The false prophets who doomed Nigeria The promise of a prosperity is unravelling

Five years ago, economists prophesied a prosperous future for Nigeria, and the rest of the continent. Yet today, the country is facing what one leading Nigerian academic recently told me is its “biggest crisis since independence”. The devaluation of the Nigerian naira by 230% over the past year, along with a huge rise in inflation, has sparked an economic crisis unequalled in its modern history. With meat, eggs and milk now a luxury, there have been reports of people in the north of the country being forced to eat poor-grade rice usually used as fish food.

Nigerians have responded with a wave of “hardship protests”. Since February, demonstrations have rocked many large cities including Lagos, Ibadan and Kano. In Lagos, police responded with sympathy, handing out biscuits and water to the protesters to prevent them fainting from hunger. After ration sizes in Nigerian prisons were cut, protests broke out in the prison of the central city of Jos at the end of February.

Many have blamed the crisis on President Bola Ahmed Tinubu, who was elected in controversial circumstances last year. The powerful emir of Kano, Aminu Ado Bayero, said in February that Nigerians faced “economic hardships, hunger and starvation” and called on President Tinubu to take action. Later that month, Tinubu agreed to release 102,000 tonnes of a strategic grain reserve at subsidised prices, but such is the hardship faced by most Nigerians that when this happened there was a stampede at the depot.

On the face of it, President Tinubu’s economic policies are to blame. In May 2023, he removed fuel subsidies, which the World Bank estimated could save the Nigerian government $5 billion a year. It was part of a wider strategy to increase foreign investment. Yet, in spite of the pain this catastrophic strategy has already caused, global investors warned last week that the Central Bank had to “tighten” monetary policy further to attract investment — even after a 4% increase in Nigeria’s interest rate, to 22.75%.

This tightening of the screws will only worsen the crisis. The call from investors runs counter to what financial leaders said last year: that scrapping fuel subsidies was already giving markets “everything they hoped for”. Even the Financial Times reported last week that, in retrospect, “many are questioning the wisdom of abruptly removing the subsidies without a shock-absorbing plan”.

But Tinubu can’t be blamed for everything. When he was elected, Nigeria was already facing an economic crisis. By late 2021, analysts were pointing to a looming debt crisis, with public debt having soared under the previous president Muhammadu Buhari. This followed a decade during which, as Bloomberg reported, long-term loans had more than doubled. In 2022, the last year of Buhari’s government, annual debt repayments stood at $7.5 billion, which exceeded the government’s total revenue by almost $1 billion.

However, it’s worth noting that in 2019, the picture was the reverse. That year, the African Development Bank issued its annual report, which said that “the state of the continent is good. Africa’s general economic performance continues to improve”. This followed a decade of sustained economic growth across Africa, with some claiming at the time that the eradication of poverty by 2030 was possible. As two Dutch economists concluded in 2018, there were “broadened opportunities for sustained economic growth in the longer term”.

What changed between 2019 and 2022? The obvious answer is the Covid pandemic response, which not only interrupted economic growth across Africa, but in the Nigerian case, saw a collapse in the oil price that resulted in a sharp drop in revenues. It also saw a huge increase in the debt burden. In April 2020, the IMF approved a $3.4 billion loan to Nigeria to fund its Covid response — almost half of the government’s annual revenues. The Central Bank of Nigeria drew on this to offer credit facilities to businesses in distress. Now, however, those loans are being called in, and some accuse the government of “conning” Nigerians.

Worse still, at the end of February, the Nigerian Socio-Economic Rights and Accountability network filed a lawsuit against President Tinubu for the government’s failure to account for the disbursements from this huge loan. In a tale that will be grimly familiar to readers in the UK and the US, the effective printing of money that accompanied the Covid response is alleged to have led to diversion or theft of the funds that have never been accounted for.

This suggests that the real cause of Nigeria’s crisis is what scholars Ruben Andersson and David Keen aptly label “wreckonomics” in their provocative new book of the same name: a label that describes how the setting of a war economic model is used for profiteering by existing institutional interests. For these interest groups, the purpose of the war is not necessarily in winning it, but in extracting profit from the crisis situation — often by extending it for as long as possible.

Such analysis offers a different twist to the concept of the neoliberal “permacrisis”. While these rolling crises are usually spoken of in political terms, wreckonomics shows that it is part of an economic framework. In each crisis framed as a war — whether real wars such as in Ukraine, or the “war on Covid” — existing economic interests have the institutional frameworks to leap in and profit from them. This corporate money printing comes at the cost of state budgets, leading to future indebtedness, which is paid for by those who had no hand in the profits — and who must put up with crumbling state services.

The Nigerian crisis perfectly fits the wreckonomics mode. A “war on Covid” was declared worldwide. This created a massive external shock and led to the printing of money financed with credit from the IMF. Existing interests took advantage of this to profiteer from the debt in Nigeria, as also happened in Senegal, the UK and the US. And none of this had anything to do with the threat posed to the Nigerian population by Covid itself, since, with a median age below 20, this was always low risk compared to a disease like malaria that kills 600,000 people annually across Africa. Indeed, at present, the registered Covid deaths in Nigeria total 3,155.

The consequence was a vast increase in Nigerian government debt which, twinned with collapsing revenues in 2020-1 because of the oil price, reversed the rosy picture described by macroeconomists in 2019. Not only has all this led to the new era of austerity, but it was predicted right from the start by groups such as Oxfam. The charity reported in 2021 that, as of 15 March that year, 85% of IMF Covid loans were tied to future austerity in the countries concerned. These “externalised losses” have now been realised, by people in Nigeria — and indeed across Africa.

As the devastation wrought by these policies becomes clear, Africa has started fighting back. Last week, a coalition of senior African academics accused the WHO of being “colonialist” in its plans for a new pandemic treaty that could allow it to plunge Africa back into lockdown. “This is a perpetuation of classical Western imperialism coming through the backdoor,” said one academic. The coalition is seeking to challenge whether African governments should automatically accept the new pandemic treaty, as well as IHR regulation changes being promoted for discussion and voting at the World Health Assembly in May.

The group’s health advisory director, Wellington Oyibo from the University of Lagos, challenged the grounds for the new treaty. “Lockdowns affected Africans badly because these are people who earn their living from subsistent income, and yet you lock them in for several months?” he was quoted as saying. “The people are still not over the socio-economic and educational consequences of lockdowns.”

Yet with the crisis growing, the official policy menu for Nigeria’s government is very restricted. President Tinubu is negotiating further World Bank budget support of up to $1.5 billion — but this will just further the wreckonomics model that has proved itself so useless over the past five years. Meanwhile, with the postponement of elections in Senegal, and the imprisonment there of the leading opposition candidate Ousmane Sonko, political crises are growing across the continent. In such cases, governments usually look for someone to blame. The WHO might be a good start.

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