By Nelson Ekujumi The way the National Assembly comprising the…
Nigeria is currently in recession as economic activities experience negative growth for two consecutive quarters. This has meant there is a harsh and intense financial pressure on the populace and, as usual, everyone wants to know who is to blame.
They obviously look at how to point a finger at a government. Some see it as the present APC government’s fault under Buhari, while some say it is the former government’s fault under Jonathan
As expected, most opinions from Nigerians from both camps are from the deep depths of pure, undiluted ignorance and stupidity being displayed braggadociously as ‘intellectual contributions’ to a debate.
Now, some with a little bit of brain might ask: “So how do you determine who is responsible for an economic mishap?”
That is a good start in addressing the issue and I will try to answer and address this complex issue with a simple, but probably not comprehensive, answer because comprehensiveness will make it too complex for even the well-learned mind.
The reality is that governments have to influence (and are responsible for influencing) the economy by deploying their economic policy.
Note that the term used was “influence”, not “control”. This is because no government can ever control the economy except the aim is to damage it in the long term like the communists showed us.
Two of the key economic policies that have significant impact on influencing the economy are the Monetary and Fiscal policies. Other policies like foreign, immigration etc. also have an impact on the economy but I think those are less of an issue in Nigeria’s correct predicament.
The Monetary policy is the decision that the Central Bank takes to determine the size and growth rate of money supply in the economy. This is a way of heating up or cooling the economy by influencing how much money is spent, borrowed and saved in the economy by individuals and companies. A country in recession needs heating up.
Fiscal policy is the way a government attempts to manage the economy through taxation, spending, and borrowing of the government itself so as to influence the actions of individuals and companies.
Now these tools are the ones used to influence the economy and can determine the direction the economy goes. The reality there is that judging who has led the economy to go to mishap is intellectually more complex than just say “Ah, but it is Buhari that is in power na. Na im dey at fault”.
There are factors of economic maturity and lag in how these things are determined.
Economists have determined there are 3 types of lag in economic policy. They are the (1) recognition lag, (2) the decision lag and (3) the effect lag.
Economic policy is all about how to manage future occurrences, hence finding out what has occurred that you want to change is important. Recognition lag is the time it takes to discover what has happened & is about to happen and how you want to change it. That is when you identify the need to make a change in economic policy. This requires gathering useful statistical information (which are often somewhat behind the event) and then distinguish between random fluctuations and fundamental shifts in economic trends. Fundamental shifts are the important ones.
The Decision lag is the time it takes from the recognition and making a decision (on fiscal and monetary policy). While the Effect lag is the time it takes from making the decision to you seeing the effect in the economy.
The Effect lag is the most pertinent to this article but I would first say one or two things about the other 2 lags.
Recognition lag is difficult in Nigeria because the country has limited reliable data (not even a reliable census) and the country has an unstructured economy. The Decision lag is longer in fiscal policy-making than in monetary because it has to go through political discussions and approval from the Nigerian legislators (made up mostly of crooks that just want to line their pockets).
Now to the Effect lag. Remember I mentioned economic maturity earlier?
Well, the time for economic policies to take effect has a lag time that is dependent on the level of development of your economy.
For developed countries, it is estimated the effect lag is 12 months for fiscal policy and 18 months for monetary policy to take full effect on average. For underdeveloped countries, you can add 6 months to fiscal and 12 months to monetary.
Now Buhari has only been in power for 18 months; with his first fiscal policy just about 10 months old. That is a fiscal policy that is being disrupted by ethnic criminals calling themselves Niger Delta militants.
So, sorry to say, the economic recession you are seeing now is an outcome of the economic policies of 2-3 years ago. That is, a period of looting and wasting by Jonathan and his acolytes of the country’s finances. The money for infrastructure stolen, the taxation waivers, the wastage culture of carrying 100+ people to UN Assembly, the giving critical projects to Aso Rock charlatan contractors at inflated prices etc.
So when there is no job, it is not necessarily the government in power to blame.
Sagamite is a bachelors graduate from one of the UK’s elite universities after an early life in Nigeria. He is an experienced management consultant that has worked with firms in a diverse range of industries both in public and private sector. His experience provides him with a catalogue of versatile and arcane knowledge. His current interests include logical structure of opinions/arguments, entrepreneurship and human psychology. He prides himself on his organic, objective and independent thinking, so the audience should expect a significant number of his articles to be contra-popular belief. He is one of Nigeria’s leading objective-Contrarian thinkers about life’s generally accepted conventional wisdom