Policies and its effect to the average man — Pt 1
Social media went haywire on Dangote’s comments on the FT interview with David Piling.
Statements as this show how the State sways in the direction of the big businesses lobbying for monopolistic markets. The simplistic idea by most governments in order to protect and produce domestically is to ban which you would have seen from regime to regime. The bans are often justified on the grounds of preventing importation of all products that the county is deemed to be capable of producing itself. Those protected by the bans argue that the countries’ lack of infrastructure, especially energy, means that they cannot compete effectively with imports without protection.
Let’s not forget that with the futile transport network the ban magnifies the transport cost differences across regions. Perhaps because it forces traders to use smaller side roads, transport goods in smaller consignments, or they have to make more frequent unofficial payments during the overland transportation.
In 2012, the World Bank put out a paper on how the import bans affect poor people in Nigeria, raises the cost of living and, increases the number of people living below the poverty line. Many of the banned goods are necessities for which there is strong demand from the poor, who cannot afford the inflated prices.
In 2015, President Buhari called for a ban of 41 products we domestically make but not able to scale. While one might be shortsighted at this, the failure or oversight of the impacts of this policy on the average Nigerian whose daily needs are interfaced with the banned products is not in question. The use of import prohibitions in Nigeria is part of a trade policy regime that seeks to protect existing domestic industries and reduce the country’s perceived dependence on imports.
Their findings show that If bans are replaced by tariffs set at levels that reduce product prices, then a) the cost of living will fall and the welfare of domestic consumers will rise, b) profits accruing to domestic producers in the protected sectors will decline, c) government tariff revenue will increase and d) customs resources can be reassigned to standard border control and trade facilitation activities.
A dreadful Population growth towards the poverty line
The Brookings Institute published a report on the world poverty which classified Nigeria as the poverty capital of the world.
According to our projections, Nigeria has already overtaken India as the country with the largest number of extreme poor in early 2018, and the Democratic Republic of the Congo could soon take over the number 2 spot (Figure 1 below). At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute, while poverty in India continues to fall. In fact, by the end of 2018 in Africa as a whole, there will probably be about 3.2 million more people living in extreme poverty than there are today.
For Nigerians food items represent a very large share of household expenditure, and the share of products affected by the import bans among those is substantial. At the national average level, expenditure on food items represents 65.4% of total household expenditure. According to an article by the Economist, the relative cost of food, compared with other goods, is higher in poor countries. In Africa, the absolute cost is sometimes high, too. Nigerians would save 30% of their income if they bought their food at Indian prices, finds a recent study by the OECD, a think-tank. Meat costs more in Ghana than in America.
“Poverty is not just about what you earn it is also about what you pay. the worst combination is to be poor in what you earn and poor as a result of what you pay” — Feyi Fahwehinmi
We might not see this objectively as Governments reason for this is to create jobs and export. Fair point, but how does this improve the standard of living for the average Nigerian with unemployment on the rise and more Nigerians getting to the poverty line?
To conclude, the bans raise the cost of living; millions of Nigerians could leave poverty if the Federal Government can set tariffs on goods a level of those applied to similar products or enquire why food prices are higher in respect to its peers in emerging economies.
