In this reaction to an earlier piece written by Pini Jason, Chinedum Nwajiuba explains that the reason why the Nigerian economy continues to wobble, in the face of an infusion of policies which had worked elsewhere is primarily as a result of the political disconnection engendered by a leadership that is self-serving.
I am reacting to some of the questions Pini Jason asked in Vanguard, Tuesday, July 20, 2004, page 14: Why do theories that work elsewhere fail here? Why does our case defy known cures? Should the world invent new economic laws for us? In the course of doing this, I’ll refer to some other statements in his article.
These questions seem to spew from the school of thought, which question the efficacy of economic theory and practise in Nigeria. I have been asked such questions by my students. A former Nigerian President was even credited with such concerns too, and went further to express surprise that the Nigerian economy had not collapsed. As Jason wrote, herd mentality, often parroting unverified ideas is common in Nigeria. But we owe a duty to humanity to wedge the flow of ignorance.
Firstly, the Nigeria man (generic please) is an economic being as with man everywhere. For instance, economic theory teaches that there are factors affecting the demand for commodities including price, income, season, etc. In Nigeria, for many goods, as price increase, consumers normally reduce quantity demanded, and shift to substitute goods conferring similar utility. As real income increases, demand increases. While certain goods are demanded more in specific seasons. Examples include: About 1996, a popular soft drink had its unit price increased from N10 to N15. Consumer resistance reduced quantity consumed, and shifted to substitutes forcing a reversal down to N12. Increased wages in the last 5 years has led to increase in vehicles on the roads. The demand for seats on buses and airplanes rise during the Christmas. These are only a few examples from the theory of demand.
Nigerian housewives are very astute micro-economists. For instance, Mrs. Obi operating a tight budget of N1,000 to spend half (N500) on each of yam and meat, has an idea of the unit price of each and therefore the quantities she expects to take home. If on getting to the market she finds a 50% decrease in the price of meat due perhaps to suppliers misreading the market, how does Mrs. Obi react? There are options and she chooses one that meets her needs best. She rarely would double the quantity of meat she buys by spending all the N500 on it. She rarely would spend only N250 on meat to buy the quantity she planned and therefore spending N750 on yam. Typically, she increases her meat purchase by spending part of her “saved” N250 and allocates the rest to yam. In this way she obtains more yams too. Here, both meat and yam are normal goods. This aspect of micro-economic theory is consumer behavior. Specifically we are dealing with indifferent curves, budget lines, and substitution and income effects. Though the typical housewife may not so describe what she does, but ask your wife if this is not typical.
Where the doubts on the efficacy and relevance of economic theory starts is the inability of Nigerians to experience obvious and sustainable improvement in their well being, despite all manner of economic jargons, policies, programmes and projects. This is where those questions arise.
Yes, we may indeed have to invent new economic laws for us. We will have to do that, not Northern American, Western European or Asian economists, and we are indeed doing that, but perhaps either unnoticed, unappreciated or faced with antagonism.
Three examples: Prof. E. J. Nwosu’s book: The challenge of Poverty in Africa. Here you find the “integrity” factor elevated to the level of the four classical factors of production. Professor A. Adedeji, the Economic Commission for Africa and the Alternative to Structural Adjustment Programme (SAP) in the 1980’s. Another book: Introduction to Micro-Economics by Dr. C. U. Nwajiuba, which deals with the unstated assumptions of economic theory (Also published in the Journal of Social Studies Vol 2(1): 142 –– 146. March 1999). I elaborate on the last one.
From the first experience with economics in Nigerian (or African) schools previously in form 3 now in SS1, we start with basic definitions and concepts, through micro-economics to macro-economic theory. Our curriculum has been influenced by the experience of Western Europe and Northern America where most of our books come from. These unstated assumptions are so obvious, prevalent and seemingly given in those places that they do not bother with them. But that is not the case with us, and we need to teach that as pre-conditions for the relevance of our study of economics. What are these pre-conditions or unstated assumptions for the relevance of economic theory and practice in Nigeria (and Africa)?
These include: (1) Defined and effective geographical unit (2) Citizenship and rights within the country should make for fair opportunities and unhindered investments (3) Responsible political leadership (4) National security and rule of law (5) The general national culture. Briefly commenting on each of these:
1. Even in our definitions of demand and supply we do not overlook the spatial issues involved. For instance, not just demand for fuel but the demand for fuel in Nigeria, or just demand for fertilizer but the demand for fertilizer in Nigeria, and also the supply of maize in Nigeria etc. The Vanguard of Wednesday July 21, 2004 in a report by Adaobi Anike states, “influx of banned goods on the increase.” The contradiction: as we ban, volume of imports increase. While Nigeria has banned poultry products imports, are they not still available? Is it not correct that a lot of these commodities flow through and fro Nigeria serving an indeterminate population over an unclear area.
2. Can we relate Nigeria’s aggregate population to her land area? Economics recognizes resource/factor mobility. For instance, is Nigeria’s land area available without recourse to indigenship to Nigerians? Are there not even high ranking Nigerians whose investments have been seized for political reasons? What about the abandoned property issue?
3. How responsible has Nigeria’s political and economic leadership been since 1960? Have there been presidents engaged in illegal ripping of the vaults? How do you reconcile that with money supply? Have we not had leadership that actively promoted murdering of Nigerian citizens as a policy? What did Yakubu Gowon do from July 29, 1966? How transparent are our financial and stock markets?
Irresponsible Nigeria leadership has been lying about petrol prices in industrialised countries to prove that they pay more. They forget or deliberately do not tell Nigerians that this prices, for instance in the United States, include 7.65% social security taxes and medicare, sales taxes which range from 5% to 9% per gallon depending on state; unemployment taxes which is 27% of the first $9,000 paid to each employee annually in the District of Columbia, 1.9% of the first $8,000 paid to each employee annually in the state of Maryland; federal unemployment taxes which starts from 0.8%, cost of health insurance for employees working at the gas station; and workmen compensation in case of injury on the premises (see Lanre Banjo: The lies about the life blood of any economy –– petroleum. 2004: www. nigeriaworld.com) Yet this is a country where the least paid petrol station employee gets $7 per hour.
4. Can economic theory thrive in a lawless society? What about corruption? What happened in April 2003 and what are its economic and social implications? What about state governments siphoning funds due to the local governments?
5. How does the culture of corruption, quota and federal character, etc relate to an economic philosophy of liberalisation, deregulation and market forces? Are they not contradictory? Can you run a modern economy without statistics?
The net effect of these issues result to a predominant informal and underground economy. There is more money, jobs and trade outside the formal systems. Nigeria is predominantly an underground society. Access to power is underground. Health services, education, water, etc. are mostly informal. What do we learn from this? That indeed economics is a social science, which relates to other social sciences, the political system, social and cultural values, the psychology of the people, their religious beliefs and practices etc.
Which is why I am concerned each time a veiled attempt is made at questioning the competence of Professor Charles Soludo. Last year I reacted to a comment on Prof. Soludo’s understanding of the concepts of devaluation. Charles Soludo is clearly an outstanding scholar with a history of excellence. But my worry is that either Prof. Soludo has by himself, or has allowed the media project him as possessing a magic wand to right all economic wrongs in Nigeria. That may not be right. Given the structure and culture which exist in Nigeria, and which form the superstructure and environment of all that is expected of him and other members of the current economic management team, their task is certainly difficult. There is crisis in Nigeria’s economy, as there is in other aspects of the Nigeria society –– politics, education, health, transport, housing etc. What it tells us is that the issue is deeper and more fundamental.
The core issue is that a band of elites have seized political power since July 1966 and insist on keeping it, while running Nigeria as a typical mineral enclave where expatriates tell us where the oil is, bring most of the financial and technical investments, tell us what quantity they take, fix the prices and tell us how much to gather and share monthly in Abuja. After the sharing, a lot of it escapes as capital flight. That is why for most of the past two decades the essentials of economic policy in Nigeria have been devaluation, fuel price increase, wage increase etc. Each and every government since IBB has engaged in this as a cracked record plate, singing the same tune. What for instance, is the net effect of devaluation for a primary–product exporting mono-economy be, other than domestic inflation and erosion of real living standards, we are yet to see. How can we abrogate subsidies in a poverty –– ravaged society and expect crimes to be low, or better still erect high walls, and street gates, while celebrating frequent slaughtering of young Nigerian male robbers, and exporting young ladies to Italy, etc, and yet expect meaningful foreign investment.
Not all those who criticise IMF/World Bank policies do so without cause, or studied only at Awka, Okada and Ago-Iwoye. I was at UNN for B.Sc. and M.Sc. and Ph.D at Hohenheim, Germany. Many others critical of prescriptions from some of those organisations studied overseas too. Prof. E. J. Nwosu for instance. Their criticism is not without reason. We know that an organisation like the IITA in the early 1970’s promoted sole cropping systems. There were Nigerians who said no, but were overruled. Years later, IITA reversed herself. They had come to know what we knew all along, that our mixed cropping systems suited our ecology better.
We also know the originators of those economic policies. We do not know any Nigerian economist who claims he designed them. We also know of the African Economic Commission and Professor Adedeji’s alternative to SAP. We know NEEDS may not be much different from SAP. We know that those economic prescriptions did not originate in each of the adopting developing countries at the same time, yet independently. We know they are IMF conditions as well as the linkage to the World Bank, Paris and London groups of creditors –– a cartel that deals with individual debtor countries. The conduct and performance of an oligopolistic market is not unknown. Yet, we also know that the IMF/World Bank is gradually accepting that those conditions have damaged Africa societies deeply. The acknowledgement of the weakness of their prescriptions has not been without the effort of so called anti-IMF/World Bank economists, who have not stopped reminding them that the whole of rich North America, Western Europe and Japan have heavy subsidies for the poor, farmers, transport, industries, etc. Why then should the poor in Africa be subjected to unbridled market forces?
Therefore, theories that work elsewhere fail here because of the conglomeration of anti-development, historical, political and socio-economic conditions in Nigeria. Our case defies known cures, because the illness for which those cures were developed are not what Nigeria suffers from, even if they have similar symptoms.
