Tinubu Thesis, Keynesian Genius and Reviving the Nigerian Economy

Ihad over time dutifully followed Asiwaju Bola Ahmed Tinubu’s writings and copious interventions in Nigerian politics and political economy because of my deep respect for him and the usually embedded creative and branded original thinking with philosophical depth. Such is his espousal of “common-sense revolution”. Now, I have over several weeks repeatedly read the “The Chance of Prosperity versus Poverty of Austerity by Tinubu (THISDAY, Thursday, January 29, 2015 page 36) and again, as an economist, I found therein philosophical depth and a tempered, appropriately modulated espousal of Keynesian economic thought and very much like Nobel Laureate Joseph Stiglitz of my alma mater Columbia University, New York. The bottom line here is that according to John Maynard Keynes and Joseph Stiglitz and Tinubu’s common sense it is counter-productive to be pro-cyclical, contractional and austerity mode in a recessional economic trajectory or depression economy. This is the crux of and raison d’être of the contra/counter cyclical fiscal policy prescription of Tinubu in the current perplexing Nigerian economic milieu. Expectedly, the Tinubu seminal fiscal policy intervention ought to have triggered lively and vigorous public debate and enlightened economic analysis, were it not for the political opium dazzling Nigerians in the exceeding heat, razzmatazz and uncertainty of 2015 elections. However, the intellectual and practical policy depth of this particular Tinubu thesis provoked my prolonged rumination of the plausibility, or is it inevitability, of his economic perception that is distinctly contrary to the contractional, pro-cyclical, fiscal consolidation IMF poisonous prescription for our economy. The Tinubu policy prescription should not be controversial in any way and should find favour with every Keynesian- inclined government. It runs totally against the ill-fated monetarist prescription of Nobel Laureate Milton Friedman’s Chicago School of Economic thought and the Washington consensus template that fostered neo-liberal hogwash, mish-mash on most of the developing world in Africa and Latin America, with economically devastating and impoverishment-enabling consequences from the 80’s. The New Deal Precedent When the Great Depression hit the United States of America in 1929, as the New York Stock Exchange crashed precipitously on black Thursday October 24, 1929, the American economy suffered severe downturn in money supply needed to buffer and bolster the economy laid prostrate by haemorrhage of accessible capital in the stock market and the economy. The common-sense strategy or response obviously was to bolster money supply or capital adequacy in the economy by fiscal and monetary policies. President Herbert Hoover at the onset of the Great Depression, in tandem with the Federal Reserve, failed to apply the common-sense remedy to the looming ravages of the Great Depression. It was not until Franklin Delano Roosevelt (FDR) was elected President in 1932 that he introduced the New Deal which essentially was a flurry of counter/contra cyclical expansionary fiscal and monetary policies with massive government intervention. This effectively restored by 1941 the Gross Domestic Product (GDP) that had halved from $104billion in 1929 to $53billion in 1933 in current prices, and substantially offered employment by 1936 to six million people out of a quarter of the labour force or thirteen million people who had lost their jobs by 1933. Just like the Central Bank of Nigeria under Governor Sanusi Lamido Sanusi, now Emir of Kano, rescued and bailed out eight deposit money banks both administratively and by infusing recapitalising finance of N620billion during 2008-2010 Great Recession, Franklin Delano Roosevelt New Deal had earlier restored United States financial system by extending government assistance to private banks to reopen five thousand banks that closed with nine million savings account lost during 1929-1933. Many of these banks never reopened. Doubtless, our economic predicament in Nigeria at this point today is dire in many ways akin to the ravages of the Great Depression particularly in the pains of unemployment of our youth and generally emaciated purchasing power. Many Nigerians are indeed living dead economically and daily on the fringe and verge of extinction. Tinubu alluded to this traumatising situation in “The Chance of Prosperity versus Poverty of Austerity”. Olisa Agbakoba in an open letter has urged the President- elect General Muhammadu Buhari to closely examine FDR’s New Deal for adoption, replication, adaptation to the current Nigerian economic situation (Giving Nigeria A New Deal: An Open Letter to the Nigeria President-Elect General Muhammadu Buhari (rtd), THISDAY, Development Law Hub Tuesday, April 28, 2015; page 7). Former Governor of Central Bank Professor Chukwuma Soludo has in various interventions nearly cried himself hoarse on the current deplorable economic situation in our nation and the unenviable trajectory (Buhari Vs Jonathan: Beyond The Election, THISDAY, Wednesday January 28, 2015 pg31-33 and Soludo: Jonathan Missed The Point On Missing N30trillion, The Nation, Tuesday, February 26, 2015 page 38). Government Austerity Panacea In my many published newspapers articles and contributions to the melting pot of policy options in our economy and political economy, I have been positive and complimentary on aspects of Jonathan administration’s policies and actions, most recently in “2015 And Nigeria Political Economy, Guest Columnist, THISDAY, Sunday January 4, 2015”. Commendable progress had been recorded in banking reforms (which had prevented the economy from collapse during 2008/2010), agriculture, trade, industry and investment, road networks nationwide, upgrade of railway network in progress, policy momentum in power sector and energy sector reforms though results have been slow and somewhat discouraging, and some noteworthy achievements in fiscal and monetary policies. However, education, health, social security, citizen empowerment have not been adequately catered for in budgetary allocations, policies or implementation. Unemployment, poverty and citizen discontent are on the upswing while corruption is widespread, and became a consuming monster in our body politic both within and outside of the government. These have not been impressively tackled by the government, our judicial and legal systems and indeed the accomplice citizenry. Very symbolically, by the tail end of Jonathan’s administration and with the collapse of crude oil price from $115 per barrel in June 2014 to below $50 per barrel early 2015 and just mildly receiving to $63 per barrel, Nigeria’s revenue profile nose-dived significantly by nearly 50% since oil revenue constituted about 95% of export earnings and nearly 80% of federation account revenue. However, enormous export crude oil revenue had reached our nation during February 2011 to June 2014 when oil price had topped $100 per barrel. But most Nigerians and foreign observers invariably believe that much of the bounteous inflow had either been diverted or mismanaged, and poverty as well as misery index (inflation and unemployment) had climbed or escalated in our nation despite statistical reports to the contrary. Living standards of Nigerians vastly deteriorated and 71% poverty level looks more believable at $2 per day template with unemployment at 24% of labour force (same unemployment level as during United States Great Depression) but very well above the National Bureau of Statistics (NBS) figure of 54% for youth unemployment. The Central Bank of Nigeria disclosed that 80% of our youths are unemployed (80% Nigerian Youths Are Unemployed - CBN, Punch, Friday, June 6, 2014 page 32). Amazingly, in the above strangulating economy milieu for hapless Nigerians, Jonathan administration went for the jugular and adopted pro-cyclical, austerity prescriptions like cutting federal spending, typically contractional and overall antithetical to both the micro and macro economy and unhelpful to public and social welfare. But are there indeed viable alternatives to the largely austerity policies of the Jonathan administration particularly in the diminished public spending? It is bewildering that IMF does not think so (IMF Recommends Policy Continuity, Subsidy Removal for Nigeria, The Guardian, Sunday, April 26, 2015 pg 61). But others think there are alternative policies. Tinubu had persuasively proposed counter/contra-cyclical, expansionary policies as early as January 29,2015 clearly opposed to both Federal Government and IMF austerity policies, He reiterated this more recently in (Tinubu: APC Govt Will Scrap Austerity Policies, THISDAY, Friday, April 24, 2015 pg. 12). In “Austerity Measures, A Waste Of Time”, Punch, Tuesday February 24. 2015 pg33 Bismarck Rewane of Financial Derivatives Company had dismissed the austerity policies thus: “It is total waste of time. It is not austerity measures that are required, you need a strategic set of tools to help recover to stimulate yourself out of this slowdown and that does not include austerity measures. Austerity measures will come after you have blocked all the leakages. The leakages, the waste and the corruption in the system have to be tackled first before austerity measures you take will have any impacts.” But very respected economist and columnist Dele Sobowale avers otherwise and posits that austerity measures are inevitable for our nation due to the drastic revenue decline (Sunday Vanguard, April 25, 2015 pg. 39). Very correctly, he asserts that President-elect Buhari will however inherit an economy heading for a recession, and most pointedly wrote: “decades of paying lip service to diversification of the economy had produced little by way of exportable products and services”. Sobowale highlighted both our revenue problem and growing debt conundrum, the domestic debt (N8.52trillion) and external debt (N3.55trillion), but he did not quite emphasise the inexplicable depletion of oil revenue accruals occurring over 36 months of oil revenue deluge during February 2011 to June 2014 all during Jonathan Administration. EUROPEAN AUSTERITY VERSUS AMERICAN EXPANSIONISM it is noteworthy that in the wake of the Great Recession of 2008-2010, European Union nations (Eurozone Area) and United States of America adopted diametrically opposite policy options. In the main Eurozone area officially opted for fiscal consolidation and various austerity measures (cut in government spending that augments inadequate private spending) and have seen the worst economic crisis particularly in Spain, Greece among other nations, and even Germany which is Eurozone’s biggest economy and which had adopted fiscal consolidation recently had strident calls to be expansionary. The European Central Bank (ECB) recently adopted quantitative easing and monetary stimulus of $1.2trillion to support Eurozone economy after sacrificing economic growth and after suffering sluggish economy, social frustration and spike in unemployment. In contrast, United States introduced the smallest austerity policy and more monetary stimulus of $3.7trillion in quantitative easing and has had the best economic performance with economic growth, and unemployment currently low at 5.4%. Joseph Stiglitz said it all. (The Politics of Economic Stupidity, BusinessDay, Thursday January 22, 2015, pg 11) and earlier the article ‘U.S Federal Reserve To End Stimulus Programme’ described the efficacy of the American expansionary policy option (The Nation, Monday, November 3, 2014. pg 27). It is apt to emphasise that the IMF and Federal Government have adopted the Eurozone area fiscal consolidation, contractionary, pro-cyclical austerity policy option in our incipient recessionary economy. This policy option had failed in the Eurozone area and promises to fail in the Nigerian economic circumstance. The Achilles heel in an inappropriately implemented counter/contra cyclical expansionary policy menu in a recessionary economy is indeed the spectre of hyper-inflation or “hyperinflation scare” according to Tinubu. In our situation in Nigeria, the immediate road block to expansion is the dwindled revenue base in petrodollars inflows and the yet insignificant, non-compensating, non-oil resource base.

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