The decision of the government to end the restriction of forty-three items from accessing foreign exchange at the “official” rate is welcome and must be fully supported. This is imperative as a vigorous counter-attack has already been mounted by those who benefitted from the arbitrage obtained through the ill-advised policy. The ban resulted in the expansion of the black market or its alternative. Rent seekers steered the official rates into the black market, where a host of willing purchasers had lined up. With arbitrage hovering around 23 per cent, it was Christmas come early for the rent seekers. In contradistinction, we the consumers got fleeced and the economy was put in total disequilibrium. The fundamental misunderstanding of our market was as pathetic as it was laughable. It was a tragedy foretold that must never be allowed to happen again!Thank you for reading this post, don't forget to subscribe!
A crucial issue is the way in which the protection of “infant industries” was used to defraud the public and deny the government of revenue. No industry can be an infant forever. Such a format will never lead to the competitiveness needed to transform national champions into internationally competitive, export-oriented industries. In this era of “export or perish,” the country will suffer from double jeopardy and the ability to solve the balance of payments crisis negated. The “infant industry” protectionism was self-serving and at variance with commonsense. The sensible way is to use tariffs as a mechanism to protect industries, transit them into international competitiveness and at the same time protect the interest of the consumer.
In Nigeria, protectionism has been a mechanism used to fleece the consumer and obtain favours from the government. This cannot be the way to become an export-oriented economy. The cocooned oligarchs are fighting back but the president must be unyielding. His historic mission must be to move Nigeria from the perennial boom to bust cycle into sustainable development based on production, with which we can develop the economies of scale to transit Nigerian industries into international competitiveness. This is the way to achieve shared prosperity, a balanced economy, and make “life more abundant.”
Through an Executive Order, the President may wish to set up a Board of Trade encompassing the government, labour, and the private sector to carry out reforms in the tariff and trade system, to protect consumers and local industries, at the same time, from unfair competition and dumping. Brazil, Malaysia, etc. have shown that you can become competitive without protections.
Mr President may wish to designate a “junior Minister in the ministry of trade and industry” to be specifically in charge of international trade. It will be like the game changing Japan MITI (Ministry of International Trade), which coordinates the country’s exports and which was instrumental in delivering a very successful export-oriented economy. In addition to this, such a post will be like a colonial era type President of the Board of Trade who is coordinating exports, as well as the streamlining of tariffs for the enablement of local producers, as they transit into competitiveness. Through an Executive Order, the President may wish to set up a Board of Trade encompassing the government, labour, and the private sector to carry out reforms in the tariff and trade system, to protect consumers and local industries, at the same time, from unfair competition and dumping. Brazil, Malaysia, etc. have shown that you can become competitive without protections. This is a feasible way of increasing production in an interwoven policy thrust with the construction of rural roads, increase in the supply of electricity, and ensuring the ease of doing business. It is not yet Uhuru and there is still a long way to go. Nevertheless, let us thank the government for a much-needed reboot. The key is to transform local industry into international competitiveness; this is the way to become an export-led economy.
We must also note and accept that our present political economy is a problem. Before the truncation of the 1960 and the 1963 constitutional arrangements, Nigeria was export-oriented and it deployed a competitive federalism and “eat what you kill” framework. The Western Region, for example, pre-1966, had an Agent General in London who was a Minister of exports. It worked very well, with the regional government owning warehouses and commodity brokerage institutions abroad. Brazil transmuted from the primary export of raw cocoa and soya into becoming a value added manufacturer of cocoa and soya products, without banning imports. It utilised tariffs and built-up internal capital and technical capacity. Today, Brazil is a major exporter of chocolate and soy milk. The key issue is how to become competitive without employing destructive bans, which only serve the self-interest of a few. I hope the President stays the course and does not bow to pressure on this.
Bámidélé Adémólá-Olátéjú, an advocate, strategist and political analyst, is Commissioner for Information in Ondo State. Twitter: @BamideleUpfront; Facebook: facebook.com/Bamidele. BAO