Nigeria: Flashlight on Present Economic Reforms

Pensions have been privatised, 92% of Nigerians are living on less than $2 per day, the interest rate stands at 36%, the (official) inflation rate at 15%, millions are either unemployed or not gainfully employed, life expectancy stands at 45 years, annual per capita GDP at $200 and incredible sums of debt hang over the head of the poor. There is no way out on the path of capitalism.

It is highly imperative to respond point by point to various lies and misinformation being circulated by the present ruling class on the so-called “economic reforms”. As the regime is busy squeezing water and blood from the Nigerian working class, its economic think tanks are equally busy spreading lies and baseless propaganda about their non-existing achievements. The motto of the present regime is best described as “be economical”, not only economical with spending on welfare of the people; this regime is more aggressively economical with the truth.

The Federal Office of Statistics has to be closed down for not being too economical with the truth and only two individuals: the Finance Minister (Okonjo Iweala) and the Governor of the Central Bank of Nigeria are the only official truth tellers. They tell us how our economy is performing, how the masses are enjoying things and all the statistical figures are generated by them to backup their claim; no wonder we have been having wonderful economic data.

The guiding principle of the present economic reforms can be summed up as unprecedented cuts in public spending to make money available for debt management and settle some key individuals, excessive concentration of wealth in the hands of the extreme few. And most importantly, the acceptance of the fact that capitalism works only for the few at the expense of the overwhelming majority.

Pension Reforms’

Pension “reform” is ironically the most ‘laudable’, but actually laughable aspect of the present ‘reforms’. Some petty bourgeois and bourgeois economists are in the forefront of singing praise on this particular reform. It is sometimes called contributory pension scheme, because the employees and employers are jointly contributing funds for the pension of the employee.

This reform reflects the acceptance by the ruling class that this system is absolutely incapable of guaranteeing a decent living for Nigerian workers, even after retirement. It is nothing more than a drastic cut in the wages of the working class and accumulation of wealth in a few hands. All the contributions go to Pension Fund Administrators (PFA), who are responsible for the management of this fund. What a colossal wealth! No wonder we have seen the proliferation of existing banks applying for PFA licenses. The capitalists want to make money without even producing a pin.

More laughable are the reasons put across for introducing this reform.

  • Because of the failure of the past pension scheme;

  • To make funds available for long term investment thereby jumpstarting the economy;

  • To cultivate the culture of saving into the psyche of the Nigerian workers.

The unfettered access of employers to the pension account had been blamed for the failure of the previous scheme. They claimed that whenever employers ran into financial needs, it was too cheap for them to enter into pension account and thereby defaulted on the payments when due. To avoid this, a barrier needs to be placed between employers and the pension account. But actually, who is fooling who? What separates employers from the Pension Fund Administrators? Are the employers not the same as PFAs? What barrier presently exists between employers and the funds?

What makes this present scheme much more criminal is that existing funds contain part of poor workers’ salaries. Employers will continue to run into financial needs for as long as capitalism exists, and as long as they run into financial needs, they will continue to plunder the pension funds. Government is already expressing fear over the safety of people’s funds, considering the rate at which Pension Administrators now buy cars and build new houses!

The second reason is equally ridiculous. Is it true that there is no fund for long-term investment or the owners of these funds do not have faith in the economy and therefore prefer stashing it away in foreign banks? Is the availability of huge funds enough to encourage direct investment? The most outstanding characteristic of bourgeois economists is the narrow-mindedness in their analysis. They cannot connect the level of insecurity in the land with the investment level. The abysmally low aggregate demands, because of overwhelming poverty in the land, is none of their concern; 73% of Nigerians are living below $1 per day and if the poverty line is placed at $2, then 92% of Nigerians are poor.

Lack of infrastructure has completely worsened the cost of doing business in Nigeria. As the recent World Bank report on doing business in 2005 indicated, Nigeria has one of the least efficient systems in the world. It is estimated that it costs 9.1% of GNIpc to do business in South Africa; it costs 95.2% of GNIpc to do the same in Nigeria. Bourgeois economists and their hangers-on do not bother themselves with these facts, because they are helpless in the face of the truth.

Instability on all fronts does not encourage any real investment in any sector of the economy, and instability is part of life in backward countries. So rather than this scheme encouraging long term investment, it is expected to merely encourage making money out of money (M-M1), making cheap money available for the greedy, over bloated bourgeoisie, for luxury goods and unregulated siphoning off of wealth.

The third reason is obviously a serious embarrassment and an insult to the already humiliated Nigerian working class. With the minimum wage in Nigeria standing at 5,200 Nairas per month ($1.20 per day) and with millions of Nigerians unemployed, how else are Nigerians expected to live? How can a family of four/five possibly live on that humiliating minimum wage and still be expected to make monthly savings? They are trying to blame the vulnerable and overexploited masses for their own inabilities. Accepting this fact is equivalent to agreeing with the failure of capitalism. The capitalist system is obviously already in its senile stage; it can no longer guarantee one iota of human progress.

On the Bank Merger

As part of these aggressive economic reforms, 92 banks were forcefully merged and eventually reduced to just over 20 banks. In the word of Soludo (CBN Governor), while presenting his new found formula to the Bankers’ Committee:

“Mergers and acquisitions especially in the banking industry is now a global phenomenon. In the United States of America, there had been over 7,000 cases of bank mergers since 1980, while the same trend occurred in the United Kingdom and other European countries. Specifically, in the period 1997-1998, 203 bank mergers and acquisitions took place in the Euro area. Cross-country mergers are also taking hold. In 1998, a merger in France resulted in a new bank with a capital base of US$688 billion, while the merger of two banks in Germany in the same year created the second largest bank in Germany with a capital base of US$541 billion. In many emerging markets, including Argentina, Brazil and Korea, consolidation has also become prominent, as banks strive to become more competitive and resilient to shocks as well as reposition their operations to cope with the challenges of the increasingly globalized banking systems. In Korea, for example, the system was left with only 8 commercial banks with about 4,500 branches after consolidation.”

However, Prof. Soludo did not say how many of these mergers were carried out in the Nigerian style. Professor Soludo was presenting this like a schoolteacher, teaching his students in a classroom. He was saying this in 2005 when Marx had already predicted this over 150 years ago. Marx said in Capital, Vol. III, Part III:

“It (Capitalism) begins with primitive accumulation (Buch I, Kap. XXIV [English edition: Part VIII. — Ed.]), appears as a permanent process in the accumulation and concentration of capital, and expresses itself finally as centralisation of existing capitals in a few hands and a deprivation of many of their capital (to which expropriation is now changed).”

Maybe the Professor just read this and got intoxicated with it but refused to complete the wise saying of Marx who then concluded by saying:

“This process would soon bring about the collapse of capitalist production if it were not for counteracting tendencies, which have a continuous decentralising effect alongside the centripetal one”.

This is not going to solve any of their self-induced problems. Every student of Marxism knows that:

“Accumulation, in turn, hastens the fall of the rate of profit, inasmuch as it implies concentration of labour on a large scale, and thus a higher composition of capital. On the other hand, a fall in the rate of profit again hastens the concentration of capital and its centralisation through expropriation of minor capitalists, the few direct producers who still have anything left to be expropriated. This accelerates accumulation with regard to mass, although the rate of accumulation falls with the rate of profit.”

Therefore, Capitalism itself is the big ‘expropriating’ force, suppressing private property of the means of production for many, in favour of private property for few. Over 50,000 jobs were lost in the deal and many former small capitalists re-dusted their Curriculum Vitae looking for non-existing jobs again.

The forced bank mergers have led to over 5,000 jobs lost and over N170 billion depositors’ funds stock. The majority of these depositors are low and middle-income earners.

Any direction capitalism goes, there is a catastrophe of unimaginable magnitudes for the Nigerian working class. There have been strikes of Nigerian Police twice within the lifetime of this regime; this is the consequence of these economic reforms. The crisis induced by these profit-seeking cannibals will continue as long as Capitalism is allowed to stay. Just as Chavez (Venezuelan President) said, Socialism or Death.

With the interest rate standing at 36%, the inflation rate of 15% (and these are highly manipulated figures), millions either fully unemployed or not gainfully employed, life expectancy standing at 45 years, per capita GDP at $200 and incredible sums of debt hanging around, there is no way out on the path of Capitalism. Socialism remains the only way out for Nigeria.