Almost 30 years after Major General Muhammadu Buhari was shoved aside in a palace coup by the then Chief of Army Staff, Major General Ibrahim Babangida, Buhari has returned to power, this time as an elected president.
Many people rightly drew similarities between conditions prevailing in the country in 1983 when he led a group of army officers to truncate the 2nd Republic and conditions prevalent in the country in 2014/2015 when he returned as an elected civilian president.
To be sure, in December 1983 when the government of Shehu Shagari was sacked, the Nigerian economy was in dire straits. There was a consensus that the nation’s economy had been severely mismanaged by the NPN-led government. From an average annual growth rate of 6-7 percent between 1975 and 1980, GDP fell by 8.5 percent in real terms between 1981 and 1983, while consumer prices increased by over 20 percent.
Similarly, foreign exchange reserves declined from N5.462 billion in 1980 to a mere N798.5 million in 1983.
For an import-dependent country like Nigeria, that level of foreign reserves was barely sufficient to finance a month’s imports.
Expectedly, foreign debt rose from about $9 billion to $18 billion within the same period. Of course this discouraged foreign investments and encouraged capital flight.
The domestic economy was also in deep crises. Inflation rose rapidly and reached peaks of between 30 and 50 percent. Workers across the federation were owed salary arrears of between eight and 12 months and prices of essential commodities like milk, sugar, yam, rice and beans escalated beyond the means of workers and the masses in general even amid severe scarcity.
Industries were forced to cut production, retrench workers and in some cases, shut down altogether. Consequently, critical social services like health and education quickly collapsed.
It was not surprising therefore that General Abacha, and subsequently other coup broadcasters since then always made reference to hospitals becoming “mere consulting clinics”.
Interestingly, the only group or class of the society to be unaffected by the severe economic hardships were politicians and top brass of the civil service, who were rather experiencing a boom. This was, according to Eghosa Osaghae, due to the multiplication of rent-seeking opportunities through the several controls introduced under the austerity regime, and thanks to smuggling, which by December 1983 accounted for almost 20 percent of total imports. Corruption escalated as politicians and top civil servants ran amok with each struggling to make fortunes for themselves.
Of course, the Shagari government had an excuse in the oil glut and declining oil revenues. True, the oil glut contributed immensely to the economic malaise at the time, but it could have prepared better for it. The signs were obvious since 1980 but the administration ignored those signs and assumed that the artificial and unsustainable sharp rise in oil prices would remain constant. Instead, the boom whetted its appetite for reckless spending and consumption. Even when the regime did respond by reeling out a series of austerity measures to arrest the drift, the government lacked the will and discipline to force implementation. Politicians largely ignored the measures and rather engaged more in corrupt practices, smuggling and rent-seeking thus making nonsense of the measures. Nigerians were therefore relieved and in fact celebrated when Buhari and his boys put an end to the insufferable government.
As it was in 1983, so it was in 2014/2015. From 2010 to 2014, the country experienced huge revenue inflow due to the unusually high prices of oil (which reached an all-time high of $110 per barrel) in the international market. However, like in the second republic, the politicians developed huge appetite for reckless spending and embezzlement. Corruption became a household name in Nigeria and figures being cited as stolen were no longer in millions but billions of dollars. As usual, there were so much talk and speeches on diversifying the nation’s economic base to end its reliance on only one commodity but not much is done to achieve this. What was more, the nation’s politicians were very hostile to the idea of saving for the rainy day as they insisted that all revenues accruing to the federation be shared by the three tiers of government. The states especially also developed a healthy appetite for borrowing usually pledging their share of the federal allocation as collateral. The most damaging aspect of the PDP government’s rule was the gross impunity and the almost total lack of respect for rules, laws and processes that characterised governance.
That was the situation until, as predicted, the prices of oil began to decline in 2014. Expectedly also, the economy began to collapse. The first to suffer were the states who had not only been on a spending but also on a borrowing spree. Just as quickly, most of them went bankrupt and were unable even to pay workers’ salaries not to talk of executing capital projects. Of course, social services such as education and health were abandoned and all attempts were focused at preventing the social chaos that was brewing as a result of inability to pay workers’ salaries and on general elections that were to hold early in 2015.
As Charles Soludo, former governor of the Central Bank of Nigeria, opined, “We have come full circle. If the experience under Shagari could be excused as an unexpected shock, what Nigeria is going through now is a consequence of our deliberate wrong choices. We have always known that the unprecedented oil boom (in both price and quantity—despite oil theft) of the last six years is temporary but the government chose to treat it as a permanent shock. The parallels with the Shagari regime are troubling.”
By the end of 2014, it was clear Nigerians were fed up with the misrule of the PDP – the corruption, impunity and insecurity in the land – and yearned for the positive change promised by Buhari and his party, a coalition of the most prominent and biggest opposition parties in Nigeria. It was therefore not surprising that he won the general elections, and following the very positive action of former President Jonathan in conceding defeat, there was a most peaceful transition and alternation of power from one administration and party to another – a first in the history of Nigeria.
Buhari’s economic management then and now: any difference?
Upon seizing power on 31 December 1983, Buhari set out on an economic recovery project. He rolled out a ten-point programme which could be summarised under plans to: revamp the economy, eradicate corruption, indiscipline, and smuggling, create enabling environment for economic recovery, and very importantly, punish the politicians responsible for the economic malaise. Under the economic recovery plan the government took some drastic actions like massive reduction in government expenditure through massive retrenchment of public service employees to cut down the wage bill; removal of subsidies on health and education; abandonment of some government projects – like the Lagos metro line initiated by Lateef Jakande – not considered to be of top priority; change in the colours of the Naira to arrest illegal currency dealings as well as establish CBN’s control over the amount of money in circulation (it was also to short-change those who held the country’s currency worth billions of dollars outside the country especially in Britain where the Naira was said to be a legal tender on the streets); the launch of the War against Indiscipline (WAI) which saw draconian sanctions imposed on crimes such as drug peddling, armed robbery, examination malpractices, arson etc.; and the creation of special military tribunals to try politicians and corrupt public officials.
All these measures were being undertaken while negotiations continued with the International Monetary Fund over the structural adjustment programme. The significant stumbling block between the Buhari regime and the IMF was the refusal of the former to devalue the Naira to a level acceptable to the IMF. While the deadlock continued, the regime prioritised repayment of international debts and trade backlog (the regime devoted a huge part of the annual budget to this endeavour). The thinking of the regime was that it wanted to “transform the country from its status as a ‘debtor and beggar’ nation to one where it could negotiate with creditors from a position of strength.” It also thought that good fiscal management, discipline and prompt payment of its debts would invariably restore confidence in Nigeria especially in international circles.
But the regime was soon to find out it took more than those to win the confidence of the Bretton Wood institutions. Due to the continued decline in prices of crude oil, the output restrictions adopted by OPEC, little or no inflow of foreign exchange due to the refusal of international creditors – notably the IMF – to grant further lines of credit to the country, the regime had no other option than to engage in counter-trade or trade by barter beginning in December 1984. This, according to William Graf in his 1998 classic, The Nigerian State, represented a final ad hoc attempt by the Buhari government to escape from its economic immobilism by obtaining the technology, spare parts and other raw materials essential to domestic economic recovery while circumventing the need for an IMF loan and not too blatantly violating OPEC rules.”
Although it was expedient, the modern trade-by-barter came at a huge cost to the nation. It 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 summed by Osaghae, “counter trade, rather than bringing relief, only served to heighten the desperate economic situation.” In real terms, social and economic situations continued to deteriorate. Wages still went unpaid and there were general shortages of basic commodities like rice, milk, sugar, etc and the helpless masses had to queue endlessly to get to these items. Industries had to close shop and those that managed to remain open operated at very low capacity. Still, like in the Shagari regime, army officers’ wives and those in privileged positions became dealers in imported rice and other commodities.
However, despite the regimes’ pledge to cut public expenditure, one sector – defence, and particularly spending on the armed forces – never declined. But for the masses and general public, it was continued suffering.
Confronted by the apparent failure of its policies to revamp the economy, the regime became even more oppressive and intolerant of criticism. As Adebayo Olukoshi and Tajudeen Abdulraheem rightly noted, “The Nigerian Security Organisation’s powers were significantly expanded. Then the state began to play the old card of blaming so called illegal ECOWAS immigrants, especially from Ghana, for the continued shortage of commodities and jobs. But the diversion created by the second mass expulsion of aliens early in 1985 was only short-lived and was soon exhausted.”
As rational explanations ran dry, repression became the norm. The famous decree 4 that prohibited journalists from reporting anything that could embarrass the regime, even if it were true, was promulgated. It did not take long before two journalists fell fowl of the law and were consequently locked up. Soldiers were sent out with whips to enforce order and discipline on the streets and ensure cleanliness in people’s homes. Special secret military tribunals were set up to try politicians accused of corruption despite protests and boycotts of the tribunals by the Nigerian Bar Association (NBA). The accused were all presumed guilty until they could prove their innocence, and few managed that task. Most were given ridiculously long sentences, some running into hundreds of years. Certain crimes like drug trafficking, smuggling, and oil bunkering were made to carry the death sentence and three Nigerians were retroactively executed under this law. The most sensational example of the regime’s recklessness was the botched attempted kidnap and forced repatriation of Nigeria’s former Transport Minister under the Shagari regime, Umaru Dikko, who was found drugged in a crate in a London airport that had been tagged as diplomatic baggage. This led to a break-up of diplomatic relations between Nigeria and the Britain.
Buhari in 2015
Even before his elevation to the presidency, especially during the campaigns and amid concerns that he was an unrepentant dictator, Buhari had been at pains to explain that this time around, he will govern according to the rule of law and there will be no draconian measures or abridgement of the rights of citizens.
So far, except in the case involving the former National Security Adviser whom the Department of State Security is still preventing to travel abroad to minister to his health even after being so directed by the courts, he has largely kept to that promise.
Quite fortuitously however and as seen above, Nigeria is experiencing almost the same set of economic problems as those of 1983. As he has had complained severally before and after the elections, Nigeria was “materially and morally vandalised” by ravenous politicians and his tasks now are almost the same as the tasks he set for himself in 1984 – economic recovery, ending or curtailing corrupt practices, gross impunity and disregard for laid down rules and procedures, recovering the country’s looted funds stashed away in foreign banks, ending the insurgency that has ravaged the country, and restoring the respectability of the country and its image before the international community.
But how has he proceeded with that task? Is he the old Buhari of 1984/85 or has he changed substantially in response to changing times and circumstances? The prognosis does not look too bright.
Buhari’s rise to power coincided again with the collapse of oil prices and bankruptcy of majority of the states. As he confirmed recently in Delhi, India, “Nigeria is broke… You must have known that the Federal Government has to help 27 states out of 36 to pay salaries. Nigeria cannot pay salaries; the federal government itself has to summon the Governor of Central Bank on how it could pay salaries, not to talk of projects, agreements we signed with other countries on counterpart funding and so on.” But this isn’t a sustainable solution to the cash-crunch crises of the states. Instead of talking about restructuring the Nigerian federation to ensure states viability and self-sustenance, the president is focused on cash payments to over 25 million unemployed Nigerians.
On monetary policy, it appears Buhari hasn’t changed at all from 1984/85. Since 2014 the country’s currency has been under intense pressure as a result of the deep slump in oil prices and the huge gap between the country’s receipts and imports. The Naira was briefly devalued but calls for further devaluation continued with most investors suspending investment decisions to Nigeria until such a time the currency is correctly devalued to reflect market realities. Rather than allow the CBN to perform its statutory function, the president jumped the gun ahead of the CBN and declared that there shall be no further devaluation of the Naira. At the sidelines of a meeting with the French President in Paris, Buhari was quoted as saying, “I don’t think it is healthy for us to get the naira devalued.” When quizzed on the shortage of foreign exchange that the decision would cause, he argued that “the central bank is providing ample foreign exchange to essential services [and] industries”.
Expectedly, after the pronouncement and even before that, the CBN has lost its independence to determine the country’s monetary policy and has relied instead on reading the ‘body language’ of the president and taking actions that will conform with that ‘body language’ now verbalised in France.
The CBN was then forced to roll out various kinds of policies – including placing some items on import prohibition list, an action the Economist derided as archaic and irrational in a July articled titled “toothpick alert” – to protect the beleaguered Naira. Though pegged officially at N199 to a dollar, the black market rate – a truer reflection of the value – is close to N245 to a dollar.
Doyin Salami of the Lagos Business School and a member of the CBN’s monetary policy committee (MPC) faulted the apex bank’s action, arguing that sooner or later, the naira will be devalued to reflect its true value in the market. For him, the apex bank cannot maintain a fixed exchange rate, independent monetary policy and free movement of capital at the same time. “You’re allowed to choose two out of the three,” he argued. “The key question is which two will Nigeria choose? That will have to be answered in the coming months. I would rather Nigeria maintain independent monetary policy and have a market-determined exchange rate.”
Just like in 1984/85, the currency control regime is beginning to do great harm to businesses. Both traders and manufacturers whose businesses largely depend on imports are having a hard time surviving and remaining in business. Bloomberg News reports that companies like Nigerian Breweries Plc, Nigeria’s biggest brewer controlled by Heineken NV, complained that it now takes two weeks to obtain dollars to pay for its imports, twice as long as it required a few months ago, while Nestle SA’s Nigerian unit says it has had to wait six weeks for dollars. As Atedo Peterside, chairman of Stanbic IBTC, posits, “People underestimate the problems that exchange rate systems can pose to businesses… Instead of doing business, they’re devoting 40 percent of their time to scouting around for dollars, pulling crumbs together.”
Predictably, JPMorgan Chase & Co. in September excluded Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds. This is after investors raised concerns about a shortage of liquidity following the CBN’s restrictions.
Nigeria’s economy has consequently slowed down considerably. The stock market that responded positively to Buhari’s election has now crashed, plunging by as much as 22 per cent since April – the third-worst performance globally within the period after those of Ukraine and Egypt. Owners of capital have repatriated their funds and foreign direct investments have dried up. Prospective investors have suspended investment decisions until the exchange rate issue is satisfactorily dealt with. Growth has slowed down considerably, both inflation and unemployment are on the rise and Nigerians, as reported by BusinessDay in its November 27 front page, are now getting poorer for the first time since 1999 as GDP per capita plummets.
It appears the regime’s main strategy for economic recovery is to spend its way out of the economic meltdown. The government is planning to raise spending by 56 percent in next year’s budget, according to Bloomberg and plans to start paying over 25 million unemployed Nigerians a stipend of N5, 000 monthly. Where will the money come from for all these spending considering the plunging oil prices? Some may wonder! The government is attempting to plug loopholes, eliminate corruption and plans to go on a borrowing spree. Also, it has made concerted efforts to shore up its tax revenue. In line with government’s resolve to raise more money locally, regulatory bodies – known for their inefficiency, incompetence and corruption – are now running amok, competing with one another on which will raise the most revenue for government through draconian measures.
Just last month, MTN Nigeria, the South African mobile telecoms giant, was fined $5.2 billion (the largest such fine in the world) for its failure to disconnect unregistered and improperly registered SIM cards that the authorities complained were being used to cause security breaches in the country. Many analysts see this action as a desperate attempt to shore up depleting oil revenues, a view confirmed recently when the Nigerian Governors’ Forum came out guns blazing insisting that MTN must be made to pay the fine not minding that such draconian measures were heightening Nigeria’s risk profile and scaring away current and potential investors from Nigeria. Other regulatory bodies have since taken a cue from the Nigerian Communications Commission to levy very ridiculous fines on mostly foreign-owned businesses for disputable offences/contraventions.
The subsidy question
Much more worrying however, is the president’s refusal to countenance any argument against the removal of subsidy on imported petrol despite the obvious fact that the country can no longer afford it. Perhaps this is due to the president’s socialist background. Subsidy on imported petroleum product takes a huge chunk of Nigeria’s budget. In 2011, for instance, the cost of subsidising petrol and kerosene was N1.5 trillion ($9.3 billion). This represented 30 percent of government’s expenditure, 4 per cent of GDP and 118 per cent of the capital budget. In comparison, Nigeria’s education, health and works/roads budget for that year were just $2.2 billion, $1.32 billion and $680 million respectively.
Despite attempts to clean up the subsidy regime and eliminate corruption the cost is yet to reduce significantly. Initially, the then GMD of NNPC and now junior oil minister, Ibe Kachikwu, and the president’s party men advised the President to remove the subsidy on petrol, but it appears they have now correctly read the president’s ‘body language’ and have keyed-in to argument of the president.
Despite the president’s pledges before and after the elections that he’s a converted liberal democrat and would ensure that the country will continue to operate a free market economy, his actions and dispositions have all been anti-business and pro state-led economy approach. From the retention of subsidy on petrol, the refusal to approve the privatization of the nation’s dilapidated and perpetually non-functional refineries – even as Kachikwu clearly voiced his doubts on the state’s ability to revamp the refineries and get them to operate at a profit, the mopping up of funds from banks and their concentration in the Central Bank even when the economy needs revamping, to the talk about a national carrier, national shipping line and other such relics of the 1970s and 1980s that are no longer fashionable.
Buhari’s economic management for the last six months, according to Soludo, comprise of a “gamut of the ‘tried and failed’ command and control policy regime… that signals a permanent shift back to the old policy regime of pre-1986.” Jan Dehn, head of research at Ashmore Group Plc, told Bloomberg, “So far the Buhari administration has done all the wrong things…Not only has he been incredibly slow in taking any action, when he finally has taken action on the economic front it’s been diametrically opposed to sensible policy. That is a major disappointment given expectations prior to his election.”
Chris Akor
