An atavistic attachment to market control
Despite the belated attempt by the government – and forced by crippling and biting scarcity and hardships – to gradually loosen its tight control of the economy through the floating of the naira and the partial liberalisation of the downstream sector of the economy, subsequent actions and statements of the president and some of his ministers have shown their non-commitment to a free market economy and an inherent atavistic attachment to strict market controls reminiscent of the Soviet Union in the 1960s and Hugo Chave’s Venezuela – an ideology that has totally failed and has long being abandoned as a viable means of economy planning. Some weeks ago, the President was quoted as telling a gathering of business leaders that he did not see the benefit of the devaluation of the naira.
“I don’t like the returns I get from the CBN (Central Bank of Nigeria)… “How much benefit can we derive from this ruthless devaluation of the naira? I’m not an economist neither a businessman – I fail to appreciate what is the economic explanation.”
Apparently, it is due to these kinds of statements and the Central Bank’s continued visible presence in, and control of the forex market that has robbed the country of credibility in international financial circles and among international investors. That also accounts for why the benefits of floating the naira which we stridently campaigned for – a transparently priced currency that will encourage fleeing investors to return to the country, a decision that will see forex inflow which will, in turn, reduce the pressure on the naira and mitigate the sufferings Nigerians are experiencing as a result of the skyrocketing prices of imported goods and services – has failed to materialise. That is also why the recent trips of the Central Bank governor to the United States to meet with and convince investors to return to the Nigerian market achieved nothing. It was even reported that some investors pointedly refused to meet with him on the reason that not much has changed in the Nigerian forex market.
As if to dispel all doubts about the intentions of the government to continue to police and control the market, the minister of agriculture, Audu Ogbe last week released an obnoxious press release where he “threatened to shut down any fertiliser plant that denies local farmers access, while exporting the same commodities.” The minister continued:
“Two urea plants are big enough to run the Nigerian demands. We know their capacities. But where there are allegations that some people are exporting instead of putting in the Nigerian market, and prices shot to N10,000 per bag of urea, we became extremely angry with them. Thank God now, many of them have started producing and putting into the market. The price is already dropping.”
“But, we are warning against the future. There can’t be any priority but the Nigerian market. If there is a surplus, they are free to export. But, unless and until there is a surplus, we can’t sit by and watch people selling fertiliser beyond the shores of Nigeria when the local farmers have nothing to buy. And we are saying the same to others. The priority is the Nigerian market.”
There is near unanimity among economists that market forces are usually very stubborn and often resistant to attempts to control them by fiats, decrees, rule and regulations. Such moves usually leave in their trail devastated economies and social crises. Economic history the world over is clear about the results of price and economic control. Venezuela, a textbook example of a country that wants to control prices and the economy, is now a humanitarian disaster. People queue for days on end just to get essentials like bread and sugar.
President Buhari also ought to know the result of this kind of erroneous fiddling with the economy. In 1984, upon coming to power, he sent soldiers with whips to the market to force traders to sell goods at government determined prices. Obviously, fear of soldiers made traders complied initially, but the soldiers couldn’t control the ensuing scarcity and inflation. Nigerians had to queue for days to buy scarce and very expensive essential commodities.
We continue to repeat it that there is no better model of economic organisation than a free market economy where the forces of demand and supply determine the most efficient allocation of resources. The government must abandon its antiquated policy of market and price control now or watch the economy continue on a downhill.