STATE OF THE NIGERIAN ECONOMY - WHY IT CONTINUES TO FAIL AND DEFY KNOWN ECONOMIC PRINCIPLES

STATE OF THE NIGERIAN ECONOMY: Why it continues to fail and defy known Economic Principles by TOPE FASUA. FCA, FIIM, FISEGG

Protocols..

The topic I was allocated to speak upon today is a topic for the moment, and what Americans will likely call ‘the Million Dollar Question’. It is a question as old as Nigeria itself, and which has gained currency every since the Military rulership days. In today’s Nigeria we seem to be stumped and looking frantically for answers to the question of the Nigerian economy; why it defies logic, and ‘known’ economic principles. General Ibrahim Badamasi Babangida it was who as a military ‘president’ blurted out that the Nigerian economy defies every economic principle and theory in the book. Babangida – warts and all – had experimented with working with some of Nigeria’s brightest minds. He was something of a talent-hunt. Debonair and smooth, almost everyone wanted to work with IBB. But the brightest minds, and their theories, could not pull Nigeria out of economic doldrums.

           Since the time of Babangida – whose tenure ended in 1993 – the Nigerian economy has assumed the status of an ‘ogbanje’…. Here to day, gone tomorrow, frustrating its handlers like the ‘abiku’ of old hurt its mother and played games with the emotions of its parents. Perhaps, like Wole Soyinka and John Pepper Bekederemo Clark, we should start writing eulogies to the glory of the mystery of the Nigerian economy… except we get lucky, and accept some well-thought out panaceas that really work; like the types that has almost put an end to the phenomenon of ogbanje or abiku in the Nigerian society. I personally believe that if we can get rid of our many cognitive biases – including our anthropomorphism, by which we believe inanimate objects have the ability of humans and more – and if we can fix egotistical and selfish motives that result in corruption and throws the best laid plans out of orbit, if we could be bold enough to reimagine, reinvent, not ‘diversify’ the economy, perhaps we may exorcise the abiku spirit ailing the Nigerian economy and begin to head somewhere.

State of the Nation

           I needn’t bore you with what you already know, and ruin your dinner tonight. So I will do a brief run-through of the issues of the moment. Many times, it does not pay for one to begin to set out the issues that ail the economy else one will be tagged as a ‘wailing wailer’, by the ‘hailing failers’ of course. But it is what it is. Abuja City is a even wrong place within which to expostulate these issues… except you will take you mind to the hundreds of slums that dot Abuja and surround it. Punch Newspaper during the week carried the story of Utako – where the village Chief says Prostitutes have overrun everywhere - and Karimo, where no one has a toilet. The realities of a failed economy, nay a failed society, is fast overwhelming our beautiful city, Abuja, and the solution is not to demolish everything demolish-able, but to develop a culture of constructive debates, deliberations and deep thinking, and to face our contradictions, in order to solve them. Tantrums are not enough.

           So what are the issues we are face with today?

Stagflation

           Nigeria is officially in a recession. The National Bureau of Statistics has reported three consecutive quarters of declining Gross Domestic Product (GDP) - a weak measure by every means but we will return to that in a moment – which means that people are losing opportunities. Contrary to a demonstration made by a former Minister for Finance and Coordinating Minister for the Economy, Dr Mrs Ngozi Okonjo-Iweala, wherein she represented the GDP of a country as its National Cake, no, GDP is not national cake. It is instead, a measure of everybody’s quantifiable work or productivity in a given period. GDP is not something that governments create. It could grow, with or without the government, and in spite of it.

           However, beyond recession, Nigeria’s problem for now is STAGFLATION. The economic heartbeat is slowing down to a halt in a couple of industries. Real Estate sector is comatose. The Stock Market is catatonic. Capacity utilization in the manufacturing sector has declined further still. People are being laid off as companies fold up or downsize to the barest minimum. Most state governments are unable to pay salaries. Even if they did, workers are unproductive in the civil service at large and the delays in salaries are only exacerbating their lackadaisical attitude – and further promoting corruption. Stagflation is a bad situation that no country every wishes to go into. But here we are. Double jeopardy.

High Unemployment

           Flowing from the above is the high unemployment situation. Or rather low productivity. Nigeria has a productivity problem in short. And the way to look at this is to look at the young, employable demographic of Nigeria. In every productive country in the world, the emphasis is on the bracket of 15 – 24 years old. That is the enthusiastic age, and the age that requires to be influenced in order for the ‘tomorrow’ of a country to be great. It is the impressionable age at which most youth go astray. It is the demographic that needs to be handled with tact and strong arm where necessary. But it is the demographic that Nigerian leaders – out of their immense wisdom – choose to ignore the most. Some say that it is deliberate, that our political leaders especially need a steady deluge of political thugs, miscreants and area boys. In a sample of 10 armed robbers, 8 of them are secondary school leavers or dropouts. It is the neglect of that category of Nigerians that is dragging down the rest. In this instance, bad money is chasing out good money. Not only are more graduates embracing crimes, we even have a ‘great’ initiative in Lagos State recently, by which 100 Nigerian graduates will be recruited as Bus Conductors. And the idea was greatly hailed.

           My thoughts are that once a government believes that it’s employment problems are about graduates, it has missed the bus. Nigeria should stop talking about graduate unemployment and focus its efforts on employment for secondary school leavers. Graduate employment will then be automatic and productivity will be enhanced in the nation at large. Insecurity will reduce. A new class of spenders will emerge who will buy local. It will be as good as increasing minimum wage because dependants will reduce. And the youth of the country will truly own their country and be more connected, more patriotic.

Weak Banking System

           The Central Bank of Nigeria is in a battle to ensure that no bank collapses and have been quite proactive about that. Yes, some of the banks are making tons of money around the devaluation of the Naira – which itself is not good for the system at large as the Middle class is bearing the brunt of that. Can the banks sustain the current FX margins and fee income? If they cannot, many may become weaker as the years go by.  Many banks are sitting on huge, sticky exposures to the oil and gas, real estate, and power sectors as we speak.

Comatose stock market

           Nigeria’s stock market basically crashed twice in a span of 8 years. The market declined sharply circa 2008 and we attributed that to the Global Financial Crisis. But ours was a secondary effect. We had a lot of guys playing with hot money in our stock market, plus a lot of insider-trading and market manipulations. Once markets crashed abroad, we had a contagion effect as these smart traders exited our market en masse. The Nigerian smart Alecs who played that market also saw this happening and exited – all the while pumping up hope with their adverts of 600% returns on investment in their shares. It was a typical ‘pump-and-dump’ scenario. Innocent Nigerians were the ultimate victims. About N8trillion was lost in market capitalization. Then last year – 2015 – another crash happened. Another mass exit. The regulators of that market are working frantically to bring some life back into that market but it has not been easy. One of their greatest problems now is that Nigeria government bonds are far more attractive. At coupon rates of 16% or 17%, foreigners are enjoying that Nirvana. And it is risk-free. Who wouldn’t? Yet in spite of these experiences, in our bid to attract US Dollars by every means, we have seen a situation where we are directly and actively courting these same Portfolio Investors. It is a scary situation, to say the least.

Budget Deficits and New Borrowings

           Nigeria has run budget deficits for at least a decade now. In 2008 we almost balanced the budget but recorded a 0.2% deficit. In 1997, we had a budget surplus of about 1%. For all other years in recent history, we have run deficits. See figure 1 below. Nigeria borrowed through every oil boom, especially the recent one that saw crude oil prices peaking at $147 per barrel. The standard excuse is that we want to build infrastructure; that there is no need to save for the rainy day, that the rains are here. But we can look back today in hindsight and see that a lot of that talk was deceptive and we had been spending to fill the pockets of a few, and not the commonwealth. Many of the infrastructure so built are languishing away untilised or underutilized…. Dead capital.

Figure 1

Agric Renaissance and the coming ‘famine’

           The country has had to look again at Agriculture as a critical sector, and especially at Agric value chains with a view to creating jobs. This is very commendable and one of the few shining lights in an atmosphere of gloom. It needs to be noted though that Agriculture will no longer employ the numbers it used to because serious agric is also mechanized farming. The value chain we want to tap into may require a fairly long time for set up of factories and such like. And what is more, there is a need to look into the sociopsychology of the entire matter. Recent investigations by the Punch Newspapers reveal that in parts of Nigeria, arable land is now massively being used to cultivate Cannabis Sativa – which has a 4 months cycle – as against Cocoa which has 4-5 years. In a world where people have been conditioned to be ‘smart’, even the cultivation of this illegal cash crop, is crowding out the cultivation of food crops, and this may have a debilitating long-term effect if not curbed early. It must still be noted that the poorest people around the world – especially in places like India – are farmers. And recently, the presidential spokesman warned that we would soon have famine in our land… in January.

Corruption – public and private sectors (and the public vs civil service conundrum)

           Corruption is still part of our national fabric. In recent time, the squeeze put on the economy has turned people desperate, and we still see those practices where people try to obtain something for nothing, especially in the public space. Nigeria has not actually started to fight corruption because we have not addressed any of the root causes of this ailment.

Currency Crisis

           The Naira has taken a tumble in recent times and no one knows just how far things will go. The fall in the value of the Naira has been beyond the imagination of most Nigerians. Even those who promised that devaluation was the only way to turn around the economy because it will lead to a deluge of foreign investment inflow have been singing another song, and asking for even more devaluation. We have been living through the realities of a currency crisis in Nigeria, currency crisis being sudden devaluation/depreciation of a currency, occasioned by uncertainties about what will happen next.

Monetary and Fiscal Policy clashes

           There is the huge debate about what types of policies will lead Nigeria out of the wilderness. I personally believe that a situation where we expect monetary policies, through the instrumentalities of interest rates, cash reserve requirements, liquidity ratios, financialisation of the economy, redenomination of currencies and so on, will not work for Nigeria because such policies never touch the real nerve of what matters to this country and its people. The economy is at once more complex, and more basic, than that. Also reviving the Nigerian economy requires an ‘urgency of now’. The monetary policy angle is a long journey and has too many hit-and-miss moments. It cannot work. Fiscal policies – no matter how much resistance has been coming from fiscal authorities – has the key. But governments must not spend for spending sake. Fiscal spending must be targeted to where we can get the most bang for the buck. Fiscal spending – targeted at conglomerates – never solve any economy’s problem. We must approach our problems with economic complexity in mind.

WHY THE NIGERIAN ECONOMY DISOBEYS ECONOMIC PRINCIPLES

1.    We’ve read and understood economics erroneously, ab initio. Economics doesn’t do dogma. Economics is about disbelieving till you see. And when you see, you ‘shine your eyes’ until you are absolutely sure. Real economists are skeptics, they disbelieve until they see. Real economists disbelieve the textbooks too. We are trained to believe there is a motive and incentive behind almost everything. That is why it is surprising that the people we call Economists today are dogmatic. They repeat by rote, the things they read in some textbook or the other, and foist unworkable and toxic economic policies on their countries and peoples.

Professor Ogbimi of the Obafemi Awolowo University wrote about the ten debilities of Economics in the Guardian of the 26th of November, 2016. These are the wrong ‘scientific’ methodology we adopt, our ignorance and misunderstanding of history and the role of history in economic development, our emphasis of capital as the most critical factor of production, our emphasis of the GDP as measure of growth, our treatment of employment as cost, rather than investment, our reliance on nonexistent theories of ‘equilibrium’, our ignorance of the importance of learning, among others.

2.    What are ‘known Economic Principles’? How do they fit in for Nigeria? Or even elsewhere?

I was asked to tell why the Nigerian economy does not respond to ‘known’ economic principles.  I decided to leave the words economic principles and pursue the world ‘known’ instead. This concern presupposes that we can and should only deploy those principles we ‘know’. And that is what we have ever done since the days we started controlling our own economy.  What about economic principles that we do not know? Most runners of Nigeria’s economy since its independence have subscribed to a certain mindset. Most have been neo-classical economists. The halo of neo-classicalism envelops and chokes us all. We almost believe that there are no alternatives. But the world is moving on and I will show us some of the new alternatives below. Again, being an economist is about being a skeptic, or better still having an open mind to critique and absorb new information, new knowledge, new ideologies. At the end it is about commonsense. The progressive world has since adopted commonsense even if they claim to be of certain economic ideologies.

3.    We write the models wrongly.

One of the chief reasons why economic principles don’t work is that models are mis-stated. Economic models are first of all different from scientific model because of the recognition of one factor; the error term. Our theories are imprecise, and all we try to do is ‘minimise the error term’, knowing for a fact that it will always be around. This is because human beings are not totally predictable, and aside from the variables that we may identify to explain a phenomenon, there may be others which influence the phenomenon that we do not know or may be unable to add to our model. Lifting models from textbooks without looking at our own socio-psychological peculiarities here, is counterproductive, misleading and dishonest. 

4.    The Tyranny of Wild Data: Beyond measurements.

Yes, they say ‘if you cannot measure it, you cannot improve it’. But we know that we do have several problems around data in Nigeria. How do we collate the data? Do we generally have a mindset to keep records, and to divulge same? How do we report our informal economy? In other words, how large are the assumptions we make? The larger the assumptions, the larger the error term. The countries we emulate have worked on cleansing their data for centuries, and have developed the right mentality among their citizens over time. Yet they do have errors. So, next time we hear someone sounding so eloquent around Nigeria’s data, and believing that the access to official figures make them intelligent, take it with a pinch of salt, and go behind and beyond the data. Most data we have in Nigeria – even with the yeoman efforts of the current NBS – simply makes no sense.

5.    Finance is not Economics

Nigeria is said to have received inflows of $20Billion as foreign direct investment this year alone. People are asking where is the money because it certainly has not percolated to the units that matter. NCC (Nigeria Communication Commission) said Nigeria has received $68billion into the Telecoms sector this year as well. The Minister for Trade listed some of the ‘deals’ that have taken place this year; Dangote sold an asset, BUA sold an asset etc. Sounds fantastic but for the fact that the financial world is so advanced these days that people can dictate where they want their monies. For example, any of these companies can nominate any of their foreign accounts to receive the proceeds of assets sold, and it is legitimate. The hoi polloi in Nigeria will hear of those fantastic amounts but may have to wait for Godot to feel the effect of such inflows. Finance, is not Economics. Yes, it is not. Otherwise, we would not be hearing of so much national debt and little development. Nigeria borrowed through the oil boom according to the Debt Management Office, and today we are full of complaints. Those piloting the Nigerian economy must be sincere enough going forward. They should ensure that they have their priorities right. Any policies that lead to furious cash flows that circulate only among the super-rich and heads outside the country is not good economics. It may be good finance. Nigeria is known to do so well as a country with a relatively advanced financial sector, but an economy stuck in the medieval times… literally.

6.    Why Nigeria cannot diversify its Economy?

As a corollary to this discussion, we have to think about why – in spite of high-sounding rhetoric to this effect – Nigeria is unable to diversify its economy. First of all, when government speaks of the need to diversify, they actually focus on diversifying their own revenue source. This means too, that the Federal Government intends to hold on to its relevance and continue to disburse largesse to states and local governments. However, what Nigeria needs is a new way of thinking, of ordering ourselves and our priorities. In thinking about what it takes to diversify an economy, one will land on the fact that it is all about increasing self-reliance and sustainability, even as a country plays the globalization game. A diversified economy is one which builds local capacity among its entrepreneurs, to target the cash flow in the pockets of its citizens, which intensifying the export of value-added, complex products that takes as much cash as possible from the pockets of the citizens of other countries. That is the name of the game.

7.    How many barrels of crude oil does it take to change a light bulb?

Yes how many? We must begin to look at everything from the perspective of how many barrels of crude it takes after all we rely so much on crude oil in this country. And I have been doing this experiment. A normal Samsung phone that may be rejected by some of our children, costs about N200,000 these days. In official/interbank terms, this is like $700, and if Crude oil sells for $50 per barrel, that is 14 barrels of crude oil. Imagine how many of those phones we buy in Nigeria on a daily basis? Now, recall that if Nigeria is able to produce about 2,000,000 barrels of crude oil on a good day with little disruptions, only about half of that accrues to us as a country – because we produce under Joint Venture or Production Sharing Contracts. We depend so much on crude oil but it could not be said that we actually have the capacity and capability to produce all on our own. The owner of the technology owns the resource. But back to the crude oil analogy. If a Toyota Prado SUV costs N40million today, that is about $130,000 in official terms. At $50 per barrel of crude oil, that is 26,000 barrels on wheel. If we spent our daily cash flow from crude oil on buying these SUVs (and sometimes we do), we can only buy about 300 of them. Now imagine how many we buy in Nigeria. And imagine what else we need to spend money on. It is established that it costs N1billion to tar 1 kilometre of road in Nigeria. If Nigeria’s daily inflow from crude oil is $50million (i.e. $50 for 1million barrels), and we convert at an official rate of say N320, we would arrive at about N16billion. We can only tar 16kilometres of good road with all our daily proceeds from crude oil. How many kilometres need to be tarred? Thousands. That is if we ignore education, health, and every other sector. Now you see why this economy is unlikely to EVER be prosperous?

a.    So the issue is our fixation with natural resources, and by extension the wastage of even more important factors of production like human resources, time, information, intelligence, knowledge, energy, talent/creativity. That is why we are hearing that 100 Nigerian graduates will now be recruited as Bus Conductors in Lagos and many applauded it; after all it is about cash in the pocket. We forget that it is the application of knowledge and intelligence to the things around us that has made some countries great. We drag down our most important resources into the gutter. Counterintuitive.

b.    From the above we can see that factors of production have now gone beyond Land, Labour, Capital and ‘Entrepreneurship’. If you think those are the factors of production, think again. I wouldn’t blame you much. This is what we were taught in secondary school, and even the university. What are Land, Labour, Capital and a desire for Entrepreneurship when there is no knowledge, no intelligence, no information, no talent or creativity, no energy and no time? They are useless. These are the new factors of production.

8.    No easy problems, no easy solutions. Solution to economic problems no longer to be found in Economics

Nigeria is stuck in a morass also because we expect our problems to be easy. We expect our problems to be solved by other people. We believe that foreigners have our best interest at heart, and we only listen to them and not our own. We refuse to think for ourselves and even ostracise those amongst us who dare. In this world however, there are no more easy questions, easy problems or easy solutions. And I am not sure we can pray our ways out of the problems we now find ourselves either.

WAYS FORWARD

A need to embrace New Economic Thinking.

           Albert Einstein it was who said it is insanity to do one thing the same way and expect different results. He also said that we cannot fix the problems of today by using the same thinking and instruments which created them. Is it any wonder that we are stuck in a sand trap in an economy that we have always run with the same ideas? What is our idea of the best economists? Yes, they have to have attended Ivy League Colleges. And a stint with the World Bank or IMF is a big added advantage. It is good to look out for academic excellence but that is not all it takes.

Neoclassical Economics has failed. Economic thinkers are now boldly questioning Adam Smith and his protégés. Someone even wrote a book titled “who cooked Adam Smith’s Dinner?”, questioning Smith’s assertions that people do things for selfish reasons and that humans are calculated beings who take rational decisions all the time. The world has now reached a consensus – among thinking people – that there is nothing like Equilibrium, Efficient Markets, Rational Man (Homo Economicus) etc. These phenomena simply didn’t stand up under empirical scrutiny. Markets are great, but they often fail. They work better if government is also responsible. And there are functions which the market cannot on its own guarantee – such as a commitment towards full employment. Humans are now known to take many irrational, sub-optimal and inefficient choices for a swathe of reasons. Think about the unreasonable things you have done… today alone. And what is equilibrium? In what free market has that ever been reached? It is a non-existent concept.

In view of this, there emerged a new group of Economic Thinking called Heterodox Economics, challenging neo-classical thoughts that have held the world spell-bound for way too long. Three of its forerunners are briefly discussed below:

a.    Behavioral Economics – Fuses psychology with Economics. Emphasizes that humans are very complex beings and take decisions for all sorts of reasons, and it is important to follow the psychology in forming economic policies. In the UK they have the Nudge Unit which flows from the work by Richard Thaler of the same title. Nigeria needs this more than most other countries. Our people are peculiar, so why are we applying textbook explanations to model our own behaviors?

b.    Complexity Economics – Attacks the idea of Homo Economicus – Rational Human Being – and explains that rather than being cold and calculated, we live in a complex world and the economy interacts in ways that we haven’t properly modeled. It is important to understand that complexity. Economics is hardly linear. Sectors interact with each other, economic units take cues from one another, and so on.

c.     Evolution Economics – Emphasises the role of innovation in economic development. Believes that economic principles, like everything else, should always evolve and that economic managers should be able to choose and discard as they go along. Economic principles cannot be static.

If it ain’t broke, fix it!

           The world is operating at a level where innovation leads, and innovation pays. Innovators have since realized that human beings will pay for convenience and so even before things become broken, they are fixed, improved. The ability to continually fix what is not broken is how countries become extremely prosperous.

Heuristics and Cognitive Biases

Heuristics (rules of thumb, practical methods not guaranteed to be optimal or perfect, sufficient for immediate goals eg valuing what you work for more than things you won through betting, buying an idea that is stated fluently) and Cognitive Biases (eg confirmation bias – seeking information to justify what you already made up your mind on, belief bias e.g. some people don’t take blood transfusion. Bandwagon effect; doing things because others did it). 

Who Cooked Adam Smith’s Dinner?

Katrine Marcal wrote a book with the above title, which challenged the thoughts of Adam Smith about the ‘rational man’. Katrine, probably a feminist, sought to bring out the fact that the contribution of women to the economy has always been underestimated and denigrated since the time of Smith. She asked who cooked Adam’s dinner, for Adam Smith never got married and lived with his mother till she died. Did Mummy Smith take calculated decisions of rationality before she went to the market and made dinner for her son? What was in it for her? Marcal concluded that the ‘rational man’ that Smith wrote about could only be a man, certainly not a woman!

THE RACE FOR CAPITAL

           Thomas Pickety came out with his book “Capitalism in the 21st Century” a couple of years back. It spoke about the growing inequality in an increasingly prosperous world and sought to explain why this is so and what could be done to build a better world for all. It recommended increases in taxes for the top 1% and spoke about how the rich not only get richer, but are able to buy economic policies from politicians, that keep them getting richer still. I don’t believe in taxing the rich more. I believe instead that the world will be a better place if governments – especially in our corner of the world – would be more responsible and ensure that the basic needs of life are fulfilled for the majority of their citizens, such that we don’t all have to become millionaires in order to just survive. In Nigeria today, it’s either you’re a multimillionaire or you are dirt poor. This is not how to run an economy or order a society.

           On a global level, there is a race for capital. Who gets what? There are industries that are almost exclusive for citizens of some particular countries and there are countries that have been able to play the diplomatic and globalization game so well, that they have secured the prosperity of their generations unborn. I believe that the problem of corruption that we have is at best a misreading of how the game will pan out. Rather than just a handful of us being superrich – even more than most rich people elsewhere – the way forward for us is to spread the wealth so that more may become rich. In this race for capital, you get more brownie points when you improve your people in the vast majority and show them how and why they must contribute to the overall goal of national development. I’m afraid our successive governments have not been able to come round to this.

           A major problem is that the rich are able to substitute labour with capital through the acquisition of technology. This means that labour is endangered, so long as technology can take its place. Yet, the population of the world – especially in places like Nigeria – keeps increasing. What do we do with the numbers. One of Pickety’s scary observations is the ease with which the superrich can write the rules simply by financing politicians into position and influencing the law-making process. If Europe can be thinking for its poorest and disenfranchised, why not us?

PREMATURE LOAD-BEARING ISOMORPHIC MIMICRY

           According to Professor Lant Pritchet at Harvard University, one of the biggest problems of developing countries is called ‘premature loadbearing’. It is usually caused by ‘isomorphic mimicry’, whereby a country tries to mimic others ahead of it in order to look like it has made progress. Such a country ends up carry loads that it is not prepared for, and that keeps its economy underdeveloped.  For example, it is doubtful to any critical mind if Nigeria really needs, or benefits from, having a bicameral legislature, whereby laws get reviewed and debated in one house and then gets referred to the other, and little gets done. Are we the USA? Can we afford the time being wasted or the monies being spent on these activities? These are issues to ponder upon. It would be great if we could look into areas where we merely mimic other countries and critically assess to see what we can cut off.

A SYSTEMS APPROACH TO OUR ECONOMICS TO MOVE AHEAD

           A systemic approach is what we need. In Nigeria, a class structure has emerged but it is so fragile. The well-to-do are really very few compared to the desperately poor. If this generation of rich people would die out, their children will not know where to start and may not be able to control the calamity that is coming. For now, the superrich in Nigeria interact more with the global world. Everything they need gets supplied from abroad; the houses they build, the cars the drive, the clothes they wear, the education for their children, their health and leisure needs… everything! Trickle down economics has turned out to be a farce. And there is no invisible hand making sure that wealth is spread evenly. What is more? The middle class keeps thinning out by the day, as the ongoing economic crisis drags many down into the realm of the painfully poor.

           The problems in the economy can no longer be solved by economics. We need to think outside the box and seek help from other professions. We also have to be ready to think broadly and systemically, with an ultimate goal of general prosperity in mind, in order to solve the current economic problems. For instance, we cannot think of fixing the economy without fixing the society. Perhaps the solution we seek lurks in our social sphere? What about the environment? I personally believe that is where the trigger lies. The economy is about all of these; the society, the politics, the environment, and everything in between. No less. It is only a bad economist who waxes philosophical about fixing the economy without knowing that it is the general impact that counts.

STRUCTURAL ADJUSTMENTS – WHAT ARE THEY?

           Circa 1986, Nigeria was asked to undertake a ‘Structural Adjustment Program’ (SAP), which required us to privatize many public institutions, reduce government expenditure, raise taxes, sack workers, raise interest rates, and of course devalue our ‘overvalued’ currency, among other bitter pills. It is noteworthy, that when the same countries wherein the International Monetary Fund (IMF) and World Bank resides went into a serious economic downturn recently, occasioned by a financial crisis, they took the exact opposite decisions. They did not devalue their currencies but fought for stability through ‘Quantitative Easing’. They nationalized car manufacturers and banks. They focused on job creation and increased government expenditure, and so on. This should tell us that we must think for ourselves.

           We are in the best position to adjust our own structure because we should know more about our structure than anyone else. Rather than being asked to devalue, or to sack workers and privatize at the worst times, we should be proactive about such initiatives. Nigeria currently has a productivity problem. We have a scenario where our strongest workforce is out of work; our youth. We needn’t be told by foreigners before we focus on this. We have instead chosen to expend our efforts on the debate about ‘restructuring’, or ‘regionalism’.  The underlying economic goal is noble and important, but it is tainted by separatist tendencies powered by religion and tribalism. So it is sullied.

           In my opinion, we need to reorder our politics, and economy. It will certainly be easier to do if we would break up into regions and make the centre weaker. But we need to be careful lest it spirals into animosities and civil strife.

SHARING THE NATIONAL CAKE

           A note of caution to those who speak about states or regions controlling 100% of their ‘resources’. The dictionary meaning of Federalism is the centralization of resources and power in the centre. Regionalism is what we actually desire and there is nothing wrong with that. In the USA, whose brand of democracy we copy, the Federal Government does not hijack the resources of states, but still shares what are called grants, especially to the less-privileged states. They have two types of grants; block or targeted. The targeted ones are specific as to what purpose they are to be used for. The block grants are general and could be used by state governors for whatever they deem is priority. But we are talking of a country where a considerable level of responsibility has been inputted into governance over the years. Some governors drive themselves to work.  Others take the train.

           In Canada, they tried to establish a minimum standard of living for all Canadian and through that means, they balance our finances between rich states and poor ones. In general I believe strongly that we should take our minds off this idea that only natural resources are worth banking on. The most important resource is human resource. Countries like the US leverage on intellectual capital and the rest are secondary.  

HOW TO GET THE DOLLARS AND COMPETE IN TRADE IN A GLOBALISED WORLD

           We desire to compete in a globalized world. But our product is weak. Economic complexity leads the charge. Countries that do not add much value to things never get ahead in the globalization game. We need to check out the Harvard University Globe of Economic Complexity to know who is selling what. African countries are not doing very well at all. Perhaps the best way to start is to look inwards and furiously start producing what we need.

• https://globe.cid.harvard.edu

Reporting and Measuring the Economy Differently - GDP as a measure of the Economy Challenged

           It is good to be able to measure the economy and some of its indices. What is better is to know what you are measuring and to ensure that the figures we are throwing around really does make sense. GDP as measure of development is grossly flawed, especially in our environment because it reports the figures in an impersonal manner without giving any insight into how these figures affect the human beings in a population. It is also well-documented how growth may be skewed to one sector of an economy, or just a handful of people in a community. GDP is a rather lazy approach for an economy like ours, especially where it is evident that figures are obtained in haphazard, incomplete ways and where the informal economy is large. Can we do better? Yes, we can. We can report GDP side by side with other measures of well-being like the HDI – Human Development Index – and others. David Cameron, in his time as the Prime Minister of the United Kingdom, did suggest at one of the OECD meetings that the focus should be on Gross Wellbeing (GWB). Others like Bhutan are emphasizing Gross National Happiness (GNH). Why is Nigeria afraid of looking at anything else but GDP, when it is we that should be championing such innovations?

           Please see below, what some world leaders have had to say about GDP. And please note where they are from;

?  José Barroso: "The appropriate choice of indicators is key to boost our understanding of the complexity of our diverse societies within the European Union, to better communicate on it, and to better respond to new policy needs as for example with the "GDP and beyond" initiative to include measurement of well being." - José Barroso, former President of the European Commission, 2010

?  Ban Ki-moon: "We need to move beyond gross domestic product as our main measure of progress, and fashion a sustainable development index that puts people first". 23 April 2012)

?  Herman E. Daly und Joshua Farley: "Even if we can never quantify [satisfaction or happiness]...,as precisely as we currently quantify GNP,...perhaps it is better to be vaguely right than precisely wrong." (2003).

Robert F. Kennedy:

“ Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product. For the Gross National Product includes air pollution, and ambulances to clear our highways from carnage. It counts special locks for our doors and jails for the people who break them. The Gross National Product includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missiles and nuclear warheads.... It includes... the broadcasting of television programs which glorify violence to sell goods to our children. And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials... the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America -- except whether we are proud to be Americans." - 1968

?  David Cameron: "It's time we admitted that there's more to life than money, and it's time we focused not just on GDP but on GWB - general wellbeing" May 2006

?  Angel Gurría: "Improving the quality of our lives should be the ultimate target of public policies. But public policies can only deliver best fruit if they are based on reliable tools to measure the improvement they seek to produce in our lives.". OECD Secretary-General Angel Gurría

?  Ashok Khosla: "If we are to end gross disparity and poverty, reduce rampant climate change and species extinction, avoid massive depletion and destruction of resources and pre-empt the resulting overshoot and collapse of societies, we must go well beyond simplistic indicators such as the gross domestic product that have today become the grossest mismeasures of progress." 2007.

?  Pier Carlo Padoan: "The OECD believes better statistical information is an essential support to democratic governance. So yes, the OECD thinks it is time to move beyond GDP to provide better and more useful information. We believe that by using GDP and indicators covering other aspects of our life, it is possible to develop new measures of progress, and we are ready to support the growing global movement which shares these views. This is why we have launched a Global Project on "Measuring the Progress of Societies". Deputy Secretary-General of the OECD Mr Pier Carlo Padoan. 2007.

?  HE Chief Emeka Anyaoku: "What we currently measure as development is a long way away from the EU and the world's stated aim of sustainable development. This is because economic decisions routinely ignore natural capital expenditure. Economic indicators are essential, but without natural resource accounting, ecological deficits will go unnoticed and ignored. It is as if we spent our money without realizing that we are liquidating the planet's capital." 2007.

?  Joseph Stiglitz: "No one would look just at a firm's revenues to assess how well it was doing. Far more relevant is the balance sheet, which shows assets and liability. That is alos true for a country." 2005.

?  Robert McNamara: Progress measured by a single measuring rod, the GNP, has contributed significantly to exacerbate the inequalities of income distribution." 1973.

?  Simon Kuznets: "Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Goals for more growth should specify more growth of what and for what." 1962.

?  Simon Kuznets: "The welfare of a nation can scarcely be inferred from a measurement of national income". 1934.

The importance of laying our beds

           I make it a point of duty to always close off many of my talks these days with an extract from a speech given by Admiral William McRaven of the US Navy Seals at the 2014 Commencement of University of Texas at Austin. It speaks about the importance of the seals laying their beds. But it is not as much as laying physical beds, as it is about knowing where to start and knowing that one has to do the dirty job oneself. This is something that seems alien to our DNA in Nigeria. We are saddled with this huge sense of importance, which translates into a total ignorance of our environments and surroundings in pursuit of big game outside. The fact that we have hardly been able to catch that big game doesn’t faze us, and we have never developed the capability to introspect. Nigeria needs a mirror. In my view, the trigger-point for Nigeria’s greatness lies in its attitude to the environment. There is much work to do there which absolutely no one will do for us. If we are brave enough to commence that work, an avalanche of construction, prosperity and poverty reduction will be unleashed. Insecurity will reduce and Nigeria will regain some of its lost respect in the comity of nations. Let us listen to Admiral McRaven and try to make some sense out of what he says;

“Every morning in basic SEAL training, my instructors, who at the time were all Vietnam veterans, would show up in my barracks room and the first thing they would inspect was your bed. If you did it right, the corners would be square, the covers pulled tight, the pillow centered just under the headboard and the extra blanket folded neatly at the foot of the rack — that's Navy talk for bed.

It was a simple task — mundane at best. But every morning we were required to make our bed to perfection. It seemed a little ridiculous at the time, particularly in light of the fact that were aspiring to be real warriors, tough battle-hardened SEALs, but the wisdom of this simple act has been proven to me many times over.

If you make your bed every morning you will have accomplished the first task of the day. It will give you a small sense of pride, and it will encourage you to do another task and another and another. By the end of the day, that one task completed will have turned into many tasks completed. Making your bed will also reinforce the fact that little things in life matter. If you can't do the little things right, you will never do the big things right.

And, if by chance you have a miserable day, you will come home to a bed that is made — that you made — and a made bed gives you encouragement that tomorrow will be better.

If you want to change the world, start off by making your bed”.

Figure 2 – Fishbone Diagram of how Focus on Environment can Spin off a new economy.

Figure 3: Finance is not Economics. Huge spending deepens the recession.

EPILOGUE

Alvin Toffler: The illiterate of the 21st Century, will not be those who cannot read or write, but those who cannot learn, unlearn, and relearn.

Have a great evening, ladies and gentlemen.

References:

European Commission. (2016). Quotes from Beyond GDP Summits: Measuring Progress, True Wealth and Well-being. Retrieved from:

https://ec.europa.eu/environment/beyond_gdp/key_quotes_en.html

Ogbimi, F. E. (2016): Reasons Economists Cannot Manage the Economy. Guardian Newspapers. Retrieved from; https://guardian.ng/opinion/reasons-economists-cannot-manage-economies-well/

McRaven, A. W. (2014). University of Texas Commencement Speech. The Importance of Laying our Beds. Retrieved from: https://www.youtube.com/watch?v=pxBQLFLei70

Silim, A (2016). The New Economic Thinking. Evonomics. Retrieved from https://evonomics.com/new-economic-thinking/