I think I was in Primary 2 the first time I heard a version of this particular idea being expressed. My class teacher, a loveable Ghanaian called Mr. Ba, told us during a social studies lesson that the reason Nigeria is poor is that the government takes bribes from foreigners to allow everything to be imported into the country.
Because of the subsequent lack of production in this import-dependent landscape, he said, there were no jobs in Nigeria, and so the solution was for the Nigerian government to ban imports and thus stimulate local production. Do this, and Nigeria would be great!
To my 7-year-old self, this idea seemed to make sense at the time. The reasoning was easy enough to follow because in my everyday life, it was difficult to go a day or two without seeing evidence of importation everywhere around me. The cars we came to school in, the PCs in the computer lab at school, even some of the books we used in class were imported. Simply forcing Nigerians to manufacture these things in Nigeria would create jobs and prosperity for all, wouldn’t it?
It was a seductively simple and nuance-free idea, like telling a child that he will be able to get ice cream as soon as daddy gets home. Of course, that would be a fact. Why wouldn’t he get his ice cream? And then, of course, I grew up.
The market can stay irrational longer than you can stay solvent
In my prior iteration as a financial reporter in 2018, I covered a number of stories focusing on asset classes that were generally thought of as overvalued. In some cases, such as with several cryptocurrencies, the expected crash came swiftly and decisively. In some other cases, despite the asset showing all the same doomed fundamentals as the most obvious exit-scam cryptocurrency ICO on the market, its price and trading volumes simply would not fall as and when expected. People would just keep buying the stuff, pushing the price ever higher, and I would be left scratching my head because… why?
One of my editors shared an article on the Slack channel one day, which included a quote from John Maynard Keynes. The quote, which originates in the 1930s goes thus: “Markets can stay irrational longer than you can stay solvent.” What one of history’s most respected economists was telling us was that in some cases, 2+2 does not equate to 4 – or at least not immediately. Over the course of time, 2+2 always does equate to 4, but the problem is that where human behaviour is involved, a whole gamut of variables come into play, which makes real-life outcomes and timelines markedly different from the sterile environments of a science lab or a spreadsheet.
More recently, investor and former Wall Street Journal columnist Morgan Housel expressed the same thought more succinctly in an article published earlier this month. In his words, “Unsustainable things can last longer than you anticipate.” Using the example of the US housing market crash of 2008 and the years of frenzied speculation leading up to it, Housel made the point that merely predicting the eventual collapse of the subprime mortgage bubble was not exactly the stuff of genius because it was apparent to any trainee analyst on Wall Street that the situation was unsustainable. The only thing that nobody knew was when. Since there were still fantastic sums of money being made in the unsustainable market, everyone simply shrugged off little things like evidence, precedent and data-driven forecasting.
Thus, he said, many investors who tried to do what looked like the smart and prudent play by shorting the clearly unsustainable market got completely wiped out years before the actual crash. As I have mentioned in this column before, it is often the case in economics, that the so-called “Bigger Fool” scenario results in worthless ideas and assets being traded and highly valued long after it should have been evident that they simply do not work. Which brings us back to Nigeria of August 2022.
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Ban foreign models to boost the economy: Here we go again
Just like Mr. Ba in 1997, an uncomfortably large number of Nigerians continue to hold on to the problematic idea that their economic salvation lies in an utopian state of zero imports and multiple exports. Some like The Man In Aso Rock even believe in North Korea-style autarky and “self-reliance.” It does not matter how many BusinessDay columns one may write explaining for the umpteenth time that global trade is not a simple, binary, zero-sum game made up of “exporters” and “importers,” or that Chairman Mao-style protectionism and hobbling of international trade simply makes countries poorer and societies more insular.
It does not matter how many times it is pointed out that Nigeria’s best-performing industries did not grow because of top-down import bans and capital restrictions, or that such things actually have the exact opposite effect to what is intended pretty much 100 percent of the time. No matter how many graphs and statistics the bespectacled boffins like Kalu Aja and Mustapha Chikeobi put out showing that embracing trade and specialisation on the road to building competitive advantages is the way forward, a very large number of Nigerians will continue to hold on to the chimera of an import ban solving Nigeria’s unemployment problem and turning Nigeria into a net exporter of everything from belts to spaceships in 15 years.
Recently, the government made the decision to ban use of foreign models in Nigerian advertisements, ostensibly to create more opportunities for Nigerians in the creative sector. Questions such as, “How many foreign models and voice artists actually work in Nigeria’s creative space?” and “How will this impact on Nigerian creative talents active in the global creative space?” were left conveniently unanswered. Nor will they ever get an answer because the point of such bans is not to actually have the desired economic effect. The entire point is the ban itself – it is like a religious belief. Like all religious beliefs, it requires no evidence to believe that banning services and goods from outside Nigeria will somehow raise Nigeria’s competitive level.
Why is this? Because like with the US subprime mortgage crisis before 2008, there is always a Greater Fool to sell the warm bag of hot narrative nonsense to.
The fool in this case, being the Nigerian electorate.
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