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Thursday, June 11, 2020

ECONOMICS 101: UNDERSTANDING NIGERIA'S ECONOMY


ECONOMICS 101: UNDERSTANDING NIGERIA'S ECONOMY
By Steven Atogi

Your traditional economic  textbooks from Secondary School to Tertiary level must have told you fancy stories of economic systems; capitalism, socialism, communalism, mixed economy. If I'm to ask what what type of economic system Nigeria is practicing, most of you textbook learned folk would say, Capitalism, or Mixed Economy, or more fanciful term like “free market economy.” If you believe any of those terms then you are not in tune with the realities of the Nigerian economy.

                                  Flashback

Let's flashback to colonialism, that was less than 70years ago. How was the colonial economy structured in Nigeria? How did growth flow? First, it was structured to feed the metropole (Britain). Priority was given to specific goods to be produced and services that facilitates the production of those goods and infrastructure which supported the effective transportation of those special goods to the metropole. Cocoa, Rubber,Timber, Palm Oil, Groundnut, Cashew, and other cash crops were instructed to be cultivated, promoted and prioritized. Prices were as well fixed by colonial officials. The price–as raw produce and finished goods–was fixed by the colonial institution, so at what price the Nigerian farmer sells his produce and what price he buys finished goods (like chocolate from his Cocoa) was determined by one factor; the colonialist.

This metropole-periphery economic structure saw to the advancement of the colonialists' home country than the colony. Hence, the life of the average citizen and Middle Class in the metropole improved considerably well than that of the average farmer in the colony. During colonialism, this system of unequal exchange was seen as fair by the colonialist, while swinging a whip, gun in another hand and tobacco hanging on his mouth. But, it was condemnable, and Nigeria's educated class spoke against it. The case was the same for the entire continental Africa. Who thought good fortune could come from the 1941-45 European War, a lot of the African people observed, experienced and understood differently to pushed for independence after fighting the colonialists' war.


Fast forward to the present. So many textbooks by capitalist scholars will poke at the then USSR and China and call them “Command Economies,” because they were communists or socialists. Now, don't get me wrong, I'm no Communist or Socialist. But, how the colonial economic system was structured is a typical example of “Command Economy.” Else, how do you explain to millions of Congolese that King Leopold of Belgium amputated for not meeting their daily rubber quota as he had COMMANDed?

Back to Nigeria. We are talking about what economic system Nigeria is practicing. So what do we practice in Nigeria? Simple. Nigeria practices a “Command Economy,” certainly not a free market economy as many are wont to believe. It is in Nigeria that an entrepreneur will get into business in the morning, go to bed in the night after work, just to wake up the next morning and found out he doesn't have a business to run anymore.

It is command economics, that sectors of the economy can be monopolized to certain individuals and no competition by new entrants whatsoever is encouraged or tolerated. Due to nepotism, favouritism, identity politics and who-you-know, SMEs are killed by government policy somersaults, just so specific few can monopolize the market. Oride and Gokada in Lagos are an example. Government banned them and within a month licensed a single person (with newly registered company) to operate the same business model as introduced by Oride and Gokada.

That is one scenario, but we are familiar with this type of scenarios at Federal, State and Local Government levels. In some local government areas, private transport companies are not permitted to operate except the one poorly managed by the local council. Examples are replete in the Nigerian economy. Command Economy.

The Irony.

Ironically, it is the same government that preaches entrepreneurship and self-reliance like a sacred sermon at every opportunity. Nigeria practices a command economy and contradicts itself with unpredictable penchant for policy somersaults. Sending many SMEs to early grave. As an entrepreneur, you must acknowledge the reality of Nigeria's economic practices and invest accordingly. It's like a tide that rises to swallow lower waves. An entrepreneur has to provide electricity, transportation and logistics, pay salaries to employees, and other expenses in running the business, and pay taxes (legal and illegal). However, a policy can be implemented the next day and all the entrepreneur will count are losses.


It is command economics you see in action as border closure, arbitrary VAT increment and other taxes. The government talk about cashless policy through the CBN but is taxing online bank transactions with apps, termed “Stamp Duty ” Beat that. Business-friendly countries all over the world are implementing post COVID-19 economic resurgence plans, giving tax-paying businesses credit to resuscitate. You won't see such in Nigeria. The government can only give tax-breaks to those few who fit in the portfolio of the monopolists.

It is command economics that keeps Nigeria on a regression path than progress and growth. Command economics, as the term is often used for socialists economies seem to indicate a certain limitation to economic progress and prosperity compared to free market economies. But the communists and socialists even believe in the progress of their countries, unlike Nigeria who practices a stringent command economy without envisaging progress or prosperity.

It is indeed a difficult turf for entrepreneurs in this clime. The secret, however, as an entrepreneur, is to know, acknowledge the reality of the command economy and use that knowledge strategically, else your business may be caught up in the silliness of mad command economics.

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