Basically, economic prescriptions tend to be more of an unproven hypothesis, than applied theories, because, unlike in the other fields of scholarly knowledge, economic theories are explained and measured, only on a single particular specimen circumstance, as in the instance, when it is taken and applied in a different community, even though, the economic theory might be of the same nature and having similar characteristics with the original specimen, as in a society test, it could as well produce a different result, as a laboratory that is as vast as a sociological habitat. It simply cannot be aggregated, as if in a controlled environment, typically set up for a projected and objective research result.
In that context, the application of every economic theory is merely an experiment, albeit, an unproven exercise, which on proper application could be magnificently successful, but, it could as well go horrible wrong, upon diligent execution. When projected assumptions do not eventually materialize and for a fact, the reverse of what was expected, could become the consequent result of a good gesture, which had produced the direct opposite of what was the visionary good intention of its initiators.
In fact, it is why economic theories and economic policies are usually applied as a cocktail of measures, which are periodically assessed on what works and what doesn’t, while the successful measures are strengthened, re-enforced and supported, the unsuccessful prescriptions are discarded and substituted with other economic measures, which could be operational on environmental specific basis.
It is why the premier global economic prescription agency, the International Monetary Fund (IMF), which before the recent times, it had advocated the adoption of the Structural adjustment Programme (SAP), however, it is now disowning the programme as ineffective and ineffectual, in tackling the development challenges of low income countries, facing the structural balance of payment disequilibrium . Mind you, as a responsible economic development agency, it never proclaimed an apology, for having prescribed wrong policies nor acknowledged the fact of having deliberately acted in error.
Because, it is a needless exercise to undertake, as the same Structural Adjustment Programme (SAP) policies, which are about private control of the means of production or to put simply, privatized companies, minimal expenditure spending or less government spending on social services, government should only act as an institutional regulatory agency in business and generally, lesser or smaller government in the lives of the citizenry.
This guiding ideal is exactly the governing constitutional model, upon which the Republican National Party (RNC) of the United States of America (USA) is built, it is also the guiding ideology which every government voted under the party had ruled the country, yet the philosophical belief never pauperized the citizens of the country, nor was it condemned as a bad economic policy. In essence, what am I actually inferring at, it is the fact that no economic policy is bad in every instance, rather, it is when it is applied to a different society or in an inappropriate time, it becomes ineffective and ineffectual, thus a wrong policy for that particular national community.
Now, putting it into the context of the Nigerian economy and most particularly, the economic policy direction of the President Muhammadu Buhari (PMB) administration, where the government had insisted on the provision of cheap and subsidized petroleum products, for nearly the whole of its first year in office, it was because of the fact, a lower refined petroleum products is directly related to consumer confidence in the population and its capacity to stoke the inflationary trend upwards. It is worth noting that these two elements and economic indicators, when available in lower range and percentage proportion, serve to stimulate economic growth and development.
The fact that government changed the policy, was not because it is a bad economic policy, rather, it is because it had become largely unsustainable, thus highly prone to abuse and self induced compromise by the operators in the refined petroleum trading business.
Take the policy on maintaining the value of the naira, also, it was substituted with a more flexible foreign exchange policy, not because the former was a bad economic policy, which refused to allow the national currency to fluctuate at the prompting of the market forces, rather, the policy was discontinued because of an evident gang up against the currency by speculators and investors, who swore and vowed to undermine it, if it is not allowed to follow the free market equilibrium.
The question to ponder here is, if the value of a national currency is measured by the productivity of a nation, what makes crude oil, which is just a mere 13% percentage point of the Gross Domestic Product (GDP), to determine the overall productivity of the country, when its price is determined by factors outside the citizens work ethic and productive capacity of the people in the nation .
And this two other things:
RISE IN ECONOMIC ACTIVITIES COUNTERS RECESSION
One of the most feared and unwanted development indicators is the economic misfortune of a national recession, which is a successive period of two negative growth circles and most unfortunately, it is what is staring the Nigerian economy on the face.
In the case of this country, it was caused by a structural disequilibrium of an initiated economic reform happening in the polity, which has caused a slowdown, almost to a halt in economic activities, basically, because of the structural challenge of none government stimulus spending through late budget implementation and the structural monetary misalignment of the unavailability of foreign exchange for productive and production activities.
But, how can Nigeria get out of the negative economic indicator? It is easily done through sustained and effective budget implementation, which automatically galvanizes economic activities, and when coupled with an aligned monetary policy, through the instrument of a flexible currency management, which incentivizes foreign exchange remittance and investor confidence, it would expectedly boost economic activities and overall wealth creation in the national economy.
CARRYOVER INFLATION AND FLEXIBLE EXCHANGE RATE
It is an incontrovertible fact, that one of the often criticized monetary policies of the President Muhammadu Buhari (PMB) administration is the foreign exchange management or most specifically, it is the policy banning certain imported products from gaining access to the official window of the foreign exchange market. Thus, it is because of the policy, many imported products have already gone higher in prices and became affected by evolving inflationary trend, as the importers and marketers of the products, have already factored their prices on the black market exchange rate.
Now, all things being equal and if ‘real’ inflation is the basis for the determinable setting of the Consumer Price Index (CPI), would the inflationary trend continue to rise and the prices of goods go higher, because of the reality of a flexible exchange rate, especially as, the traders have already become used, business activity wise, to a more expensive dollar, and thus, have already factored it into the price range of their products.
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