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The economics of nation-building
ibrahIm ayagi
To
start the discussion, it seems relevant to ask:
What is nation-building and what is the economics of nation-building? This
is first part of the title proposed to me by Professor Bimpe Aboyade. I could
not be sure what she had in mind on this topic, but thinking in the way an
economist would think, I first take up the words: "The economics of ..." and try
to give it a meaning. Of course, even the dictionary describes economics as the
"science of the production, distribution and consumption of goods or conditions
of a country as to material prosperity." Is that description correct and
appropriate?
I believe the dictionary is generally
correct. Economics is the scientific study of the behaviour of man faced with
the realities of surviving, existing and living on earth. To survive on the
earth, man must consume and to consume, he must produce. Hence, the two basic
core activities of man are production and consumption. Ample resources are
endowed by nature to man’s environment wherever he exists, and he is responsible
for devising the appropriate technology to tap and exploit the resources for his
own use and benefit. What applies to man applies also to societies and to
nation-states. Communities and societies organize themselves around and in
conformity with the dictates of the resources endowed in their environment. They
organize to use the resources endowed them to produce, distribute and consume
the goods and services they desire. They form economic communities or societies.
From these, nations are formed with their defined territories and identified
borders. Each nation guards its boundaries to protect its people and resources.
The resources are preserved and nurtured for improved production and
consumption. The objective of each country or nation is to produce more and
better goods and services so as to consume more and live better. More and better
production and consumption are always better and preferable to less. Improved
technology and better systems of distribution are all means to an end and the
end is the production and consumption of goods and services.
A nation is a country with a defined
system of economic production, distribution and consumption. How to produce
what, with what resources and whom to distribute to, and at what prices
constitute the economic system of a nation. Each society and each nation strives
to achieve a state of the greatest happiness for the greatest number of people.
The basic items that constitute the ingredients that contribute to the greatest
happiness for the greatest number of people are goods and services wither within
the economic system and/or from outside it. The quantum of goods and services
produced by a nation is called Gross Domestic Product (GDP) which represents the
value of total production by the nation’s citizens. The higher the GDP, other
things being equal, the better the welfare and well-being of the nationals of a
country.
From this analysis, it can be seen that
nation-building does not mean expanding the boundary of a country, which is not
practicable today, especially for countries outside the present eight or so
industrialized nations. Nor does it mean expanding the population of a country
which does not seem to be a positive objective for nations to pursue. It is
reasonable to see nation-building as the growth of the GDP with its impact on
the life, well-being of the society. Policies geared to the growth of the GDP
and the relevant related indices of development are policies geared to
nation-building. The policies are enunciated in terms of what to do to
accelerate the growth of the GDP and the improvement of the relevant indices.
That is nation-building, and the economics
of it is what governments do in their policies to effect desirable changes.
Consequently, Nigeria had various governments, each involved in its own way in
nation-building. Even the most destructive of any government- the one that
unfortunately ruled Nigeria and destroyed its economy between August 1985 and
November 1993-must be seen as being involved in nation-building, destructively!
The above analysis had defined what is
nation-building and what is the economics of nation-building. That is the first
part of the title of this presentation. The second part of the title is: A
Critique of the Obasanjo Administration. This is the section that analyzes the
performances of some of the governments of Nigeria vis-a-vis the present (2004)
Administration of President Olusegun Obasanjo. For its scope and time
constraint, this analysis is limited to only some rather than all the
governments of Nigeria.
Nation-building has been going on in
Nigeria for 44 years-since Independence in 1960. Of the 44 years, you take out
the in-between eight years of 1985 to 1993. The first part is the 25 years of
1960 to 1985 which has a total of six governments-most of them good and some
even very good-all involved in the nation-building of Nigeria. The last set of
governments was for the 11 years of 1993 to date (2004), which constitutes the
bulk of this presentation. The government in the in-between is the destructive
government of the period 1985 to 1993 which constitutes the springboard of this
analysis.
Nigeria had a patriotic government in the
period January 1984 to August 1985. The Nigerian economy had suffered
tremendously in the period 1979 to 1983. Not only had Nigeria consumed away all
the foreign exchange revenue surpluses it accumulated during the country’s oil
boom period but had, in the bargain also started to accumulate foreign debts.
The country was afflicted by so many ills and evil, highlighted by an extreme
degree of corruption and indiscipline. Poverty had also started to spread
amongst the generality of Nigerians.
The military government that came to power
in January 1984 was resolved to attack head-on and solve these economic, social
and societal problems of Nigeria; and they started very well. They started to
repay Nigeria’s outstanding foreign debts and introduced measures to instill
discipline into Nigerians.
That government was extremely popular and
their actions and decisions to salvage the Nigerian economy and nation were
accepted and highly regarded by the generality of Nigerians. Furthermore, the
government’s objective were being achieved. However, these actions and polices
of the military government went against the interest of a few elite rich
Nigerians and against the interest of the country’s foreign creditors and their
agents. These were extremely influential and powerful groups and before anyone
knew what was happening, that military government was overthrown from within
itself. All that they did was to remove the Head of State and his Deputy from
amongst themselves, and the military government became a new one on 27th August,
1985. All of a sudden a group of military rulers that was patriotic,
nationalistic, transparent and honest changed to the almost complete reverse
qualities just by extracting the leader and his deputy, putting them behind iron
bars and replacing them with two from amongst themselves. This an excellent
demonstration of the fact that the most important element in nation-building is
leadership, that is the "Leader": if he is the right man, the country is led a
right while if he is wrongly disposed and with the wrong attributes the country
is accursed. One man could reverse the process of nation-building from good to
bad, from positivity to negativity, from morality to immorality, from discipline
to indiscipline, from fight against corruption to corruption permeation and from
patriotism and nationalism to the sell-out and mortgaging of national resources
and the national interest to Nigeria’s foreign creditors.
That was the government that ruled Nigeria
for eight years to 1993. That was the government that dribbled Nigeria and
Nigerians to undesirable situations. That was the government that effectively
stopped the fight against indiscipline in Nigeria. That was the government that
virtually institutionalized corruption in Nigeria. And that was the government
that introduced the Structural Adjustment Programme (S.A.P). Introduced in 1986,
SAP was a macro-economic programme designed to stabilize the economy (from the
demand side), and restructure the economic base with emphasis on diversification
away from petroleum-related activities and the enhancement of private sector
role in production (from the supply side). The SAP was supposed to be a tool for
discipline in consumption and stimulation production in the Nigeria economy.
The economic policy tools employed
included devaluation of the Naira, deregulation, Iiberalization of the foreign
trade sector, elimination of subsidies on petroleum-related products and
fertilizers, downsizing of the public sector through privatization and
rationalization and tight monetary and fiscal policies. However, implementation
of the policies was half-hearted, unco-ordinated, non-transparent, insincere and
downright dishonest. In fact, viable and potent economic policy tools that had
been successfully applied to salvage the economies of many countries were simply
trivialized and bastardized in Nigeria at that time. It was therefore, no
wonder, of course, that by November, 1993 when the leadership of that military
administration was forced to step aside and the life of the administration came
to an end, the implementation of SAP had brought the Nigerian economy to its
knees. Continued devaluation of the Naira not only reduced the purchasing power
of Nigerians but also led to a plummeting of the rate of capacity utilization in
the manufacturing sector to the 28-34 per cent range due to high Naira
equivalent in costs of imported raw materials and spare parts.
High unit costs of production resulted in
high selling prices which could not be paid by Nigerians whose purchasing power
had been eroded by inflation and continuous devaluation of the national
currency. These developments caused the collapse of many manufacturing
enterprises, accompanied by additional unemployment. The flames of inflation
were intensified by devaluation and excessively large budget deficits which were
financed by the Central Bank of Nigeria (CBN) credit. The activities of the CBN
ensured that interest rates were at such high levels that discouraged investment
in productive enterprises and encouraged speculative short-term investments in
monetary assets. Furthermore, an unprecedented number of mushroom banks and
financial institutions were licensed to ensure the cornering of the largest
portion of the nation’s economic resources by a handful of the elite at the top
echelon of society.
Within a period of eight years, that
military administration succeeded in re-structuring the Nigerian society. The
Nigerian nation had, hitherto a normal distribution in its societal structure,
that is, it had the normal three classes of lower, middle and upper strata. The
upper class constituted 5 to 10 per cent of society. The lower class constituted
15 to 20 per cent of society. The middle class constituted the bulk of 60 to 70
per cent. For the middle class in Nigeria, like in other countries, life was
good and comfortable. The income was good and the essentials of life and living
were available to most people in the class. However, that military
administration changed all that. Its activities, actions and non-actions skewed
the structural distribution of society: the lower class was virtually
eliminated. This is a big problem. The source of economic growth for most
countries is the middle class. It is the class with the highest propensity to
save and invest in themselves and in the future welfare of their children. By
eliminating the middle class from the structure of the Nigerian society, that
military administration eliminated Nigeria’s lifeline just when it needed it
most in its growth process.
The contribution of the subsequent two
military administrations before 29th May 1999 to the nation-building of Nigeria
was a mixed bag. The 1985-93 military administration pretended to take rather
seriously economic advice from the industrial countries of the West and the
international financial institutions, namely, the International Monetary Fund (IMF)
and the World Bank. However, the Sani Abacha-led military regime adopted a
critically sceptical attitude to advice from other countries and the
international financial institutions. The regime formulated its economic
policies independent of outside advice, and so experimented with and on a number
of policy problems. The regime experimented with the so-called "guided
de-regulation", "guided privatization". Various decrees were promulgated to
implement these policy decisions, but with mixed and/or uncertain results.
Realizing that corruption was one of the
most important causes of economic problems in Nigeria, the Abacha regime sought
to entrench the principles of accountability and transparency, the regime was
courageous in dealing with some highly placed Nigerians who were hitherto
considered as "sacred cows" or "untouchable". The Failed Banks (Recovery of
Debts) and Financial Malpractice in Banks Decree No. 18 of 1994 did a lot to
sanitize the banking sector in Nigeria. There were also probe panels to
investigate the management of the Central Bank of Nigeria (CBN), the Nigerian
National Petroleum Corporation (NNPC), the National Electric Power Authority (NEPA)
and others. However, revelations, after the demise of the Abacha administration
of siphoning and diversion of huge sums of public funds from the CBN to private
use and accounts which involved some key officials of the regime and even
members of the Head of State and himself suggest that the regime was more
interested in preaching the ideals of probity and accountability than in
practising them.
The end of that regime came with the death
of the Head of State on 8th June, 1998. General Abdulsalam Abubakar was elected
by his colleagues in the Provisional Ruling Council (PRC) to become the Head of
State.
•To be
continued tomorrow.
•A paper delivered by Prof. Ibrahim Ayagi,
chairman, National Economic Intelligence Committee (NEIC) at A Founder’s Day
lecture of the Development Policy Centre, Ibadan, last month.
General Abdulsalam Abubakar took over the
reigns of power at a time when Nigeria was both internally and externally
turmoil. The country was split into dangerous fragments. The agitations against
the June 12th Elections Annulment were exacerbated by the sudden death in prison
of Chief Moshood Abiola.. The National Democratic Coalition (NADECO) which
crystallized in 1994 as a result of the conflicts between the government and its
political opponents was already agitating for the holding of a Sovereign
National Conference the aim of which was to split Nigeria grant the various
nationalities the right to govern themselves. Several political opponents of the
government were arrested and detained without trial. There were also individuals
who were framed in alleged attempted military coups against the regime in 1995
and 1997. Among them were General Olusegun Obasanjo (rtd) and Major-General
Shehu Musa Yar’Adua (rtd) who died in prison.
Externally, by June 1998, the relation
between Nigeria, the major Western nations and the international financial
institutions were at their lowest ebb ever. Nigeria was suspended from the
Commonwealth. Disagreement between Nigeria and these important nations over
human rights violation, military rule, and the diversion of economic policies
made Nigeria a pariah nation.
Consequently, to satisfy both the internal
and external pressures, the Abubakar Abdulsalam regime had to act in extreme
hurry. The biggest pressure on it was the release of all political prisoners and
the production of a transitional programme that would lead to the restoration of
a democratically elected government in Nigeria. This, the regime did, and within
11 months and three weeks of its assumption of power, General Abdulsalam
Abubakar handed over power to a democratically elected government on 29th May,
1999. This was the most positive achievement of that administration.
However, in terms of its economic
policies, the achievements were mainly negative. The macro-economic record in
1998 indicated a definite deterioration. Growth in real GDP fell from 3.2 per
cent in 1997 to 2.4 per cent, capacity utilization in manufacturing declined
significantly from 32 per cent to 28 per cent, the rate of inflation rose from
6.3 per cent May 1998 to 8.2 per cent in September 1998 and the balance of
payments position recorded a deficit of N153.4 billion compared with a surplus
of N1.1 billion in 1997. Furthermore, and in recognition of the declining real
value of salaries of public servants, the Abubakar administration decided to
increase salaries by generous percentages, with the minimum monthly salary fixed
at N5,200.00 from the previous N800.00. However, after operating the new salary
structure from September to December 1998, the government backed down on it. In
its place, it introduced a new Salary Structure with minimum monthly salary
reduced to N3,500.00! The regime also eliminated the official exchange rate of
N22.00 to the US Dollar, allowing it to rise to N86.00 to the US Dollar.
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