By Abdulrauf Aliyu
Last week, I had the privilege of attending a policy roundtable discussion in Abuja, where three prominent economists dissected two pivotal economic policy decisions of President Bola Tinubu’s presidency – the removal of petrol subsidies and the floating of the naira. As they delved into these policy choices, it became evident that the insights of cognitive psychologists, particularly Daniel Kahneman’s groundbreaking work on biases, had much to offer in understanding these decisions.
Dr. Adebayo, a distinguished economist with decades of experience, began by scrutinizing the removal of petrol subsidies. He argued that President Tinubu’s government might have fallen prey to the “anchoring bias.” This bias occurs when decision-makers fixate on a particular piece of information and use it as a reference point for subsequent decisions. In the case of petrol subsidies, the government might have anchored their decision to global oil prices, neglecting the unique complexities of Nigeria’s economy.
Next, Dr. Chukwu, an expert in monetary policy, analyzed the decision to float the naira. He pointed out the “confirmation bias” that seemed to be at play. This cognitive bias leads individuals to seek out information that confirms their preexisting beliefs while disregarding contradictory evidence. President Tinubu’s administration might have been inclined to float the naira based on their prior beliefs about the benefits of a flexible exchange rate, ignoring potential downsides or considering them too briefly.
Lastly, Professor Okafor, known for his research in behavioral economics, shed light on the “overconfidence bias.” This bias involves individuals overestimating their own abilities or the accuracy of their beliefs. It appeared that the government was overly confident in the positive outcomes of these policy decisions without adequately considering the potential risks and unintended consequences.
As we discussed these cognitive biases and their implications for policy-making, it became clear that acknowledging these biases is the first step towards making more informed decisions. The question then arises: How can Nigeria’s government mitigate these biases in future policy decisions?
Dr. Adebayo proposed that policymakers should broaden their sources of information and engage in comprehensive data analysis. By considering a wider range of economic factors beyond global oil prices, they can avoid falling victim to the anchoring bias.
Dr. Chukwu emphasized the importance of establishing independent committees or think tanks to evaluate policy choices critically. These institutions can provide unbiased assessments and counteract the confirmation bias.
Professor Okafor suggested fostering a culture of humility within the government. Encouraging policymakers to openly acknowledge their limitations and seek input from a diverse set of experts can help counteract the overconfidence bias.
In conclusion, our discussion on the biases in Nigeria’s policy decisions underscores the need for a more mindful and deliberate approach to governance. By drawing insights from the work of cognitive psychologists like Daniel Kahneman and implementing the recommendations of our esteemed economists, Nigeria can make more rational and effective policy choices that benefit all its citizens. The road ahead may be challenging, but with a commitment to reducing biases in decision-making, we can pave the way for a brighter economic future.
Abdulrauf Aliyu
An economist and Policy Analyst writes from
45 Ashiru Road, U/Dosa New Extension
Kaduna
