Results of government’s control of the economy
National Bureau of Statistics (NBS), data released yesterday indicates that Nigeria’s Gross Domestic Product (GDP) shrunk by 2.24 per cent in the third quarter of 2016, worsening the country’s chances of getting out of its current recession in 2016.
The results of the government’s attempts over the past 16 months to control the commanding heights of the economy are now visible across the country. From the government’s obsession with fixing the exchange rate and prices of essential goods and services to directives to banks and companies not to lay off workers regardless of the consequences on their businesses, deciding how and to whom companies must sell their goods regardless of price, and the raids on bureau de change to forcefully determine the exchange rate, the government’s efforts have come full circle.
The GDP ha contracted by 2.24 percent in the third quarter. Inflation is at an all-time high of 18. 3 percent). The Naira is depreciating daily both at the interbank (N356/$) and at the parallel market (400/$). As attested to by an analyst recently, companies that can no longer comply with the government’s bizarre directives “are offloading excess workers to keep afloat, fuelling unemployment and underemployment, which has reached 45% among the youth, worsening poverty and social malaise. Nigeria’s misery index has climbed to 47.7%, becoming the country with the 5th highest misery index in the world for the first half of 2016.”
The results were so glaring and the country was gradually going the way of Venezuela that the government had to eat its pride and grudgingly raise the price of petrol and claim to float the Naira. However, comments and reactions from the presidency has since shown that the government is not truly committed to those measures preferring the antique and expired practice of socialist control and command economics. No wonder it is still interfering in the fx market and trying to determine rates. Consequently, investors have seen through the government’s hypocrisy and have continued to stay away from the country, thus deepening the scarcity of forex in the country.
Some months ago, a poll result confirmed the fast deterioration of the country’s manufacturing sector as a result of challenges like foreign exchange constraints, petrol and diesel supply hiccups, poor power supply policy inconsistency and limited access to credit. Also, the manufacturers association of Nigeria (MAN) reported last month that about 50 manufacturing companies have been forced to close shop in the country while about 222 small-scale businesses have also been forced out of businesses within the last one year leading to over 180, 000 job losses. What is more, the association said painfully that most of the manufacturing companies that closed shop in Nigeria relocated to neighbouring countries with more friendly business policies from where they manufacture and import to Nigeria.
It should be obvious to the government by now that it is not in its place to control the economy. Its major function with regards to the economy is to regulate players in the economy. Sadly, in its ill-advised attempt to be the most important player in the economy, it has no capacity and has neglected the need to develop its capacity for effective regulation of economic players, thus further exposing the economy and consumers to all the negative effects of a free and unregulated market.
We urge the government to take the painful but correct decision to liberalise the economy, free the forex market, privatise the refineries and develop a framework for public private partnership where the private sector can partner with the government to build and provide infrastructure in most parts of the country.