‘It’s the economy, stupid!’, this was the popular campaign slogan for Bill Clinton’s successful 1992 Presidential campaign. The message was simple; voters only care about the economy. This correctly describes Nigeria's 2019 Presidential election as the economy is arguably the biggest concern. With sluggish GDP growth of 1.9% in 2018, an unemployment rate of 23% and the infamous title of ‘world poverty capital’; the economy deserves the current campaign attention given by the two frontrunners, incumbent President, Muhammadu Buhari and Alhaji Atiku Abubakar. To this end, it is important to unpack their economic policy positions.
The Atiku Plan – The private sector to the rescue
Atiku Abubakar has consistently argued for promoting a private sector driven economy with minimal state intervention. His goal is to build a ‘competitive and open economy’, with a GDP of approximately $900 billion by 2025. In sharp contrast to the current administration, his policy document does not contain any social welfare programme targeted at ‘the poor’. When tasked on this at a townhall event, he insisted that commercial agriculture and access to credit, especially for women are more effective ways of addressing poverty.
In line with his belief in a private-sector led economy, he has strategies to support both small and big businesses. For big business, he plans to review major high-profile investment incentives such as export expansion grants, import duties and other tax incentives. He has also promised to ensure that Nigeria has the lowest corporate income tax rate in Africa. For small firms, he plans to attract $250million of private sector funding for an SME Venture Capital Fund to provide longer-term capital.
Atiku also plans to sell most of the government’s stake in NNPC and privatise all four refineries, moves reminiscent of his time as Vice President when he oversaw private sector reforms. Finally, in another marked departure from the incumbent President who has consistently said he ‘cannot kill the Naira’, he plans to fire the current Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele and float the Naira. It doesn't get more market-friendly that than in Nigeria.
Buhari – The Omnipresent Government
For the incumbent President, his record so far provides a clear indication of his economic policy orientation. While the rhetoric of this administration has been supposedly pro-business, a lot of their actions have been inimical to business interests and have instead portrayed a government disposed to interventionism. While the administration has signed many executive orders to improve the ease of doing business; the foreign exchange crises during the height of the economic recession, led to the closure of many businesses, big and small. A situation many analysts argue could have been prevented if the President wasn’t so strongly opposed to floating the Naira – an illustration of his opposition to freely functioning markets. Similarly, while the administration has organised several roadshows abroad to supposedly attract FDI, heavy-handed tactics such as slapping hefty fines on big companies like MTN sent shockwaves through the investor community.
More fundamentally, the administration has struggled to implement any major private sector reform akin to the telecommunications and banking sector reforms of the Obasanjo administration. Although there were hopes that the full Petroleum Industry Bill (PIB) would be passed, only the Petroleum Industry Governance Bill (PIGB) section was eventually passed. Finally, their preference for interventionism is evident by the government’s direct involvement in the creation of jobs through the N-power programme and the direct provision of credit to businesses through the Tradermoni programme – activities that arguably could be more efficiently undertaken by the private sector.
Private Sector vs State-Led Development: Lessons from history
At various points in Nigeria’s economic history, we have leaned towards a private-sector or a state-led model. In the immediate post-independence period, Nigeria’s industrialisation strategy involved running state-owned enterprises and also providing credit to private sector businesses. This led to some initial success as manufacturing value-added grew by 11.4% p.a. in the first three years, however, by the 1970s many of these enterprises became poorly managed leading to a debt crisis in the 1980s.
The point here is not to present state-led models as necessarily bad after all that is what the East Asian Tigers are famed for, but instead, it appears that Nigeria does not have the institutional capacities to make it work. Unlike Singapore for instance, we do not have a strong state, efficient bureaucracy and the ability to discipline capital provided to businesses effectively.
On the other hand, the government of Olusegun Obasanjo embarked on perhaps the most extensive private sector reforms yet, leading to an average GDP growth rate of 7.1% between 2003 and 2006. More importantly, structural reforms were undertaken to enhance competitiveness and reduce government intervention in the economy. These include privatisation of many state-owned enterprises and the liberalisation of certain sectors especially the much-lauded telecommunications sector which led to significant job creation. Banking sector reforms were also undertaken to improve the availability of domestic credit to the private sector leading to an FDI inflow of about $652 million into the industry.
Nonetheless, these gains did not sufficiently trickle down to ordinary Nigerians as high unemployment and poverty rates characterised the period. This shows us that markets by themselves are not efficient and there needs to deliberate redistribution efforts by the government to ensure that growth is inclusive.
It is clear that the two leading contenders for Nigeria’s top job have very distinct ideas on how the economy should run – each model with its own set of consequences. The ball is now in the court of Nigerians to decide the kind of economy that they desire to have and who they deem best to deliver it.
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