I am long on strategic subsidies and I believe that governments can subsidize critical components in market systems. I have been making that point for years. The job of a government is to create platforms, and then allow private companies to build companies on top of them. In an efficient market system, roads, security, affordable energy, working postal services, etc are platforms. We teach platforms to startups, explaining that if you build a great one, you win your market. Indeed, the largest and richest companies in the world today (Apple, Amazon, Meta, etc) are all platforms, and the most prosperous countries in the world (China, USA, Japan, etc) build platforms!
In 2019, I was invited to the National Assembly; I made the same point: you need to become effective and subsidize things: “we discussed the mechanics to take this nation from $500B to $3 Trillion GDP. I want to thank the Speaker of the House Femi Gbajabiamila for approving my special day,” I wrote afterwards.
I boldly told our leaders that if they followed my plan that Nigeria would move from $500B to $3 trillion in GDP within 15 years! It was a tough one because I pushed the unconventional wisdom that we must further subsidize postal services, petrol, and education, EFFICIENTLY. I lived in Ovim for years before I left for FUTO. But with our then working post office, I was not far from the city. But when the post office went, the village became a distant place, with the commercial angle gone!
As part of my plan to subsidize more, I noted that Nigeria must remove corruption as a “ministry”. I laid the plan here in my hypothetical presidential speech. I called the removal of corruption Pillar 1 and wrote: “We will build a corruption-free nation where it would be extremely impossible to perpetuate corruption because technology will make things obviously transparent. All government systems must be structured to be corruption-resilient so that people that want to perpetuate corruption will fail.”
Of course, I do not also believe in the floating of Naira unless there is an industrialization playbook (you must float industries before you can efficiently float naira). I have explained that no economic fundamentals within a demand–supply framework would help Naira, when our demand is asymmetrically more than supply: “If I apply what he explained in that book [AO Lawal book on economics], floating naira with no capacity to earn USD dollars will kill Naira, because there is an asymmetric imbalance on demand and supply of USD in the Willing Buyer, Willing Seller nexus. In other words, two people may each have $100 to sell while twenty people want to buy each $100. If you do not close that number to near parity, the equilibrium point will keep shifting and I do not see how Naira will stabilize because demand outweighs supply here.”
Fuel subsidy, postal subsidy and dual exchange rate are not the issues. The challenge is that inefficiency in the government is why they appear to be bad policies as I explained here.
Dual FX in a corruption-free system is a subsidy which can help manufacturers; the US has released $billions to Intel, Ford, etc on different initiatives to help them compete, that is their own FX subsidies and dual exchange! Nigeria at our present state of industrialization will struggle to unify our currency unless our diasporas could be asked to save at least 30% of their salaries in Nigerian banks.
Like majorly using interest rates to fight inflation in Nigeria which makes minimal sense, our leaders must be creative because our challenges are unique
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Please do not read anything political in my posts. When I write, my mind works better, and I feel liberated. Writing is my tea and coffee. These are postulations from a village guy; always consult with the experts. Nonetheless, I am always open to defend my positions. A piece is…
— Ndubuisi Ekekwe (@ndekekwe) July 1, 2023
