How Banning Things Makes Nigerians Poorer

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Feyi Fawehinmi i

– Feyi Fawehinmi

The way you ask a question goes a long way in determining the kind of solutions you come up with. According to the World Bank, in 2017, Nigeria had a GDP per capita of $1,968. In the same year, Bangladesh had a GDP per capita of $1,516 – that is, the average Bengali was around 30% poorer than the average Nigerian. Bangladesh has a population of roughly 164 million people so not too far from Nigeria’s estimated 180 million, depending on who you believe. But when you check the World Poverty Clock data, it tells quite a different story. In 2017, Nigeria was estimated to have 85 million people living in extreme poverty while Bangladesh had 22 million people in extreme poverty.

When we look at these 2 things, we can easily see that what makes people poor is not just their income but their costs. What the 2 sets of data are telling us is that $1 in Bangladesh goes a lot further than $1 in Nigeria because things are much more expensive in Nigeria. If we view the problem in this way, then we are led to ask very different questions than if we were simply looking at the problem as Nigerians being poor because they are not rich enough. When you look at data from the USDA measuring what percentage of income households in countries around the world spend on food, we quickly identify a culprit. They found that Nigerians spent an astonishing 56% of their income on food, the highest in the world. Interestingly, Nigeria’s Philips Consulting did their own survey and found the figure to be 59%. In Bangladesh, this figure is less than 40%. It then becomes obvious why Nigeria, with a higher GDP per capita, has 4 times the number of people living in extreme poverty than Bangladesh.

We are now faced with a very different solution to the question of how to reduce poverty in Nigeria. Yes, we definitely needmore jobs and for Nigerians to earn more money but there is clearly a bigger problem of costs because it is possible that with more income, prices will simply go up thereby weakening the effect. In this scenario, we cannot afford to do anything that increases the cost of food for Nigerians, no matter what the policy goal is. We must find ways to bring food prices down, by whatever means we can. Why? Because if food consumption goes down from 56% to say 36%, that extra 20% of income is released as demand for other things in the economy. All of a sudden, this will make other industries viable, leading them to create more jobs and so on. That extra 20% might go towards housing which will then make it viable to build more low costhousing creating many more jobs in the construction industry.

By understanding the problem in this way, there is no way that banning imports is a solution to the problem. Imagine that a bag of imported rice sells for N10,000. If you decide to ban foreign rice to support the local rice industry, what you are saying is that the price of a bag must be higher than N10,000 for the local rice industry to compete. By banning, you want to take away the option of cheaper rice so that Nigerians will pay more for local rice. Once you do that, you have definitely increased the number of Nigerians living in extreme poverty as rice consumers are way more in number than rice farmers. If local rice was N9,000 per bag, there will be no need to ban foreign rice as it will effectively ban itself. By using the force of Customs and the power of tariffs, the government is effectively forcing the price of food up and making Nigerians poorer. When the figures are published showing Nigeria is the poverty capital of the world, the government should not get angry. In fact it should celebrate it as evidence of its policies working.

From rice to palm oil to cement – the story is the same. In the name of some policy goal, the government increases the costs of goods for Nigerians by banning the import of one thing or the other under the guise of ‘creating jobs’. If there are cheaper imports, access to those goods will make Nigerians richer thereby freeing up income for them to spend on other things. This is why a country like the United Kingdom has not fed itself for around 100 years running, relying on food imports instead, and has gotten a lot richer in that time. The same is true of America – the country has gotten richer the more it has imported from China even though President Trump currently has other ideas.

This is one of the most frustrating things about Nigeria. You cannot even change this policy by voting for a different party as they all believe in it with the only difference being the degree. You will merely move along the same spectrum from PDP socialists to APC communists. These days from President Buhari to Vice President Osinbajo to Governor Emefiele to Minister Ogbeh – you will find all of them as believers in this policy of making Nigerians poorer. It is akin to a long running article of faith in Nigerian governance that has been around since the 1970s. The belief that Nigeria can ban its way to glory is unshakeable.

But the biggest tragedy of all is that having heard this message relentlessly from the government, many Nigerians have come to believe that they can make themselves richer by making themselves poorer.

– Feyi Fawehinmi is an accountant and social commentator.