History of Nigerian economic policies
Nigerian economic development has shifted from adopting heavy doses of statism to pinches of liberalism. From the time of self-government in the early 1950s, all the regional governments of the time and the central government embarked on development plans to transform the economy. None of the governments have done all they can to empower Indigenous businessmen in the private sector. On the contrary, they set up parastatals like the Western Nigeria Development Corporation, unlike the private Chaebols promoted in South Korea. Although Nigeria claimed to operate a mixed economy, there was a lot of socialism in the air that still persists today.
This state mentality intensified with the advent of oil and petrodollars leading to the creation of mega-parastatals, especially those created by the federal government. The NNPC by asset was seen as a global giant in the 1980s. Most states, including the newly created ones, immediately set up their development companies, eg OWENA by Ondo State and OPIC by Ogun State. Everything seemed to be going well until oil prices collapsed in 1982, causing castles to fall into the air.
The oil crash precipitated a change of government in 1984, and the new government deepened statism with the introduction of price controls and central distribution of commodities. They have failed to remedy the structural flaws in the economy; this only happened with the introduction of the structural adjustment program in 1986 after a change of government. This represented the first about-face on statism after Nigeria’s independence in 1960. Price controls, central distribution of so-called essential products, as well as fixed exchange rates and the obtaining of licenses. importation from bureaucrats, were abolished as part of structural adjustment. Program. The first steps in the sale of the state’s holdings in parastatals were adopted as part of a privatization program. This period also saw an expansion of the financial sector.
Less than two years after the introduction of SAP, there has been a boost to the economy. Industries heavily dependent on imports went bankrupt, but were replaced by industries sourcing domestic raw materials. Former central bank governor Professor Charles Soludo claimed in an interview that any resilience in the Nigerian economy that caused us not to go Venezuela’s path was built during the PAS years.
Unfortunately, with the help of the media, the Structural Adjustment Program has received a bad reputation. Granted, he never achieved all he was supposed to accomplish in part due to government indiscipline and a lack of full buy-in from the Nigerian business elite. This meant that the bitter medicine we had to swallow to correct structural flaws in the Nigerian economy has long been seen as the cause of our underperforming economy. If you doubt this submission, know that China began its structural adjustments with the arrival of President Deng Xiaoping in the 1980s with admirable results. India was forced into structural reform in 1991/92 with admirable results as well. However, with a change at the helm in 1993, the much-maligned Nigerian SAP was put aside and we reverted to fiduciary fixing of the naira. The Fiat determination of the naira is the hallmark of Nigerian statism.
With this development and the brutal military regime’s pariah status, the recovering economy sank into the stagnation of 1993-1998. A change of guard occurred in 1998, leading to a return to civilian rule in 1999. The new team called its structural restructuring “reforms” of the economy. This marked another phase of reduced statism, not complete elimination. The signal to liberalism was a market determined currency. Privatization has moved up a notch from what was achieved in the past with private investors leading new investments in telecoms. Licenses have also been granted for private refineries. Today Nigeria is home to the world’s largest single-train refinery. Attempts have been made in road concessions signaling a new movement of private participation in road infrastructure. Fortunately, this was a prolonged phase of increased liberalism spanning 1999 to 2015.
There was another administration change in 2015 and the new team had strong statist credentials. They signaled their strong credentials in statism through the fiduciary fixing of the naira and through numerous other government interventions. They took a step back by trying to bring back a former parastatal, Nigerian Airways. The disastrous consequence has been that an economy that achieved economic growth of 6-8% could barely grow by 2% each year for six consecutive years 2015-2020.
My submission is that we have empirical and historical evidence as to which ideological choice the economy works best. Rather than throwing the baby out with the bathwater, we restrain the baby by changing the bathwater, the bathwater being political parties.
Whenever I advocate for the ratification of our unwritten libertarian realities and solicit private sector-led economic principles for the transformation of our nation, commentators respond that the “government” should continue to initiate and drive policies. . I must make it clear that I do not subscribe to this “government conduct policy” because of the government’s reputation for forcing on the nation bad policy choices that have set the nation back. I intend to catalog a number of Nigerian government policies that have left the holes in which we find ourselves. More so, unlike in the past, our best is no longer domiciled in government or their agencies.
Membership of the LomÃ© Convention: This revealed the state of mind of those responsible for government policy in the 1970s. The LomÃ© Convention is a pact between the countries of Africa, the Caribbean and the Pacific and the European Economic Commission, which has become the European Union. We signed the convention in 1975 to protect the quotas of the ACP countries of bananas, coffee beans, cocoa beans, etc. competition from some Latin American countries. This pact allowed us to trap us at the lower level of the agricultural value chain, limiting us to exporting only raw agricultural products.
Industrial import substitution policy: On the eve of independence, Nigeria followed the path of Latin American countries and chose ISIP as a path of industrialization, adding to the wealth of society beyond the agrarian economy. By the 1970s, the weaknesses of this policy had become evident, but not to Nigerian policymakers who, now plentiful in petrodollars, further deepened ISIP. It got so bad that most of the industries introduced to the country in the 1970s were based, among other things, on imported basic raw materials. To this day, we still stand by ISIP saying that we have to satisfy the Nigerian market and therefore cannot export our more complex industrial products. This has been the Achilles heel of our industrialization.
Exchange rate policy and the Dutch disease debacle: Nigerians love a strong currency and the way policymakers have provided us with one since independence. Before the oil boom of the 1970s, a Nigerian pound was traded for a pound sterling. Later, with the introduction of the naira and the kobo with one naira, you could get close to two dollars. These rates were set by decree – declaration of the Nigerian government. This exchange rate policy allowed the Nigerian economy to eventually catch Dutch disease. SD is an economic malaise that plagues resource-rich countries, especially oil and gas-rich countries whose foreign reserves are growing astronomically. I will discuss Dutch disease in more detail another time.
Importance of identifying what went wrong: In the early 1960s, African nations, including Nigeria, had better development prospects than the Asian colonies. Fast forward 50 years and the different result is there to be seen. The 21st century would belong to Asia, while Africa falters. This is simply because Africa and Asia took different development paths after each gaining independence. Yet, discussing with young Nigerians, managers of our future, they espouse the very mistakes of their fathers as our path to development. This narrative must change lest we get trapped as the poverty capital of the world.
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