DEMYSTIFYING NIGERIA’S ECONOMIC CRISIS: A Socialist Solution
DEMYSTIFYING NIGERIA’S ECONOMIC CRISIS: A Socialist Solution
By Kola Ibrahim
That Nigeria is in economic recession is no more news. All indices of economic measurement are in the negatives. GDP growth has worsened from -0.3% in the first quarter of 2016 to -2.06 percent in the second quarter, while unemployment has risen by 4.6 million since Buhari assumed power. Inflation has risen to 17.6 percent in August 2016 as against 15.5 percent in June. At the same time, naira has lost about 60 percent of its official value, rising to as much as N315 to a dollar in October, as against N197/dollar some 6 months ago. In the parallel market, which is more accessible than the official window, a dollar sells for as much as close to N500. Furthermore government’s oil and non-oil revenue has nosedived seriously, basically due to fall in crude oil price and the activity of Niger delta militants that have led to a crude oil production shortfall of over 1 million. The devaluation of naira has also led to higher cost of production, which has affected government revenue from the non-oil sector.
Consequent upon these realities, various solutions have been propounded by various pundits. Many of these solutions are still situated within the capitalist system whereby private sector is touted as the messiah of the country. The federal government on its part is using the economic crisis to further drive down more anti-people and neo-liberal capitalist policies. For instance, under the guise of saving money, petrol price was hiked by 67% in May this year, while prices of other fuel like diesel, kerosene, domestic gas have increased by an average of 45%. This is despite the fact that over 3 million workers and pensioners are owed salaries and pension arrears in 27 states across the country. The so-called money meant to be saved from fuel price increase will be lost in multiple as cost of production increases leading to more job losses, low purchasing power and lower revenue. Furthermore, the government is proposing sale of public assets and enterprises as a means of funding the budget.
‘WE ARE ALL GUILTY’
Some pundits, especially from supporters of the ruling party, believe that it is the corrupt tendencies of all citizens that has pushed us into the economic crisis. We are told that we are reaping the fruit of our economic waywardness. We are told that we have been living on a fake economy since, and the current government has only come to liberate us. However, this is a tool in the hand of the real looters of the country’s to divert attention away from the real culprit in the current economic crisis. An average working class person has gained little or nothing from the so-called fake economy or economic boom of the past. Indeed, working and poor people have been used as tools of the ruling elite and capitalist class to make more profits.
The minimum wage enacted into law in April 2011 was hardly implemented by state and federal governments, and private sector, yet by the first month of 2012, the Jonathan government had increased fuel price by 50 percent (from N65 to N97), thus making mess of the N18, 000 minimum wage. Even the N18, 000 minimum wage, without increase in fuel price, could hardly meet the needs of an average worker. Unfortunately, Buhari government has further increased the fuel price by 67% to N145. On the other hand, less than 18, 000 political office holders (0.011% of the total population) are earning about N1.3 trillion annually as emoluments, which is about 10 percent of the total national budgets of all tiers of government in 2014. Interestingly, despite cosmetic reform of the Buhari government, humongous amount is still spent on political officers.
In fact, between year 2000 and 2015, Nigeria’s dollar millionaire population increased from 5,000 to 15, 400 (0.0091% of total population), while poverty rate increased from about 54% to over 70% within the same period. Within the same period that the rich class not only increased in number but also in value, government’s policies created emergency billionaires. For instance, aside the humongous emoluments of politicians, this period also witnessed government’s handouts to big businesses through privatization and commercialization, over N2.5 trillion-worth bank bailout in 2010, N1.5 trillion looted through fuel subsidy under Jonathan, over N1.5 trillion-worth of waivers to big businesses, issuance of costly treasury bills, among several others. It is therefore obvious that while majority of the working people fell into the pit of poverty, public resources were used to make the handful rich richer. Therefore, it is a miscarriage of reality to claim that all Nigerians, including the working and poor people, contributed to the current economic crisis, by their lifestyles.
PRIVATE INVESTORS AS SAVIOURS
Some other pundits have been proposing that government hands off the economy, including defence of naira value, and encourage the private sector, through government’s support, to run the economy. The reality however is that Nigeria’s capitalist class otherwise referred to as private investors will only commit their funds where it is safe for them to make quick profits or when the state use public resources to insure or sustain their profits. In either case, the country suffers. For instance, it took several years of government handouts to Dangote, through privatization of nation’s cement companies at rock-bottom prices, creation of virtual cement importation monopoly, etc. before the businessman built the biggest cement factories. Yet, despite the country having full capacity for cement production, Nigeria’s cement price is one of the costliest in the world, while the country has a shortage of over 15 million houses. Also, the nation’s electricity sector has been privatized for the past 3 years, yet there is no improvement in generation or supply, despite increase in electricity tariffs of more than 200% since then. In fact, things have worsened. Electricity facilities and infrastructures have received little improvement, as more capable hands, trained with public resources, have been lost through massive retrenchment by the private investors. Moreover, many of the workers have been turned into casuals.
If the private sector is actually interested in genuine development of the country, $20 billion will not be held in private domiciliary accounts of billionaires while the country’s currency continue to lose value. With trillions of naira in bank vaults, several billions of dollars of profits made by big businesses and a rapidly growing population, Nigeria should be an el dorado of economic development. But the capitalist classes, either in Nigeria, New York or London are not interested in any long term development, but more and more concentrate on their short-term private profit making interests. Worldwide there is a fall in investment as the capitalists have lost confidence in the future. Consequently, it will be sheer illusion to expect the same private sector who gained from the policies that ruined the economy to be the solution to the ruination. Even cutting costs of governance as some people, like former governor of Anambra State, Peter Obi, suggested, without using it to directly invest in social and public infrastructure through direct public work programme will only lead to siphoning of the saved money by big businesses and politicians.
RECESSION AS A CAPITALISTS’ HORSEWHIP
Socialists maintain that aside the economic recession being caused by the capitalist system, it is also a potent tool for the rich class to drive down living standard of the majority in order to guarantee super wealth for the rich few and big businesses. While several millions of workers are losing jobs, having their salaries unpaid or being unable to meet their basic needs, the politicians in power still maintain their ostentatious lifestyles. The frugal President Buhari was reported by his media aide to have spent ‘only’ N20 million to treat ear infection in Britain, meanwhile power supply to University of Calabar Teaching Hospital (UCTH) was cut off by Port Harcourt Electricity Distribution Company (PHEDC) because of N32 million debt, leading to death of at least five patients, according to the Chief Medical director of the hospital.
While the private sector employers use the tool of economic recession to sack workers or drive down wages, the emolument of top managers and owners have not stopped, neither has this stopped them from making huge profits. Some months ago, the manager of Abuja Electricity Distribution Company (AEDC) was reported to be earning monthly over N30 million; meanwhile several staffs of the same company have been sacked or turned to casual workers, with slave wages. In the first quarter of 2016, thirteen out of the fifteen banks listed on the stock exchange gained N116.6 billion as profit after tax (PAT) (Punch, 18/07/2016). While this is a drop of about N10 billion (8.4 percent), when compared to PAT in the first quarter of 2015, it is still a huge sum; yet, the banks are sacking thousands of their staff while cutting the salaries of remaining workers. This shows that the working class is being made as scapegoats and canon fodders of the economic crisis caused by all sections of the capitalist class.
PUBLIC CONTROL OF ECONOMIC MAINSTAY
While we agree that the mismanagement of the economy under Jonathan government, coupled with the fall in crude oil price, affected the revenue of the Buhari government, we maintain that by taking revolutionary steps in the economic, social and political structures of the country, this can easily be surmounted. For instance, instead of getting bogged down with unproductive debate on whether naira should be devalued or not, the real question is how can Nigeria break from the grip of the capitalist dominated world economy? In a situation where the leaders and strategists of the imperialist countries currently have no confidence in capitalist economy’s future, this question is sharply posed. A state monopoly of foreign trade, openly run under democratic control to prevent import license rackets etc., would allow a government representing the workers and poor of Nigeria to begin to reorganize the economy and the use of the country’s resources in the interests of the majority. The government can take bold step to nationalize the banking sector, which will liberate trillions of naira and billions of dollars in bank vaults, which are hidden by the rich class. For instance, government can utilize over $20 billion in private accounts of billionaires to resolve the foreign exchange issues. With nationalization of banks, government can start to plan on how to finance various developmental projects such as giving cheap or interest free loans to small farmers’ cooperatives and supporting them with equipment, inputs, and extension services. This coupled with the establishment of big state farms across the country will not only provide millions of productive jobs, but will also make the country self-sufficient in food production, while laying basis for industrial development. It will also reduce pressure on the currency.
Furthermore, a socialist government will take control of strategic sectors of the economy which are currently under private hands. For instance, by putting the iron and steel industry under public ownership and democratic management, it can be possible to plan how to utilize the resources to develop our infrastructures and technological sector. All the major iron, steel and machinery industries, established by the state in the last three to four decades have been privatized, yet virtually all of them are comatose. For instance, by renationalizing and refurbishing the Osogbo Machine Tools, and iron and steel companies in the country, it can be possible to provide adequate agricultural equipment for the agricultural sector, and machineries for the textile industry. We can also use products of our iron and steel industries to expand on a large scale the rail sector. None of this can be done when these sectors are in the hands of big businesses, whose only aim is profit maximization. Also, by renationalizing the electricity sector, we can plan on how to expand electricity within the possible shortest time. For more than three years after privatization of the electricity distribution and generation companies, there has not been any serious investment in expansion of electricity infrastructures by the private investors, despite increasing the tariffs on three occasions. It further underscores the fact that only state direct role in the economy can ensure sustainable development.
Moreover, by embarking on refurbishing and expansion of state refineries and building massive storage and distribution facilities for fuel and gas, the country would be on the road to being self-sufficient in local production of fuel by now. But the Buhari government still believes in the old and ruinous policy of handing over the oil and gas sector to private hands. The government also seems to be relying on the private oil refinery being built by businessman, Aliko Dangote, which when completed has the capacity to refine greater percentage of Nigeria’s oil. But a serious and pro-people government cannot be relying on private ownership of a strategic sector of the economy for the country to develop. Aside holding the country to ransome the same way the oil importers had done so far, the Dangote refinery will not provide the needed succor for the mass of people in terms of providing cheap fuel. Dangote himself affirmed that he would only sell at international price; more so that a significant part of the fund used in building the refinery was procured through bank loans that would have to be factored into cost of fuel.
MASSIVE SOCIAL INVESTMENT
In addition, by massively investing in and expanding infrastructures and social services, government would be enforcing genuine counter-cyclical programme that will reverse the austerity programme of the past. For instance, if more schools and hospitals are renovated and rebuilt at all levels and mass water supply programme along with mass housing projects are undertaken, it will lead to massive provision of decent jobs for millions while also improving living standard. Unfortunately, the so-called ‘expansionary’ budget of Buhari government contains some of the worst provisions for education and healthcare. Just 3.65% of the budget is for health as against expected 15% recommended by Maputo protocol; while less than 10% of what teaching hospitals needed to operate is given to them (Punch, 20/02/2016). This will mean further commercialization of health, collapse of health facilities, inadequate medical staff and expected industrial crisis. Also, “the total capital appropriation to each of the federal ministry of education headquarters and 19 federal secondary schools is more than the capital vote of the 39 federal universities, 24 polytechnics and 21 colleges of education” (Thisday, 24/03/2016).
Currently, over 3 million workers and pensioners under the employment of state governments are owed salaries for at least three months. Of course, the federal government gave a bailout of over N300 billion to state to pay salaries, but this seems more like a Greek gift, as the so-called bailout is a loan with 9 percent interest. This means that in the next ten to eleven years, states will be paying 100 percent of the loans as interests. This loan burden will surely be carried by the working people and youth. A Socialist government will not see salary issue as problem of the states, but a fundamental issue of economic development. All salaries will not only be paid, but government will also raise minimum wage to meet economic indices. Aside ensuring full payment of salaries, government will abolish fees in all government schools and hospitals, and releasing shortfall fund to cover for this. By this action, the government will not only be reversing the impact of the economic crisis, but will also raise purchasing power of several millions of working people, and by that also reduce poverty and want.
WHERE WILL THE MONEY COME FROM?
By raising taxes on properties of the rich few, government can recoup several billions of dollars to state coffer. Between year 2000 and 2015, the number of dollar millionaires increased from 5,000 to 15,400. In the same period, poverty increased from around 50 percent to 70 percent while unemployment also increased drastically. The richest 10 Nigerians are reportedly worth more than N7.2 trillion, which is more than the federal budget for 2016. Clearly, the rich class can only get rich in the midst of extensive poverty by amassing what belongs to the majority. We do not need to go too far to see this. In major cities like Abuja, Lagos, Port Harcourt, etc., several exotic mansions owned by the rich people are lying fallow and unused, while the number of private jets in Nigeria is more than commercial jets. If someone has hundreds of millions to build mansion where he/she will not live in, taxing such property heavily should not be a crime. Also, by placing politicians on average salaries of civil servants and reducing the bogus political appointees, over N1.3 trillion currently spent on emoluments of less than 18, 000 political officers can be reduced by more than half, which can then be used to fund social services.
Therefore, Nigeria can raise trillions of naira to initially fund social services and programmes by taxing the rich and cancelling most of the national debts which is possible by the nationalization of banks under democratic control and management of workers and consumers. But it will take a government of the working people with a socialist program to do this and to build the economy that can take the country out of poverty and darkness. The same people who constitute the rich class are the same people in political power. Labour should begin the process of building a new political party with full democratic tenets and socialist ideology while at the same time, mobilize mass resistance against any attempt to make workers and the poor masses bear the burden of capitalist crisis.