When Social Club Managers Oversee Our Economy

The recent comments from a senior economic adviser to the Tinubu government about the economy numbers released by the National Bureau of Statistics (NBS) raised important points. There were political motives in what he said. With elections coming up, his job was likely to make the government look good. As the saying goes, in politics, the truth often takes a backseat. Was he trying to show off? Maybe. In Nigeria, discussions often aim to outshine others, not to build understanding. This leads to arguments instead of real conversations. In this case, he seems to have hoped to impress potential voters.

Yet, the figures from the NBS matter. They are not just tools for political fights. They show how our economy is functioning. The decisions made by various economic players, both local and foreign, depend on the data our national statisticians provide. Knowing which sectors are growing and the unemployment rates influences where investments go. If we cannot trust these numbers, we have to ask: what other data sources does the government use?

Understanding which data the government uses for its decisions is key for those looking to benefit from them. It also helps those trying to protect themselves from negative outcomes. The idea of “forward guidance” in policy aims to clarify market expectations by sharing future plans. But more important than the numbers is understanding how the government thinks. Unfortunately, Nigerian governments have often failed in this area. They act like they are in charge of social clubs rather than running an economy. Their focus seems to be on throwing the best parties instead of making sound economic choices. The only limit to their ambitions is how much members pay in fees. If they raise these fees enough, they can create the lavish parties celebrated in the songs of Yorùbá juju musicians back in the 1970s.

It is no surprise that many of those clubs no longer exist. They could not influence their members' incomes or their ability to pay the fees regularly. This made them vulnerable to changes in their members’ lives. Running an economy is different. Government choices impact a wider range of people. If they increase taxes, they might reduce how much people spend based on domestic output.

Why does the increase in tax revenue matter? It depends on how the government decides to spend that money. For example, spending on salaries versus investment in public goods can either support or limit overall demand. In democracies, there is also added pressure for governments to spend more before elections. This temptation is hard to resist almost everywhere.

In this situation, macroeconomic management is divided into fiscal and monetary policies. When political goals influence tax and spending decisions, the monetary side tries to control inflation. This is crucial to avoid rising prices from affecting consumer spending negatively. When people spend less, businesses may cut back on investments, sometimes leading to layoffs. If businesses stop spending, unemployment increases. With more people out of work, consumer spending falls even more. This can set off a vicious cycle.

More importantly, this situation highlights how interconnected the different parts of the economy are. The adviser’s casual attitude towards domestic economic data misses this connection. Nigeria’s ongoing struggles with managing this cycle come from the fact that the business and economic dynamics are often beyond the grasp of those who are best at running social clubs.