Nigeria: Buharinomics – halfway measures can’t solve the crisis

As the third wave of global crisis of capitalism is approaching – the first and second waves being respectively the sub-prime housing and European sovereign debt crises – the so-called emerging and developing economies are entering deeper into economic, political and economic crisis. Nigeria connects to this global crisis through the mechanism of the global crude oil glut and collapsing commodity prices.

This is not surprising given the fact that the country, which imports everything including matchsticks, is heavily dependent (more than 80%) on a single commodity (crude oil) for its hard currency. Additionally, the government, which happens to be the largest employer of labour due to the underdeveloped private sector, is equally heavily dependent (more than 90%) on the same commodity for its revenue. Now the revised GDP figures have revealed the oil sector contributing just 11% of total economic output. As a result of this, because of the over-reliance on imports by both consumers and businesses and a sole source of hard currency (US dollars), the fall in crude oil prices has thrown the country into an epic crisis.

In what appears to be an accidental coincidence, but which in reality expresses an underlying necessity, the economic crisis comes with a rapidly maturing social crisis such as the Boko Haram Islamist insurgency which has demystified the image of the standing army, splitting it along class lines (between the top army chiefs and rank and file soldiers who have been involved in open mutinies).

The struggle between the classes in society has continued to develop by leaps and bounds with the historic January 2012 uprising triggered by the removal of the fuel subsidy and the rise of self-defence committees of workers and youth against Boko Haram being particularly prominent.

Politically, the main bourgeois party at that time, the PDP, became the main target of the angry workers and youth. Unfortunately, due to the criminal negligence of the labour leaders who refused to build a working class alternative, this anger and revolt of the masses could not find an organised political outlet.

In stepped the more far-sighted bourgeoisie and their imperialist-backed masters who filled this vacuum with the Buhari/APC deceit. As we have explained several times before, these were the objective and subjective reasons for the emergence and consolidation of the APC/Buhari illusion in the minds of even some advanced layers of workers and youth, which enabled the rise of the current ruling APC.

Since the victory of the APC, events have served to a more or less rapid clearance of the illusion of the masses. This is just six months into APC rule and further clarification on the basis of events will lead to a greater and qualitative development in the consciousness of the masses. Six months into its rule the APC does not have a roadmap out of the crisis. There actually is no genuine solution on the basis of capitalism. Any solution to the economic crisis on a capitalist basis will lead to an intensification of the political crisis in the form of a fierce working class response. The confusion and paralysis afflicting the ruling elite is reflected in a division at the top, not on whether the living standards of the masses should be attacked but at what pace this should be done.

Reflecting this intra-class bourgeois division is a paper delivered recently by Professor Soludo, a former governor of the Central Bank of Nigeria. In his paper he analyses the policy direction of the Buhari government in such matters as the rigid foreign exchange rate, import controls and the merging of various government accounts into one single account (the so-called Treasury Single Account, TSA). The current regime has pursued these measures in an attempt to control capital flows, import trade and government expenditure.

The professor sees a parallel between Buhari's current policies and what he did during his short military reign in the early 1980s. For the professor this apparent reappearance of the past is a mere reflection of an unchanging personal disposition of the former dictator. The professor actually takes his unscientific idealist approach even further, attributing this reappearance of the past as a divine plan.

He said, “...From the snippets of policy since the new government came, there is a growing perception of nostalgia, reminiscing of the ‘old good days’ pre-1986. There seems to be a growing tension between a tendency to return to the past versus a progressive match to the future. I am not sure how the new wine will fit into the old bottle... There must be something in PMB’s natal chart that keeps bringing him back to power as oil prices collapse and the economy/country is in crisis. After his first stint 30 years ago, I believe God has given him a second chance to correct the economic ‘mistakes’ of his first coming and perhaps finally lay the foundation for a truly great country. For me, the ‘mistake’ to correct is to abandon or reform the ‘old Buharinomics’ of command and control economic system. Times have changed, and Nigerian economy is different. Every leader in the world is also adapting to the changing world. Countries such as India, China, Russia, etc. are fast learners and trying to beat everyone to the ‘game’. We must pragmatically play this ‘game’.” (Chukwuma Charles Soludo, November 21, 2015, See Avoiding the Mistakes of the “Old” Buharinomics)

The professor needs to be reminded that the re-emergence of old Buharinomics, just like the re-emergence of Keynesianism in much of the West, has objective reasons independent of whether Buhari the person has changed or not. A government heading an import- and mono-commodity-dependent economy in an era of collapsing global commodity prices and haemorrhaging external reserves under the combined effects of speculative attacks on the local currency and unbridled corruption and facing an impending revolutionary upheaval from below, would be compelled to carry out policies similar to Buhari's.

Of course the bourgeois professor does recognise this fact but he is concerned that such measures may become permanent under Buhari whereas he is of the opinion that they should be temporary. Well, we have news for the professor: this crisis in unlike any in the history of capitalism globally and in Nigeria. The Shale Oil Revolution is a permanent shock to the global crude oil markets independent of the current crisis of overproduction.

What Exactly is Professor Soludo Criticising?

Professor Soludo correctly points to the fact that the policy initiatives of the Buhari government cannot solve the fundamental crisis Nigeria is passing through and that such policy initiatives will actually sooner or later exacerbate the crisis. The regime of fixed nominal exchange rates will not stop the real exchange rate from allocating capital and investment. A sense that the Naira is overvalued will stimulate capital outflow and prevent inflows as is currently happening and as is reflected in JP Morgan's delisting of Nigeria's currency from its index. Foreign exchange controls through import bans will also hurt local businesses heavily dependent on imported spare parts and raw materials. This in turn will lead to job losses. The Treasury Single Account (TSA) will lead to a drying up of liquidity hurting banks and bank jobs. And then there is the fundamental question of how to pay for ambitious social welfare programmes and sustain the fuel subsidy.

However, what is the professor’s alternative policy prescription? It is interesting to note that with the exception of social welfare programmes, including the fuel subsidy, Soludo agrees that he would do exactly the same thing, i.e. he would institute a regime of capital and foreign exchange controls, but would additionally engage in deceptive pronouncements such as the “independence of the central bank”, “the transitory character of the controls”, etc. One can draw this conclusion from the fact that Soludo has admitted the need to implement some of the initiatives but only as short-term measures. The professor's main concern is that under Buhari such measures are communicated wrongly as “presidential directives” undermining the Central Bank's autonomy and additionally that such measures have a tendency to assume a permanent character. In the final analysis, professor Soludo is attacking the fuel subsidy (which Buhari is reluctant to remove) and the non-existent social welfare programme promised by the APC!

The Basis of the Disagreement between Buhari and Soludo

If the crisis afflicting Nigeria were purely economic and independent of other social issues, then Soludo would be absolutely correct. That is, government intervention should be geared towards asking the workers and poor to pay for the crisis through the removal of the fuel subsidy, a wage freeze, the devaluation of the currency and helping private businesses reap more profits. This is the “socialism for the rich” which has been implemented in the United States, Europe and elsewhere since the onset of the global crisis of capitalism. Unfortunately for Soludo the Nigerian workers and poor will not sit back and watch their living standards being mercilessly attacked. No working class will. Such an attack will trigger a working class revolt. Buhari is acutely aware of this fact which Soludo naively wishes away by thinking the president has the moral authority to prevent such a storm.

Thus, Buhari opted for an attempt to reconcile the interests of the bourgeoisie and those of the working masses. But here Buhari is equally naïve, as he ignores the fact that capitalism has its own laws and logic to which it subordinates even the most idealistic of people. The private sector cannot be legislated into submission and the storm of class struggle will break through any artificial truce. As we, the Marxists, have repeatedly pointed out, Professor Soludo has explained how such policies aimed at avoiding a direct clash between the classes are economically illogical. It appears that both the Marxists and the learned Professor have arrived at the same conclusions, although from opposite class points of view.

Professor Soludo and his Statistical Abstractions

“You can't argue with statistics” the professor proudly asserts. We agree, but that doesn't mean we cannot interpret them and explain what they truly measure and what they do not. Using his statistical logic, he attempts not only to show how the cumulative 16 years of PDP [1999-2015] represented not a rot but a progress but that even the SAP years [starting in 1986] were a progress in terms of output, employment, poverty and inflation. It is not a cruel joke: he actually means it. He compares not only different periods in Nigeria's history but different countries as well, arriving at a conclusion that those countries with “neoliberal” macroeconomic policies have better outcomes when it comes to the objectives of job creation, output and inflation. Of course he admitted that reality is much more complicated.

What this ideologist of capital is saying is that capitalism can get itself out of crisis faster the more aggressive it destroys the living standards of workers. In other words, the greater share of surplus value capitalists appropriate from the working class the faster and more robust the recovery from the crisis. Marx and Engels long ago wrote about this, explaining that capitalism develops on the blood and tears of the working class. But this is why we have the struggle between classes. The Marxist logic is that humanity can permanently put an end to this unending cycle of misery, even more so because capitalism, independent of its repeated cycles of crises, is now an absolute fetter to the development of modern productive forces.

Soludo’s statistical logic is that workers should allow themselves to be sacrificed in the interest of and as a sign of gratitude to capital. It is like telling the British workers that since capitalism had historically raised the standards of living of society above what was obtainable under feudalism or above one “socialist” state they should now just accept wage cuts and austerity. Professor Soludo forgets that any time capitalism attempts to get out of a crisis by asking the working and poor masses to pay, the class question becomes more pronounced. As “neoliberal” policies are pushed through a fierce battle between classes ensues.

So professor Soludo's statistics do not tell us the story of the battle between the classes which is the context in which such “successful” neoliberal policies are implemented. What is equally not mentioned is that the working and poor masses are being forced to pay for the crisis they didn't create. As Marxists we know that it doesn't have to be this way. The crisis can and should be solved by asking those who created it in the first place to pay for it through a socialist reconstruction of society.

New Buharinomics versus Marxism

Professor Soludo presents himself as an objective analyst detached not only from partisanship but from class struggle as well. But is he? This is what he says with regards to the last three decades of our economic history: “...under the structural adjustment programme (SAP)... Nigeria began the journey to a modern market economy. Of course, the journey has been chequered, and naturally is still a work in progress. Since 1986, Nigerian economy has changed a lot and my reading is that there is a broad consensus on continuing progress towards a competitive (probably also compassionate) market economy framework."

So for this bourgeois ideologist the last 30 years including the years of SAP are a story of so much progress that there is a consensus to continue in the same direction and with the same policy thrust. Of course he means progress for his class and a consensus reached by members of his class. For the working and poor masses, SAP and subsequent years are a story of deindustrialisation, massive decay in infrastructure, rotting education and health systems and unrelenting attacks on living standards. This brings into a sharp focus the class perspective from which the professor gives his lecture.

Even from his bourgeois perspective, Soludo has correctly diagnosed Buhari's limits. The President has a narrow conception of the economic crisis treating it more like a big accounting crisis with variables such as income and expenditure. This fits the President's narrow conception of corruption in the land. For the President, accounting and bureaucratic manoeuvres are enough to solve the crisis and avoid a clash between the classes. Soludo correctly exposes the naivety of this thinking. He of course admits the existence of market failure and the need of state intervention to check speculative attacks on currency and official corruption. However, he differs with the President on what words to use while doing the same thing; to avoid the expression “directing CBN” while actually doing so and to claim the measures are temporary even when they are permanent. In other words, Soludo simply displays a greater mastery of the art of bourgeois deception.

Apart from this, Soludo's new Buharinomics will complement the statist measures with decisive attacks on the living conditions of the masses: the removal of the fuel subsidy, suspension of other social welfare programmes, a wage freeze, greater tolerance of inflation, etc. We agree with the bourgeois professor on one thing. The only way out of the crisis on the basis of capitalism is to ask the working and poor masses to pay for it and force them to accept a deterioration of their living standards. The professor has statistics to back this claim.

In essence, Professor Soludo has reminded the Buhari regime that you can only control what you own, either directly or indirectly. The Nigerian economy is in the hands of a few fat cats, the so called oil and gas tycoons, the Dangotes and their related oligarchs. It is naïve and childish to attempt to manage profit-seeking owners of the economy without expropriating them. All attempts to stabilise politics will lead immediately to instability in the economy and vice-versa.

Everything points to a turbulent period ahead, these successions of one form of instability and others will continue unabated until the revolutionary class, that is the working class, expropriates the fats cats that currently own and control the economy, and put these resources to use in the interest of the people instead of profit.

The Professor observes that painful sacrifices have to be made to finally come out of the crisis. But we would argue that those to be sacrificed should not be the hardworking masses but the fat government officials and their friends in business. There is a huge need for resources to develop the infrastructure, agriculture and industry (including the refineries) as well as raise workers' productivity through quality and free education and health. We do not need political office holders and bureaucrats on fat salaries and allowances. What we need to finance the necessary reforms is the nationalisation of the commanding heights of the economy under the democratic control and management of those who actually produce all the wealth in society, i.e. the working class.