Since President Muhammadu Buhari came into office, Nigerians have been waiting to get an idea of what his response would be to the current economic melt down. We have an idea that the government would be involved, but we really don't know how it would be structured or how big the involvement would be. We still don't have the details.
In a recessed economy such as ours, the government can jumpstart the economy by borrowing and spending large quantities of money. Increased spending will generate demand thus leading to creation of jobs which in turn leads to recovery.
When Barack Obama was elected President November 4, 2008, the US announced a net loss of more than half a million jobs. It was the largest drop in a single month for 34 years and bringing unemployment to 6.7 per cent . The following day, Mr. Obama announced the biggest infrastructure investment since President Dwight Eisenhower created the US highway system in the 1950s.
In his first address to the Congress, Mr. Obama put his top priority for America's beleaguered workers in simple terms: “ Now is the time to jumpstart job creation.” Known as the American Recovery and Reinvestment Act, it seeks to bring timely relief to 11.6 million unemployed Americans. Shortly after Congress approved $787 billion stimulus plan, Mr. Obama Said: “We have once-in-a-generation chance to act boldly and turn adversity into opportunity, and to use this crisis as a chance to transform this economy for the 21st century.”
Mr. Obama's stimulus package breakdown is as follows: $27.5 billion for highway projects, $340 million for watershed and flood prevention operations, and watershed rehabilitation, $2.5 billion for distance learning, telemedicine, and broadband programs, $150 million for economic development assistance programs, $4.7 billion for a broadband technology opportunities program, $6 billion for local clean water initiatives, $21 billion to laid-off workers with employer provided health insurance through COBRA, $53.6 billion to help states deal with budget deficits, $36.2 billion for energy spending, $19.9 billion for aid to poor families, a tax credit up to $400 for low-and-middle-income individuals and $800 for families, a one time payment of $250 to recipients of Social Security and government disability.
In 2013, the Bank of Japan pursued an unprecedented $1.4 trillion stimulus plan to loosen monetary policy and spur economic growth. The Bank of Japan's shock therapy was designed to jumpstart the world's third largest economy which was hard hit by collapsing exports to China and European Union, falling domestic auto sales, and decelerating post-tsunami reconstruction spending.
In 2008, China unveiled an economic stimulus program totaling $586 billion, aimed to bolster domestic demand and help avert a global recession. The plan includes spending in housing, infrastructure, agriculture, healthcare and social welfare, and a tax deduction for capital spending by companies.
Last year, South Korea reeled out a stimulus rescue worth 16.1 trillion won ($14.31 billion) to jumpstart Asia's fourth largest economy as it fought to overcome the twin challenges of weak domestic and global demand. “Our fiscal soundness will worsen temporarily,” says Bang Moon-Kyu Vice Finance Minister, “but we have decided it is more important to make the economy recover early on and create a sturdy fiscal foundation,” says Moon-kyu.
It's been 16 dark years for Nigerians to be sure. Our people's health are frail. Our financial prospects are bleak. Our families are dismantled and dispersed. Jobs are uncertain and tomorrow looks no better than today. Nigerians have seen it all: want and misery, ignorance and brutishness, pain and penury, neglect and contempt, trial and struggle. It's easy to be overwhelmed by the darkness.
Presidents have long been seen as operating within a political environment that is intractable and highly resistant to change. History has also revealed that presidents are powerful agents of structural change. Nigeria is in the worst economic crisis in our history. Millions of Nigerians are unemployed or underemployed. There is a lot of pain out there, and a lot of potential going to waste. President Buhari should deploy all the full brunt of the federal might into the economic crisis.
The federal government needs to step in and spend. A lot. Mr. Buhari must provide a blood infusion to the patient right now to make sure the patient is stabilized. We need a huge stimulus plan in the trillions to jumpstart the economy. Budget alone is not enough to curtail the hemorrhaging job loss. Stimulus plan worked in the 30s, 40s, and presently for the US. It worked for Japan in 2013, it worked for China in 2008, and it worked for South Korea in 2015. It will work now for Nigeria in 2016. The stimulus plan should target infrastructure, housing, education, health, transportation, broadband technology, clean drinking water, postal services (post-office), agriculture, social services and other essential sectors.
Millions of jobs will be created in rebuilding and repairing our schools – elementary, secondary, universities and other public institutions. Public transportation – new rail lines, new road network of four or five lanes in each direction that crisscross the 36 states like the US Interstate 95 (I-95), building new hospitals all over the states, construction of new ports in riverine areas, new refineries in all the 36 states, hydroelectric power, solar power, and wind power. Allocate money to states to help them deal with budget deficits, provide internet in all schools, build new public libraries and parks, construct housing projects in all the 36 states for low income workers, establish state and local government police and state troopers that will man our dangerous and deadly high way 24/7. The job creation in these areas do not require heavy reliance on electricity because they are not manufacturing industries. Once we get our acts together in the power sector, we can dive into heavy industrial manufacturing.
An effective, appropriate stimulus plan should accomplish the following: A stimulus package that will generate growth and jobs to offset rising unemployment. A stimulus package that will take effect immediately. A stimulus package that will target unmet needs. A stimulus package that will be fair to all sectors of the economy. Jobs, jobs, jobs, a stimulus package that will create immediate jobs. A stimulus package that will not be bogged down by bureaucratic nonsense. A smart stimulus that will have its impact within the next year. It must have some components that will have immediate effect, and others that might have impact in six months to a year.
The government should not be a slave to textbook economics because it doesn't apply to a very nonstandard situation as reflected by the economic reality on ground. If we slash government spending, the economy contracts further and creates deeper recession and cuts into long term job creation.
President Buhari need to act now to craft an effective economic stimulus plan to spur growth and job creation. Without a stimulus of sufficient magnitude, the Nigerian economy is headed to dire straits.