By MA Iliasu
In May 2021, a lecturer of Managerial Economics stood before his graduating students and raised a question: “What is the benefit of government intervention?” And as any man with as little as second-hand knowledge of the economic theory would expect, the response was dominated by arguments raised along market inefficiency corrections. However, the lecturer didn’t seem convinced. He asked once again: “What market inefficiency has the interference of the Nigerian government ever corrected?”. Similarly, the class went silent, a poverty of options so revealing for a graduating year that champions Keynes and government intervention. And for an endeavour so rich with controversy and a lecturer of investment-banking speciality known with open admiration towards a free market, the mood was that he was trying to discredit the whole notion of government intervention, as do many new classicals and monetarists at the encounter with Keynesianism. And who had sufficient reason to blame him?
Meanwhile, while the teacher had a point to discredit government intervention with evidence from Nigerian experience, the encounter also reminds us about the dilemma of the economic society in which unreasonable applied entities bring shame to reasonable economic principles. Indeed, learning the dynamics since the loop in 2008 warrants the argument of government intervening to stimulate the economy proving more viable and efficient than any policy prescription on the alternative, which exonerates the logic of intervention and asks what’s the Nigerian government doing? Yet, it equally seeks to discover what is wrong that’s demoralising the Keynesian tolerance and even the benefit of doubt borrowed by classroom experts?
Inflation in Nigeria is at an all-time high. Productivity is nearing an all-time low. Debt status is rising. The value of the domestic currency is depreciating. The exchange rate is unfavourable. Deficits are being recorded regularly in the balance of payment. At the same time, the impact of the unemployment rate is proving possibly the most threatening phenomenon seen in the country since the Civil War. Among many other disastrous economic signals last seen rallying together, they formed a coalition that devastated a whole economic society in Greece.
The economic culture in Nigeria proves childish at both national and individual levels. A beleaguered government that’s living beyond its means – expenses weigh more than incomes – taking loans from international institutions to cover its deficits with no respect for the weakening revenue base. The inspiration to sustain whose child play also comes from the expectation of bailout in the event the game can no longer be played – which is the likeliest outcome, which at this trend of the global economic crisis is also utterly ill-advised. And the cancerous logic is extending within the economic society.
The individual households whose position proves more difficult have been deliberately imitating the culture in their search for economic escapism. Records show when the Covid-19 loans were made available for employees and business owners to reduce the pain caused by the pandemic, the applicants rallied up to enjoy the incentives without thinking that someday they are expected to pay back. The popular belief is a satirical question that asks: “when the government comes looking for a payback from an insolvent beneficiary, of what grave would be the consequence?” – so much like an institution of government which lost the plot and economic agents who have resented to a carefree, self-destructive autopilot culture.
The fact is when a loan applicant predicts insolvency by the expected time of repayment before even securing the loan in the first place; questions need to be asked on the logic, responsibility and the economic motive behind it. Because it seems like a ploy to use the money on non-renewable and nonrefundable ventures – funding consumption deficits caused by inflation – which is an endemic culture so common among Nigerian economic households. One which was effortlessly taught and subconsciously propagated by the assembly of the states and federal governments that apply for foreign loans to service non-renewable and nonrefundable ventures, mainly covering deficits caused by a high recurrent expenditure that can’t be tamed by achievable income streams, which is also a consequence of the very actions both the government – that’s expecting repayment from people while in itself doesn’t know how to repay its own – and individuals who are swimming deeper into the norm. Such a devastating comedy of errors!
The circle eventually ends up like the Greece economy, where the government was cuffed by debt with no viable formula for repayment. Half of the populace was insolvent and unable to repay loans. The other half came together to endure the torture of the ever-rising inflation, causing more unemployment and a significant reduction in productivity. The unreasonable printing of money in the name of the so-called quantitative easing also destroying the effectiveness of monetary policies by causing the velocity of money to outweigh the productivity. The consequence is more inflation and even lesser productivity.
Meanwhile, such wasn’t the initial logic of government intervention. Securing loans to cover deficits was meant to fund renewable expenditures that shall bring back profitable economic value capable of boosting the repayment process and the fluidity of market efficiency. Rather than amputating the currency and foreign exchange values to secure loans that’ll not only be misused in servicing pensions and luxuries but paradoxically damage the work rate and the effectiveness of hardworking economic enterprise in Nigeria.
An intermediate macroeconomics lecturer once asked in a test: “would Keynes agree with [the] Nigerian government if he was to come back?” during my third year in college. As the lecturer taught, the correct answer was yes because the government embarked upon the Keynesian prescription of the budget deficit and fiscal intervention as unmistakably stated in the annual budget. But I trusted the application of the policy to be so wrong as learnt in the vivid results of the quarters that I couldn’t betray my conscience as to answer yes. No, in my results-backing opinion, Keynes wouldn’t agree with Buhari or any brain in the economic cabinet for that matter. The attempt, whether deliberate or not, is a mockery of the policy. Which instead of stimulating the economy, it’s ending up destroying the engine beyond an easy repair. The Greeks can attest by experience, as shall any Nigerian who’ll live beyond now. So if yes was the correct answer, then no was even a more accurate answer. If all were to be judged from it, Nigeria is the deepest loophole that happens to the logic of intervention. The economy just couldn’t have done any worse in total free-market mode.
Intervention means intervention anywhere in the world. But some interventions are closer in reason to the actual rationale behind intervention than others. To which Nigerian experience is immune. The comedy of errors witnessed in the country is no more than an institution of government subjecting the economy like a nomad does a cow to get milk. How sympathetic of a nomad to feed the cow and ensure its health before milking? Nigerian government can’t say the same with our economy with the direct negligence and the alarming-albeit-avoidable debt culture. A tragedy to the principles! A field day to the policy alternatives! And an absolute joke of applied departments! Lord have mercy!
MA Iliasu is an economist who writes from the ancient metropolis of Kano. He can be reached through his email: firstname.lastname@example.org.