By Muhammad Sagir Bauchi
John Maynard Keynes was an economist who lived in the 1930s. He developed macroeconomic ideas parallel to the classical school of economics that believe in absolute economic freedom, which needs no government intervention to stabilise an economy when it’s disequilibrium.
The classical school ideas were centred around economic growth and freedom. During the 1930s great depression, many Western policymakers were proponents of classical schools. They believed that the economic downturn would be corrected by less government intervention (deregulation) in the economy and by encouraging businesses and investors to take advantage of the lower input and prices to pursue their businesses-interest.
In that regard, it would return output and prices to equilibrium. But to Keynes, the economic meltdown proved the classical notion flawed and needs rejigged. As there was low output corresponded with a high rate of unemployment and price instability. These inspired Keynes to think differently, which led him to develop the macroeconomic ideas that, according to him, represent the reality of economic downturn.
Keynes advocates for government intervention during an economic meltdown through spending, which will create jobs to stimulate more demand in the face of the economic slump, restoring the economy to equilibrium and not allowing businesses and investors to determine the fate of the economy. Although this theory is practicalised and in constant play in a capitalist model of the economy, it has the major implication of pushing the government to excessive borrowing to spend, making it a constant state of indebtedness without an end in sight. These formed the basis of Keynes’s famous quote, “In the long run, we are all dead”.
In Nigeria, the previous administration of President Muhammadu Buhari succeeded in administering poor economic policies, which plunged the economy into a slumpy state. Despite his huge spending, his utopian economic policies yielded close to zero positive results. Likewise, his border closure policy enriched a few local intensive rice farmers and deprived millions of their cross-border businesses. Even as the local farmers could not bridge the demand gap in rice production, he blocked major rice importers from bridging the gap.
No thanks to his performance in transportation and insecurity, where major roads in some parts of the country were constructed/renovated, while other populated regions were neglected, railways began to function. On the security side, fewer successes were recorded in the fight against secessionists, banditry and kidnappings, thus leaving some regions at the mercy of bandits, kidnappers and IPOB terrorists. Although, a remarkable success was recorded in the fight against Boko Haram terrorists.
Inflation, insecurity, communal clashes, unemployment, epileptic labour strike and high cost of living became the hallmark of the last administration, borne out of poor economic policies.
Tinubu, Renewed Hope and New Nigeria
In his effort to correct the economic sufferings caused by the wayward policies of the previous administration, President Bola Ahmed Tinubu is trying to implement economic policies that have long-term impacts. This has started with subsidy removal on some essential goods and services, more government spending, the introduction of students loan, unification of exchange rates, suspension of taxes on some commodities and services, and others. These and many more policies are classical economic policies that have long-run positive impacts on the economy. In the long run, the downturn would be corrected, and the hardworking would have something to take home.
During his inauguration, President Bola Ahmed Tinubu announced the removal of subsidies on petroleum products. Without a doubt, the subsidy is a heavy burden to Nigeria’s economy, which few exploit to their advantage. Due to the problematic nature of the subsidy scheme, almost all the previous democratic presidents had promised to remove it at a time, for the same reasons that it has become a burden to the state, it is riddled with corruption, and only a few are enjoying it at the expense of the state, leaving the majority with negative consequences.
The country is entangled in a constant state of borrowing to finance the subsidy payment, which hinders it from funds to finance major infrastructural projects, social welfare programs and reforming the security sector to a variant capable of meeting these modern-day challenges. Therefore, if the subsidy scheme is abolished, funds will be available to finance all the critical sectors. If it can be done honestly and transparently, it is a legitimate cause worthy of support and sacrifice, but corruption in all levers of governance is what makes one sceptical of the government’s commitment to transparency and accountability in governance and its sincerity in abolishing the subsidy.
However, looking at the current state of the nation’s economy, petroleum subsidy is the only guaranteed general state welfare that will be enjoyed by all and has a general impact on the whole population. It directly links to transportation, manufacturing, energy, school fees, foodstuff prices, services and many more necessities. Any slight impact on the prices of petroleum products leads to inflation, a hike in transport fees, job cuts and high unemployment prospects.
Subsidy Against Subsidy Removal:
According to reports, the government has proposed a monthly N8000 allowance to be shared with 12 million households in the country for six months. Additionally, One Hundred Billion is marked for road construction, several billion for the judiciary, Seventy Billion for the national legislative welfare, and Eighteen Billion for agriculture. These are proposed as remedies to cushion the effect of petroleum products subsidy removal for the time being. No doubt, there are clear misplacements of priorities in this proposal.
If the policymakers are honest to cushion the effect of the subsidy removal, the agricultural sector is the most critical sector that needs urgent intervention to create windows that would encourage farmers to access soft loans, low-cost hybrid seeds, subsidised chemicals and fertilisers, and other farming implements. This would allow them the plant with ease; as such, the multiplier effects would be: the availability of food products in the market and the moderate prices of food items due to the subsidised mechanisms that farmers enjoyed. This would have a real positive impact on the common man’s life. But giving out Eight Thousand Naira to 12 million families could only cushion the immediate impact, exposing them to more suffering and an uncertain long-term future.
Now, let us examine the palliative distribution formula according to regions as reported; if numbers are anything to go by in governance, the majority must have his way, while the minority can have a say. If this is true, one will find it difficult to understand the rationale behind giving out 57% of N500bn to the South West Region of 47 Million people at the expense of the North West, a region with a stunning population of over 49 Million which was given only 4% out of that total amount. If population matters in the distribution of wealth, then there is an undeniable discrepancy here.
What is more alarming and unbalanced is how the Northeast region is almost left out of this allocation, even with its unprecedented challenges in social, political and economic destruction by Boko Haram insurgency, high poverty index and outrageous numbers of out-of-school children, it was reported that only 1% of that N500Billion is allocated to the region. This region comprises six states, with a population of 26 million and millions of internally displaced persons (IDPs) from within and neighbouring regions.
Frankly, I don’t want to believe that this administration has started on the wrong footing, with a preference for nepotism and sectionalism in the administration of appointments and lopsided distribution of the country’s wealth in this critical economic period. I hope President Tinubu will work hard to change this narrative and give hope to a renewed Nigeria.
This is a clear indication that some parts of the country will continue to be preferred over others by the present administration, even that fortnight, it was the primary beneficiary of the immediate administration of a Northerner, a president who mysteriously supervised the underdevelopment of his region to developed other regions economic future.
Muhammad Sagir Bauchi wrote via ibrahimsagir1227@gmail.com.