The descent of economic parasites

A friend once referred to the Nigerian economy as an agbero economy or middleman economy. What does agbero do? He is like a catalyst in chemical action that participates in activities without being transformed. But we are not in chemistry class. So, the agbero here may not be transformed physically but financially, he is.

Of course, agbero is a Yoruba word for those motor park louts whose job is to call or load passengers into vehicles travelling to various destinations.  They do not travel with the vehicles like bus conductors but influence fares and sometimes influence the routes of the buses. They are rooted in a particular motor park and when they see many passengers waiting for vehicles plying a specific route, they would quickly, after secret consultation with a driver or some drivers to change the route of the vehicles and arbitrarily increase the fares. They are ignorant and oblivious that they are applying the law of demand and supply. Doing this, they collect extra commission from the drivers. As parasites, they live on exploitation of passengers as facilitated by them.

 The agberos are economic parasites at all levels of economic activities. These parasites exist in virtually every area of activities in an economy, creating distortions in what ought to be smooth running of the economy, whether market or government planned (command) economy. They turn subsidy, a good economic intervention policy into something negative, like our petrol subsidy. In a market economy, often referred to as capitalism, the government provides an enabling environment for economic agents such as businesses, individuals, institutions and others to interact and agree freely on cost and distribution of goods and services. The role of middleman is virtually eliminated, although he stands by looking for opportunity to intervene and distort the free interactions for his own advantage.

In the command or communist/socialist economy, which is an economy run directly by the government, the middleman appears at his own risk. Such an economy is intolerant of personal intervention because it is autocratic in nature. Production which in a broad sense includes distribution is arranged by the government and everyone has a role to play. It is truly an inclusive economy but it can easily collapse without regular reforms. Though there are few roles for parasites, they still exist remotely. This implies that there is no society without them and without thieves. Even in China where economic mismanagement, stealing or even mistakes by public officials can result in a death sentence, official thieves still misbehave and get killed legally.

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The two major economic policies suddenly introduced by the President Bola Tinubu government have thrown a spanner in the works of the parasites. The immediate removal of the subsidy and resort to market determined price with the words “subsidy is gone” at the inauguration of the President caught the parasites unprepared and in awe. The second shock is the merging of the foreign exchange market into a single channel with less recognition for the black market.

On the fuel subsidy removal, there were arguments that the government ought to have put palliatives in place before removing subsidy instead of working on palliatives after the action. The rational expectation school in economics opines that human beings are rational and would  try to minimise negative effects of government policies or maximise the gains therefrom if the policies are made known well before implementation. The school is in favour of rules rather than discretion in governance. That is, government policies must be well laid out over time to allow businesses and private concerns to plan their activities in consonant with minimisation and maximisation doctrine. That rule would always favour parasites and to the detriment of society. The parasites would not have been knocked hard, had the President given warning.

Fuel importers, including the Nigerian National Petroleum Company Limited are parasites taking advantage of weak governance and artificially created inefficiency in the oil sector siphon money abroad. NNPCL is the institutional arm of the organised parasites, making sure the refineries are not working optimally to create shortage and room for importation. Like organised crime institutions, the oil parasites, within and outside government, have already worked out their revenues for the year and how they will minimise losses if the government decides to remove subsidy before the end of the year.

The sudden removal of the subsidy by the President was not part of their plan. That was why the first reaction from the NNPCL was to announce a minimum pump price of N500 per litre which is outside its jurisdiction. That must have been done to show open support for the President’s declaration and possibly tacitly create public uproar against the declaration. I believe there was no justification for the pump price to jump from N200 to N500 per litre.

Last week, I heard that two fuel stations were selling fuel below N500 per litre. Fortunately, it is in a nearby state from where I live. I went to one of the stations with a five litre keg to measure the accuracy of the fuel being dispensed before filling my tank. The fuel price per litre was N470. The pump was accurate and I filled my tank and drum of 25 litre. The price in that petrol station is indicative of the fact that the NNPCL price was arbitrarily fixed at N500. I have a feeling that some petrol stations would be ready to sell for N400 per litre if not for fear of an unpredictable reaction from the NNPCL.

There is information that the NNPCL is now busy giving out fuel import authorisation to more importers to flood the market with fuel to bring down the price! With depreciated naira, global unstable oil price and growing inflationary trend around the world, the price of imported fuel cannot come down. What NNPCL should be concerned with now is how to grow domestic production of fuel. What is to be done for the nation’s refineries to improve their output; how to quicken output supply from Dangote in early July and intervene in other smaller refineries to start operations. Whether obtaining forex from the banks or other private sources to import fuel, the impact on the country’s reserve is grave and has implications for settling down of naira against the key currencies.

 The sudden decision to float the naira also removed the carpet from the foreign exchange market parasites, including the black market operators. Round tripping is virtually on hold and hopefully on hold forever. Free forex into the bureau-de-change and subsequently to the black market is in jeopardy and hopefully in jeopardy forever. Hitherto, those who manage to have domiciliary accounts would go to their banks to withdraw the foreign currency, if available, and ask the bank staff (depending on the amount involved) to help connect with currency hawkers on the street to exchange the money at the black market rate. That is now eliminated.

In many emerging economies around the world, there are officially approved bureau-de-change rates at conspicuous place in the airport. As you get to the airport lobby, you can just move to any of them, check the prices and exchange your foreign currency to local currency that can be spent within the country. On your way out, you can convert your remaining currency to any key currency with your receipt of purchase and move on.

Bureau-de-change operators are also in some of our airports. It was introduced when Chukwuma Soludo was the governor of the Central Bank of Nigeria and as an outcome of a monetary policy symposium organised by the bank. The bureau-de-change operators then are quite different from what we have now. The bureau-de-change operators at the airport today are not conspicuous and operate like the black market operators. That is the kind of innovative activities and periodic reforms that the suspended CBN governor, Godwin Emefiele, ought to be carrying out instead of engaging in retail banking and competing with institutions that the bank was supposed to control as the regulator of the banking system.

The current CBN’s policy has thrown the parasites in the market into mourning. We are witnessing the decline of parasitic activities in major economic sectors and it is good for the nation to move forward. More of such shock therapy will purify the economy of agberos and make policies to work for good. However, it is imperative for the government to continue to monitor the economy and carry our periodic reforms as these economic parasites can hardly be eliminated. They are the causes of market failures in many nations that ignore their activities for long.