• Sunday, July 14, 2024
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The price of APC’s statist agenda

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No one who has read APC’s manifesto can rightly accuse the party of not knowing what it wants to achieve in government if it wins this month’s presidential race. By its own admission, the party wants to create a “progressive state” in Nigeria. But what kind of federal government would APC run? Well, if we take the party’s manifesto at face value, it would be statist, interventionist, and fiscally active. The party plans to tackle socio-economic problems through “intensive and extensive investment”.
Here are some of the party’s spending commitments: On education, APC would offer free primary and secondary education to all, and extend that to tertiary level for women; and establish six new universities of science and technology. On health, the party wants to increase the number of doctors from 19 per 1,000 to 50 per 1,000; increase national health expenditure per person per annum to about N50,000 (from current N10,000); provide free health services to pregnant women, babies and children up to school-going age, and those afflicted with infectious diseases; and increase the quality of all Federal Government-owned hospitals to “world class standard within five years”. An APC federal government would build 1 million housing units per annum, and introduce a “massive social security scheme” that involves giving between N5,000 and N10,000 per month to the poorest Nigerians. Furthermore, an APC federal government would embark on massive infrastructure projects, and increase the size of the state by creating several new agencies.
Of course, given the state of infrastructure and social services in Nigeria, it would be wrong to suggest Nigeria doesn’t need to address these challenges. However, if any major party presents such ambitious spending commitments in a UK or US election, it would have to answer two critical questions: How much would they cost? And where would the money come from? For instance, how much would it cost to make education and health free in Nigeria or to roll out a social security scheme nationwide? And would the funding come from taxation or borrowing? Alternatively, since government is about priorities and trade-offs, what programmes is the PDP government currently running that an APC government would stop so as to reallocate resources to its own priority programmes? These are some of the questions APC should answer to make its election promises credible. The old saying is true: “if you can’t measure it, you can’t manage it”!
Yet, APC’s manifesto is silent on these questions. The only clue on how an APC federal government would finance its programmes came from a recent article by Bola Tinubu, APC’s national leader. In the article, “Slump in Oil Prices: A Progressive Way Out”, Tinubu argued that, since countries are no longer under the fiscally-restrictive gold standard, and now have their own fiat currencies, they could circulate an unlimited amount of their currencies even if their foreign exchange earnings drop significantly. So, according to him, despite Nigeria’s dwindling dollar income, it could “run naira fiscal deficit indefinitely”. Tinubu’s intervention suggests that an APC federal government would finance its ambitious programmes by running a persistently large budget deficit. To fund the deficit, the government would either borrow, thereby increasing the national debt, or print money, the so-called “money-financed deficits”, although that would be crossing the fiscal line in the sand!
Of course, the gold standard finally collapsed in 1971 when the US closed the gold window. But the aftermath, the Great Inflation of the 1970s, left scars on national economies. Indeed, it was that experience that shaped the fiscal conservatism of the 1980s, and led many countries to either set inflation targets or tie their currencies to the dollar, the world’s reserve currency. So, it’s not exactly true that a significant slump in Nigeria’s dollar income has no impact on how much naira should be released into the economy. Clearly, if a currency has already depreciated, because of insufficient dollars to support it, and you oversupply that currency, you will debase it even more. And a debased fiat currency is a worthless one, with adverse consequences for the economy and living standards!
To be fair, APC has nailed its colours to the mast. It sees itself as a centre-left party. So, its approach to fiscal policy is shaped by ideology. Indeed, the party also extends its interventionist approach to industrial policy. For instance, an APC federal government would “conduct a state-by-state census of ailing or comatose industries, document their requirements and institute an industrial resuscitation fund” to bail them out! This is populist economics writ large. What industries need is a competitive business and regulatory environment, not some misplaced interventions. Unfortunately, APC’s manifesto doesn’t seriously address supply-side issues, such as reducing the costs of doing business, and promoting competition, efficiency and innovation in the economy. Instead, the party’s anti-business rhetoric, such as the promise to “eradicate predatory capitalism”, and to ban “superfluous imports” would distort the proper functioning of the market. For instance, an APC federal government would create at least five new development banks, and fix their interest rates, which “will not exceed a single digit”. This is nationalisation in everything but name!
Surprisingly, by comparison, APC’s promises on corruption and security are skimpy. For instance, on corruption, it would review the penal code and establish Special Courts for Corruption. But corruption is not just a crime; it’s also a drain on the economy. We need parties to tell us how they would block loopholes that encourage corruption, and make measurable commitments to recover money into the state’s coffers through anti-corruption measures. Despite the extremity of the Boko Haram insurgency, an APC government would mainly establish a “Serious Crime Squad to combat terrorism”. I think the challenges require more than a “squad”!
The party’s plans on political reform also lack credibility. For instance, APC promises to grant autonomy to local government, but most APC states rejected the National Assembly constitutional amendments on this. The party also promises to amend the constitution and devolve power, yet it opposed the national conference! Constitutional and political reforms usually require cross-party support. Given APC’s partisanship on these issues in opposition, how would it secure bi-partisan support for its reform agenda in government?
For me, though, the most concerning are the party’s statist and interventionist worldview and its attitude to economic and industrial policies. Like most centre-left parties, APC has over-promised and is likely to under-deliver in office! Given the perilous state of Nigeria’s public finance, an APC-led federal government would either break its promises or run excessive budget deficits to fulfil them; the former is bad for democracy, the latter for the economy. Furthermore, despite APC’s promise to make Nigeria’s economy “one of the fastest-growing emerging economies in the world, achieving GDP growth averaging 10 percent annually”, and to create a “post-oil economy”, its economic and industrial policies would not create the market dynamism needed to achieve these goals.

So, we have a challenge with the main parties in this election. There is PDP, which, as I argued on this page last week, is broadly pro-business and demonstrates some economic competence, but seems unable to tackle the problems of poverty, inequality and insecurity. Then, we have APC, which would be laser-focused on the issues of social justice, and could even make some progress on corruption and insecurity, but might mishandle the economy, thanks to its statist and fiscally-loose economic policies. Not exactly fantastic choices, if you ask me. But choose we must!

 

Olu Fasan