The second, and sufficient, condition is therefore that the combined price elasticity of demand for exports and imports must exceed unity.The argument of Buharism, for which it was castigated by global capital and its domestic agents, was that these conditions did not exist clearly enough for Nigeria to take the gamble. First our major export, oil, was priced in dollars and the volume exported was determined ab initio by the quota set by OPEC, a cartel to which we belonged. Neither the price nor the volume of our exports would be affected by a devaluation of the naira. As for imports, indeed they would become dearer. However the manufacturing base depended on imported raw materials. Also many essential food items were imported. The demand for imports was therefore inelastic. We would end up spending more of our national income to import less, in the process fuelling inflation, creating excess capacity and unemployment, wiping out the production base of the real sector and causing hardship to the consumer through the erosion of real disposable incomes.
Posted on: Sat, 24 Jan 2015 04:34:19 +0000
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