Stephen Oyedemi: Protectionist Policies Will Keep Nigeria’s Economy Down

Early this year, most Nigerians were optimistic and hopeful that the so called ‘Budget of Change’ of the Buhari administration was going to bring substantial positive change to Nigeria. Unfortunately, the country has so far been experiencing a negative growth (economic recession), a weakening currency and a hyper-inflation that have resulted in prices of many commodities becoming more than double their 2015 prices. According to the National Bureau of Statistics (NBS) the country’s unemployment rate rose from 13.3 per cent in the 2nd quarter to 13.9 per cent in the 3rd quarter of 2016.

Protectionism, according to Investopedia refers to “government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition. Typical methods of protectionism are tariffs and quotas on imports and subsidies or tax cuts granted to local businesses.”

We have seen a lot of protectionist policies come up in recent times, and this needs to be questioned. The real value of the Naira (Nigerian currency) is unknown as the government continues to fix the exchange rate. Not less than 41 items are on the Central Bank’s Prohibition List, preventing many dealers and traders from accessing the Nigerian Foreign Exchange market. This has led businesses to seek foreign exchange from the black market where the exchange rate is much higher, contributing to the instability in the financial market and the inflation being experienced. A deep-cycle battery, for example, that was sold for about N55,000 in January now goes for N115,000 making it more expensive for people who use renewable energy as these batteries are imported.

Historically, when there are crises or problems including those economic in nature, people tend to develop the ‘strong man syndrome’ believing that what is needed is a strong man or a group of strong men who would forcefully get things in shape. This has contributed to the rise of the protectionist policies we now experience in Nigeria.

Many people are made to believe that importation of things like cars, rice, clothing, machines and recently fruit juice should be discouraged in order to motivate local production and create ‘local jobs’. This narrative excludes the fact that no country can produce all its needs and that Nigeria equally exports a lot of things such as cash crops and notably, crude oil ome mineral resources among others to countries which need them. While local production is good, it cannot be sustainable except it produces quality products that compete favourably with others produced elsewhere. Many Nigerians who need to do adverts on the internet or buy things online are saddled with enormous problems as a result of the many restrictions placed on online transactions in the country. One should be disturbed that the National Agency for Food and Drug Administration & Control (NAFDAC) is raiding supermarkets and destroying imported fruit juice in the name of helping local production. Individuals should have the freedom to choose what juice or drink to consume, whether it is produced in the orange rich Benue State of Nigeria, or in the grape rich Sardinia in Italy.

In Nigeria, it is difficult to do business because of the many impediments created by  bureaucracy, overregulation and excessive taxation by the government. Nigeria ranks number 169 of the 190 countries on the 2016 Ease of Doing Business ranking of the World Bank. It is no new saying that one of the major duties of the government is to create an enabling environment for businesses to prosper. This has to come in form of free-market policies, which helps to facilitate trade and wealth creation, resulting in more jobs and positive economic growth. 

The implementation of favourable market policies which include reduction in taxes and levies, the freedom to import and export goods according to market demands, price of commodities to be determined by market forces, etc,  is what is going to help Nigeria, not the growing protectionist mentality that is in fact making things worse and will only keep the economy down.

Stephen K. Oyedemi is West African Regional Director for African Students For Liberty