Some things just never change in Nigeria. On the morning of January 1 1984, just the morning after the overthrow of the rudderless Shagari regime, General Buhari ordered soldiers into the streets and the markets with horse whips (koboko) to force traders to reduce prices of goods and services regardless of costs. This was part of the jack-boot strategies rolled out to arrest the steep economic decline and inflation precipitated by the corruption and mismanagement of the rudderless Shagari regime he had overthrown the night before.
With the price of oil down and with very little or no foreign exchange to import even necessities, the regime sought lines of credit from multilateral agencies. He was urged first to freely float the naira, liberalise the economy and allow the private sector to lead the economic revival in order to secure the loans. But he would have none of it.
He firmly believed his jack-boot approach will solve the problems. Of course, prices fell in the first few weeks of the coup due to fear of the soldiers and producers and traders took on huge losses. However, economics always defies force. So, as scarcity began to bite, prices went northwards, exceeding their levels even before the coup. Unable to access forex to import raw materials and spare parts to keep factories working, industries closed down and unemployment became rife.
The ultimate result of this archaic strategy was scarcity. Essential commodities that were once readily available were no longer available. Inflation spiked and Nigerians had to queue for days just to buy commodities like milk, rice, sugar, salt etc at very exorbitant prices. In a report in the Guardian Newspaper of 26th May 1984, the then Nigerian Grains Board was said to be unable to buy grains “because market prices were higher than what it was allowed to pay”. Also, the same paper two days earlier reported that the Association of Master Bakers, Confectioners and Caterers were said to have made passionate appeals to the government and suggested ways in which to end the severe scarcity and rising price of bread. But they were ignored and the problem continued to bite even harder.
Meanwhile, as the regime was busy handing down ridiculous sentences of upwards of 100 years to so-called corrupt second republic politicians, it was, through the scarcity it was engendering, opening up a profitable line of corrupt businesses for army officers, their wives and others in privileged positions as they became dealers in imported rice and other commodities.
To escape from its economic immobilism, the Buhari regime, beginning in December 1984, had no other option than to engage in counter-trade or trade by barter in order to get technology, spare parts and other raw materials essential to domestic recovery. Although it was expedient, the modern trade-by-barter came at a huge cost to the nation. Nigeria more or less auctioned off its oil for less than its real value. Expectedly, the usual buyers of its oil demanded to enjoy similar counter-trade discounts and this led many of them refusing to lift oil from Nigeria when the regime did not oblige them. Thus, as some analysts summed up the policy then, “counter trade, rather than bringing relief, only served to heighten the desperate economic situation.” In real terms, social and economic situations continued to deteriorate and wages still went unpaid. It was therefore a relieved and happy nation that welcomed General Babangida when he put an end to the insufferable regime in August 1985.
Fortuitously, Buhari returned to power in 2015 and fate presented him with similar circumstances. Sadly however, his response has been the same or worse. Who was it that defined insanity as doing the same thing over again and expecting different results?
To begin with, for someone with no real knowledge of the economy and who has shown no evidence of improving his knowledge since he was edged out of power in 1985 to want to direct the economy is downright dangerous. But urged on by the crowd and hangers on and a belief in his messianic role, he proceeded to usurp the powers of the Central Bank and the Monetary Policy Committee to determine the country’s monetary policy.
Like in 1984, he has now refused all sound entreaties to float the Naira, which will encourage investments, businesses and capital inflow. Even when he was forced by the scarcity of the dollar to agree to a float, he had done everything to prevent market forces from determining the value of the naira.
What is the result? Stagflation – a portmanteau of high inflation, declining economic growth rate and high unemployment. Now that all his preferred policies are failing, he’s gradually resorting to his preferred jackboot approach.
Like a bad dream, Nigerians woke up some weeks ago to the news that the Central Bank or its boss in Aso Rock has resorted to the use of force, arresting parallel market operators selling the dollar above the CBN preferred N400 rate. Earlier, both the CBN and police had met with Bureau de change (BDC) operators and reportedly obtained assurances of their support in the battle to save the naira from further depreciation.
It is easy to see why the CBN is going after BDC operators. They have always bid for the dollars above N400 and despite the refusal of the CBN to sell to them, the arbitrage opportunities in the existing forex policy means that majority of the dollar sold by the CBN ends at the hands of the BDCs who are willing to buy at more than N400. If the police, DSS and others could coerce the BDCs not to sell above N400, they will be forced to bid below N400 and thus prevent the further devaluation of the naira.
But this is an effort in futility. The CBN, DSS, police or whoever ordered the raid is only creating another black market within a black market. Dealers with stock of dollars which they probably bought above N400 naira won’t sell below N400 and will go underground selling only to trusted buyers. And since the supply side hasn’t been fixed, demand for the dollar will further lead to the depreciation of the naira. Simple economics; but not so for our government, which has chosen to stick to its expired philosophy of statism even when the price of oil is crumbling and militancy is crippling Nigeria’s capability to export oil.
Christopher Akor
