives in Abuja
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