Jeff D. Sachs and Nigeria
Professor Jeffery D. Sachs had a chat with President Jonathan and encouraged him to remove petrol subsidy. There will be short term pains which we will have to bear for long term gains. Nice!
The UN issued a press statement that Jeff D. Sachs did not represent the stance of the UN but his personal opinion. This was made after the protests started in Nigeria. Would they have done this if the subsidy removal had gone down well with Nigerians? One can only conjecture.
Jeff Sachs is an American and well respected in developmental economics. It is my own opinion (since everyone has an opinion nowadays) that he does not have any moral justification to tell us to bear short term pains when they (Americans) are not ready to do the same.
During the 2008 crises, the Americans bailed out certain distressed banks. They also came around to applaud us when we also bailed out some of our banks through AMCON. If they had pointed accusing fingers at us for flagrantly spending three trillion Naira to prop up mismanaged banks, they would have indirectly indicted themselves. This action has led to galloping inflation in the face of crunching economic hardship. We are still grappling with its after effects. We sincerely hope that this does not degenerate into stagflation in the coming months since the “very stable banks” have refused to lend to out to poor Nigerians who are generally not creditworthy. This is not surprising since most Nigerians earn $730 per annum while our GDP per capita stands at $1,222 (a stark example of economic inequality) where the FG is foot-dragging to implement a minimum wage of $1,350 per annum.
It cannot be denied that the fact the US Government bailed out some banks show that subsidy is relevant even in advanced economies. According to Merriam Webster dictionary subsidy can be defined as a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public. it looks like modern economists justify the bail outs (or subsidization) of corporate behemoths with vigor and wield the big stick when it involves the masses. It is also a fact that the Federal Reserve decision to embark on two rounds of quantitative easing and keeping interest rates at zero was for the benefit of the rich and not the poor American who lost their house in the real estate bubble. It is totally unacceptable to me that an American, whose government’s debt is 100% of its GDP and could have defaulted if it had not raised its debt ceiling in August 2011 and got its debt rating downgraded, would have the guts to come and tell my government, whose total debt to GDP ratio is 25% and have no issues servicing its debt and got its debt outlook rating upgraded from negative to stable, to make some hard choices. No! It is not acceptable, not to me.
We Nigerians are not dumb. We know all the benefits of subsidy removal but we want our government to reduce wastage and corruption before asking us to make any sacrifice. We have sacrificed enough already and we are tired of subsidizing our government. Sanusi L. Sanusi, the CBN chief told us that inflation would rise to 15%. My Governor is being clever by half. My cost of living just doubled, sir! And I would be pleasantly surprised if inflation is anything below 20% in the coming months if the price hike of fuel is not reversed. A bag of pure water that used to cost N80 now goes for N150. I needed N260 to fill my I-beta-pass-my-neighbor so I can sleep well at night but now I need N565 every night to sleep well. A kilo of turkey that used to cost N650 now sells for N1,100 and a ration of tomatoes rose from N50 to N100 and has forced my wife to cut my food ration by half. I don’t blame her. I blame Prof Sachs for advising my government wrongly. I smiled when my CBN Governor said he knows how to tackle the likely jump in inflation rate. Going by his antecedents, he will probably carry out open market operations, which will drive short term interest rates through the roof, crowd out private borrowers and worsen the already inverted yield curve. Then the consuming power of Nigerians will drop because of zero access to credit. I think Prof Sachs should relocate to Nigeria with his family and start earning in Naira.
We, Nigerians, will appreciate it very much if all these foreign economists can resolve the Euro zone crises so they can have enough money to buy our oil. Our oil is sweet light crude and very good for your cars. Your patronage is what we need, not lessons on how to run our country.