31.1 C
Abuja
Saturday, May 18, 2024

The Nigerian economy’s bitter harvest: Unearthing impact of cognitive biases

Must read

By Abdulrauf Aliyu

In a world driven by data and technology, where experts meticulously analyze economic trends and governments tread cautiously on policy decisions, Nigeria’s recent economic turmoil serves as a poignant reminder of the insidious influence of cognitive biases on decision-making. Just four months into his administration, President Bola Ahmed Tinubu made several pivotal policy choices that have had far-reaching consequences for the Nigerian economy and its people. These choices, heavily influenced by anchoring biases, confirmation biases, group thinking, and a host of other cognitive pitfalls, have sent shockwaves through the nation, leaving Nigerians grappling with the harsh realities of a crumbling economy.

The Prelude: A Promising Start

When President Tinubu took office, Nigerians had high hopes. A seasoned politician with a reputation for astute leadership, he promised to tackle the nation’s economic challenges head-on. However, his early policy decisions, influenced by anchoring bias, set a course that would prove perilous.

Anchoring Bias: A Slippery Slope

One of the first critical decisions taken by the president was the removal of subsidies on gasoline. Anchoring bias, the tendency to rely heavily on the first piece of information encountered when making decisions, played a pivotal role here. Tinubu, anchored by the belief that subsidies drained the nation’s resources, was resolute in his determination to cut this fiscal burden.

While his intention to reduce government expenditures was commendable, he failed to consider the larger picture. The abrupt removal of subsidies led to an immediate spike in fuel prices. Nigerians, accustomed to affordable fuel, were hit hard. This decision, rooted in anchoring bias, set the stage for a domino effect on the economy.

Confirmation Bias: Echo Chamber of Doom

In the corridors of power, the president surrounded himself with advisors who shared his conviction. Confirmation bias, the inclination to seek and accept information that confirms preconceptions, thrived unchecked. Dissenting voices were muffled, leading to groupthink and an echo chamber of policy decisions.

These advisors echoed Tinubu’s beliefs that deregulation would spur investments and reduce corruption. However, they failed to consider the immediate consequences of higher fuel prices on the average Nigerian’s budget. The subsequent surge in transportation costs, inflation, and the cost of living was a harsh reality check that the administration was ill-prepared for.

Survivorship Bias: The Unseen Losers

As the policy changes rolled out, survivorship bias crept in. The government was quick to highlight success stories, emphasizing how these changes had attracted foreign investments and created jobs. However, they conveniently ignored the countless small businesses that collapsed under the weight of rising operating costs. Survivorship bias skewed the narrative, blinding the administration to the plight of ordinary Nigerians.

Availability Heuristic: The Fog of Uncertainty

Amidst the growing uncertainty, the availability heuristic took hold. Decision-makers were swayed by recent, vivid events rather than considering the broader context. The sudden surge in fuel prices, unemployment, and inflation painted a grim picture of the economy. The government, in a state of panic, implemented short-term fixes without a holistic understanding of the issues at hand.

Self-Serving Bias and Fundamental Attribution Error: Shifting Blame

As the situation worsened, self-serving bias and the fundamental attribution error came into play. The administration was quick to blame external factors like global oil prices and geopolitical tensions for Nigeria’s economic woes. They conveniently shifted the responsibility away from their own policy decisions. This unwillingness to acknowledge their role in the crisis further eroded public trust.

Strategic Misrepresentation: Painting a Rosy Picture

In an attempt to quell public unrest, the government resorted to strategic misrepresentation. They selectively released data that painted a rosier picture of the economy than reality reflected. This misinformation only deepened the sense of betrayal among the populace.

Optimism Bias and Uniqueness Bias: A Dangerous Combination

President Tinubu’s optimism bias and uniqueness bias, which led him to believe that Nigeria could weather economic storms differently from other nations, further exacerbated the situation. He failed to recognize that the economic fundamentals were different and that the nation lacked the infrastructure and resilience needed to navigate such turbulent waters.

Planning Fallacy and Overconfidence Bias: Underestimating the Challenge

The administration’s planning fallacy and overconfidence bias were evident in their optimistic timelines for economic recovery. They underestimated the depth of the challenge at hand, believing that the crisis would be short-lived. As months passed and the situation worsened, their credibility crumbled.

Hindsight Bias and Availability Bias: A Grim Assessment

Now, just 120 days into President Tinubu’s administration, the consequences of these cognitive biases are painfully evident. The hindsight bias has settled in, and Nigerians rue the decisions made in haste. The availability bias amplifies every hardship, making it difficult for citizens to see a way out.

Escalation of Commitment Bias: Stuck in a Rut

President Tinubu’s administration finds itself trapped in an escalation of commitment bias. Having invested so much political capital in their initial decisions, they are reluctant to reverse course, even in the face of mounting evidence that their policies are wreaking havoc on the economy.

In conclusion, Nigeria’s current economic crisis is a harsh reminder of the profound impact cognitive biases can have on decision-making. President Tinubu’s early policy choices, driven by anchoring biases, confirmation biases, and a host of other cognitive pitfalls, have had dire consequences for the Nigerian economy and its people. The removal of petrol subsidies, the hike in energy costs, and the floating of the naira, influenced by these biases, have led to economic crises, high costs of living, inflation, and unemployment. As Nigerians grapple with the fallout, it is crucial for leaders to recognize and mitigate the influence of these biases in future decision-making to prevent further harm to the nation’s well-being.

Abdulrauf Aliyu
An economist and Policy Analyst writes from
45 Ashiru Road, U/Dosa New Extension
Kaduna

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest article