The politics and costs of regulation in Nigeria 3

Over the last two weeks, I have detailed why and how governments in Africa, Nigeria inclusive, are so desperate to regulate and control trade, manipulate and regulate the exchange rate and keep a firm grip on industries through creation of monopolies and oligopolies. These economic control programmes or “control regimes”, as I have argued previously, do not only depress economic growth, but are also economically very costly. Despite this, governments across Africa still persist with them because, as Robert Bates argues, the policies generate huge political benefits for authoritarian regimes, provide elites with sources of income and furnished means for transforming even declining economies into political organisations, enabling politicians to recruit political dependents, and most importantly, keep prices of food and services very low in key urban centres to assuage the militant workers and urban dwellers and prevent uprisings that may lead to the fall of the regime.

Sadly that is the path the Buhari regime has chosen to tread. However, it is quite pathetic that the rigid ‘control regimes’ of the administration is not targeted at improving the lot of the poor masses in all parts of the country as the President has promised, but at subsidising the lavish or cosy lifestyles of a few public officials and the middle class. Just two examples will suffice.

The first is the phoney fuel subsidy scheme. It is estimated the government has spent over N6 trillion in the last five years to subsidise the importation and consumption of petrol. Yet, fuel sells at the official price only in Lagos and Abuja. The government, the NNPC and the Department of Petroleum Resources (DPR) – the agency that is supposed to ensure compliance all over the country – are fully aware of this but do nothing to correct this blatant injustice – and that has been the case for years. In the East, for instance, petrol sells for between N150 and N250 per litre. In effect, it means only those in Abuja and Lagos enjoy the subsidy on fuel. The majority of Nigerians pay more than the market rate for petrol yet the government spends billions of dollars to marketers to subsidise the product across the country. The simple deduction from this huge anomaly is that the government is willing to ‘dash out’ billions of dollars to oil marketers just to keep the Lagos and Abuja inhabitants happy. Of course, Buhari is well aware that the inhabitants of these two cities can cause problems for his regime. As he himself is aware, the beginning of the end of the Jonathan regime started with the “Occupy Nigeria” protests in Lagos and Abuja in January 2012. So, if it takes the resources of the country being sacrificed to keep the restive people of Lagos and Abuja happy, so be it.

The second is on the exchange rate, which the president says is going to remain fixed at N197 to a dollar because devaluation will cause sufferings for the ordinary people. At face value the argument sounds nice and compassionate. But on closer scrutiny, it becomes clear that the government’s determination to fix the exchange rate is just a desperate attempt to keep government officials and the very noisy middle class happy and to sustain their lavish and cosy lifestyles. Only the rich and middle class travel, go on vacation, schools and hospitals abroad and require cheap forex. They are also the predominant consumers of most expensive imports. The poor consume predominantly locally produced food and products and have no much need for forex.

However, the government spends billions of dollars of ordinary people’s money to give subsidy to the rich and middle class. To make it worse, the CBN administers this huge subsidy based on unclear criteria and without transparency thereby fuelling corruption, cronyism and favouritism.

Also, by refusing to devalue the Naira, the government is unwittingly showing its preference for continued importation even as it mouths platitudes of encouraging local manufacturing. We know from history that China and most Asian economies that successfully transformed their economies from import-dependent to export-oriented economies first devalued their currencies to make imports expensive and force local manufacturing.

It appears therefore that the goals of economic choices and policies in Nigeria are not so much the greater common good but political expediency, and above all, regime survival. For the millions of Nigerians that genuinely voted for and hoped for real change in governance, it may sadly be another dashed hope.

Christopher Akor