Tuesday, November 12, 2013
Revitalizing the Nigerian economy: Beyond western dependence to Pragmatic home grown panacea. © by Kolawole Olaniyi 2013
By: OLANIYI, KOLAWOLE TEMITOPE
(Graduate of Electronic and Electrical Engineering, Obafemi Awolowo University, Ile Ife)
Tel No: 08068495313
This paper investigates the cause of Nigeria’s folly in her quest for economic and social development. Every successive administration has marshalled its point that Nigerian is on the path of economic renaissance especially zeroing in from on the outset of the fourth republic till this time. Continual dependence on the Western allies is traceable the comatose nature of the economy albeit not disregarding the monster called corruption. Nigeria has been the laughing stock at the international scene. Her resources (both human and natural) still remain greatly underutilized. Hence the worries and anxiety that the country is edging for the precipice should have been curtailed by her abundant/untapped resources. After clinging to the apron strings of the western allies to help rejuvenate/revitalize her economy (by taking to their prescribed policies and their loans), there has not been any significant change in the real performance of the economy. It has rather than liberated the economy, made the country more indebted, handicapped and chronically illiquid. It then means emphasis/modus operandi has to systematically shift from kow towing to every policies designed by her allies (whether economic or foreign) to indigenous solutions enunciated by economists. This will reverse the trend of stagnation and lay cornerstone of development and sustainable growth needed to be experienced by the country.
1.0 INTRODUCTION This paper investigates and recommends Nigerians misguided policies and possible solutions respectively. It is usually argued that corruption at home is mainly responsible for Nigeria’s plight, while disregarding the part her supposed allies play in under developing her economy. Make no mistake, this paper doesn’t exculpate Nigerian’s past leaders from corruption, it only points out the handiwork of her friends in worsening her already battered situation. So much illusion is created by the west by constantly convincing her leaders and populace that growth is actually recorded in the economy.
Growth of GDP (Gross Domestic Product) is greeted with much brouhaha. The value of FDI (foreign Direct Investment) hitting an all-time high has become the bastion of government in hiding its ineptitude in the control and management of the economy. These and many more yardsticks are the much pointed/talked about gains or dividends of the growing economy. I find this bereft of logical and sensible reason. Unemployment ranks higher than any other time in the economy, indigenous participation in the economy is at the lowest ebb, continual devaluation of the currency which portends weak purchasing strength is a recurring decimal , absolute dependence on importation of its consumables is an head-ache, empowerment of her citizen and massive industrialization is virtually non-existent to say the least. Despite all these, it is quite incredulous that her supposed friends are allies in talk while they are obvious foes in deeds/actions.
Section two gives a clearer picture that the actual bail-out or loans granted her by her friends are for economic enslavement/subservience/servitude. It has always given Western world a great deal of dominance or hegemony in controlling her day-to-day administration. Section 3 typifies a higher doom awaiting Africa generally and Nigerian specifically if she doesn’t take a volte-face on her policies. In here is expressly stated the manner Western countries have plunged their counterpart into recession by reneging on pact signed and instilling a pragmatic approach to individual nation. If these have had disastrous consequences on other Western nations, how much more doom would be ready to be foisted on the black world especially Nigeria.
The powerless and helpless state of the “too-big-to-fail” nations is obvious. This is magnified in section 3 as loans or bail-out accorded the country during their days of prosperity is over with each country trying to re-adjust, manage and fast-track her own economy. The economic direction Nigeria heads for is a tailspin as a result of ineptitude her current government exhibit.In short section 4 highlights the parody initiated thus far by successive government in the quest for economic growth. She must take a hard-line stance and obstinacy on some policies that had been forcefully foisted on her if the call for transformation is inevitable and Nigeria is to break the Jinx of underdevelopment. This is what section 5 strongly addresses that such parody/modus operandi be done away with and pragmatic and home-grown solutions are required to fast track the much needed transformation her citizens have been aspiring.
2. ILLUSION OF A BAIL OUT DEPICTING HEGEMONY Whenever it is being aired or proposed that bail-out, aid or loan is to be received by the third world countries, it should ordinarily be greeted with loud ovation. Unfortunately, this is the time for more economic servitude on the path of the recipient while a form of economic hegemony on the side of the guarantor. In the process of illusioning hegemony to mean bail-out, Bretton woods institutions-the World Bank and the international monetary fund (IMF)-play the scripts of the West. For the past two decades and still counting, the World Bank and the IMF have forced developing countries in creating conditions that are of immense benefits to Western cooperation and government under a scheme known as the Structural Adjustment Programme (SAPS).
For third world countries/government aspiring for development, the Bretton wood institutions act as a barricade for stalling that aspired development. An example of this is evident in 1972 to the elected government of Salvador Allnde in Chile whereby the then president Richard Nixon of the United State in tandem with his security adviser Henry Kissinger used the bank to make the Chilean economy scream which eventually paved the way for the bloody cup of 1973.
The bail-out itself would have been helpful to the third world countries provided there are no stringent conditions attached. For policies such as relaxation of trade restrictions, privatization and removal of subsidies by government of the third world further impoverishes the masses and open up the economy of the West for trade liberation and market. Unfortunately these stringent conditions in most cases are sine qua non for securing loans or relief. It therefore posits indirectly that the proposed bail-out is only a smoke screen for actual dominance and dependence of the third world countries on the West.
For a country like Nigeria in the 1960s and early 70s was not indebted neither was it dependent on the west for bail-out. In fact she prosecuted a 3 year civil war without borrowing/external aid. Then, agriculture was the mainstay of her economy, being agrarian. Much hope was poured on her during independence because of the recent discovery of oil which was a precious gold then. To the consternation of the world at large, the country mainly due to oil glut (that is the comparative advantage she had in oil had waned/and the increasingly diminishing participation in agriculture for active or over-reliance in oil exploration in the 80s instigating a pro rata fall in the price of oil at the international market) made her have balance of payment deficit in the 80s.She, then had already made revenue from oil the primary source for budgetary planning.
Having established an over-bloated size of government and embarked on white elephants, she couldn’t run her day to day activities in a balanced manner. Then, oil revenues had fallen 42 per cent in two years as the price of crude collapsed from $40.97 a barrel in December 1980 to $28.25 in March 1982. The look/search for foreign loan became ineluctable.
Muhammad Buhari after seizing and ousting the Shagari Administration on the premise of greed, corruption and ailing economy began an advanced negotiation on a proposed IMF bail-out for the comatose economy.Negotiations between the IMF and Buhari government were dead locked because of disagreement on the conditions the lending institution attached to the loan facility. The then regime’s finance minister Dr. Onaolapo Soleye x-rayed the conditionality’s of:
• Curtailment and review of public expenditures
• Reduction of government subsidies
• Classification of parastatals into economic and social categories
• Stoppage of non-statutory transfers such as loans to state government
• Simplification and rationalization of traffic structure
• Review of interest rate
• Relaxation of import restriction
• Devaluation of the naira
• Vigorous export promotion
and then concluded that securing the loan connotes a poisoned chalice to the economy. General Buhari resolutely insisted that at least three of the conditions (removal of petrol subsidies, naira devaluation and relaxation of trade restrictions) were unacceptable. With the IMF obstinate on her conditionality’s, Buhari quite stated that the loan was politically suicidal saying “we have realized the damage IMF loans have done to developing countries. None of the developing countries that have taken IMF loans have come out of it well. So if we are to go by historical indications to take IMF loans on the terms they want us to, will be tantamount to virtually destroying our own country. Devaluation does not make sense to Nigeria’s at all.
The regime of Ibrahim Babangida was like a loosening of the asphyxiating stranglehold experienced by politicians during the Buhari regime. Not only did he pardon the jailed politicians, he started the negotiation on the proposed IMF loan throwing the matter into a court of public opinion. Being an innocuous impostor and deeply Machiavellian, Babanjida threw cautions to the wind by accepting the conditionality’s for securing loan. It removed government involvement in fixing the value of natural currency and initiated the structural adjustment policies. This caused untold hardship for the citizenry. Unemployment astronomically rose. Local industries were closed up because of the relaxation on import restrictions making foreign goods cheaper and locally made goods unable to compete. Despite securing the loan, persistent current account and budget deficits, a huge backlog Of Uncompleted projects-especially in the public sector-,factory closures, large scale Galloping Inflation with a negative trend in economic growth as represented by a contraction in the Gross Domestic Product (GDP) marred his tenure. External loans from the ICM, which became significant in the early 1980’s, carried high and floating interest rate usually tied to the LIBOR which itself escalated from barely 3-4 per cent in the late 1970s to 13.0 per cent in 1989. Moreover, the restructuring that was undertaken particularly for the Paris Club debts did not give sufficient breathing space and therefore, made the servicing of the debt difficult. An arrears of principal and interest was recapitalized to further compound the debt situation. Indeed, the rescheduling made debt service as well as the stock of debt to increase. For instance, the original value of Nigeria’s external debt which was $18.9 billion in 1985, increased to $35.9 billion as at 31st December, 2004 in spite of cumulative debt service payments of about $36.6 billion during the same period.(Ogunlana,2004) Nigeria was granted debt relief during the obasanjo civilian regime: that helped broke the ice on servicing of debt and hitherto pleas for debt cancellation. It is still rather disturbing that after the then debt relief the country has still been borrowing without any lasting show. (Michael peel, 2009) gave a sterling account of the path IFIs(International Finance Institutions) played in impoverishing the Nigerian economy by giving stolen proceeds a safe haven in their respective countries. His encounter with the Enrico monfrini, the lawyer charged with recovering the stolen assets for the Nigerian government placed enormous guilt on the west financial institutions as accomplices in corruption.
According to Monfrini, the modus operandi for the asset recovery was to place a bait for stronger evidences of aiding and abetting of illegal fund to the western authorities which was swallowed by the Swiss authorities which then having gone through the Nazi gold scandal issued alerts to hundreds of banks confirming the authenticity of the accounts provided by Monfrini. What is more shocking is the manner stolen funds moved from one country to the other. He said the suspected money laundering appeared to involve at least half a dozen countries on three continents leading to changing in the currency it was held before. With much resilience and commitment on the path of Monfrini,giant stride was achieved which includes repatriation of $500m from Switzerland in 2004 and $160m from Jersey in 2003. All recovered loot stood to the credit of 12bn by early 2009.
Here is a pointer to the basic banking practice the western financial system disregarded by providing sustained dictatorship around the world. Most notably in the 1999, the US Senate permanent subcommittee on investigation issued a stinging report on Citibank’s conduct in the Abacha affair with the document x-raying the sinister interest of the financial institution overriding legality/otherwise of its client money. The role of international banks in facilitating these kinds of transactions has become something of a célèbre (Michael Peel, 2009). Let us not forget the not-too-far case of DSP Alamieyesieyha the former governor of Bayelsa State arrested in London for money laundering in 2005. While I strongly agree that the Nigerian political office holder is found corrupt and dishonest, I only point again the aim of Western government or their over bloated financial institutions in aiding and abetting corruption. The New York Times reported after studying official state documents that the state poverty eradication committee received a little more than half of what was spent on toiletries for state officials between 2002 and 2005; the state had spent more than $25m on his official mansion. Over his six and a half years in office he allegedly racked up assets abroad of more than $20m and about $11.5m of that sunk in four properties in London. As at the time of this financial madness, Joseph, a London based attorney, put an allegation in which the former governor paid E6 100,000 of Bayelsa money in equal tranches into five bank accounts in the name of each of his children. He neither responded to the claim. Having been aware of this stack illegality and subversion of best practices, the banks and estate agents involved were undeterred in their dealing with the governor showing lack of probity on the path of financial institutions. These financial institutions rather zeroed in on their gains as trustees of the trustor not minding the manner the trustor acquired the trust. Although foreign dependence on loans might have diminished with the issuance of government bonds in funding deficit, the country continually depend on the west for foreign direct Investment and privatization of her enterprises. As earlier stated all these would not come to be if Nigerian is yet to agree to the deal of economic servitude or dependence.All the afore said is to point the mind of the audience to the fact that bail-out, loans or whatever it is from the west is a diplomatese for hegemony, dominance and self-assertion in the area of economy and trade.
I conclude here with the words of George Washington, the former US president who said “it is madness for one nation to expect disinterested help from another. The US does not have friends but interest” (Abbah, 1996).Hence help bail-out or loans from the West means dominance, buoyancy, hegemony or prosperity for the west and misery, servitude or subservience for the loaned.
3.0 THE DOOMSDAY SCENARIO OF THE WESTERN WORLD CONVEYING GREAT DEPRESSION FOR NIGERIA
The too-big-to fail economies that collapsed like a pack of cards during the global recession live an unprecedented mark in many countries, having been premised on the maladjustment of their economies.
History, as they say in economics would always repeat itself. Recession, downturn or meltdown as the case may be, occurred way back and funnily global economy had risen from that through timely solutions afterwards. That the world experienced an economic downturn during the 07-08 years does not spell a permanent doom to economic prosperity (albeit the prosperity achieved hitherto the latest economic meltdown were rooted in financial speculations, risk creation). The panacea is to look outside the box for hard-line solution to the economy malady.
In the light of the aforesaid, the problem needs to be understood, the future occurrences need to be nipped in the bud, and the status-quo needs to be changed. The first bug bear is to determine the economic recession and its co-comitant degree. It is perhaps at this moment axiomatic to stress the financial contraction of the world economic giants going by their antecedents in being the world movers and shakers. It is also disheartening to stressfully opine that massive wealth acquired by the capitalist few belies the expansive growth rate of the economy.
Before the bubble burst the wealthiest (especially in the US economy which is the prime mover of global economy) saw their income rose as never before. The Euro zone and European Union had lots of financial exposure by disregarding banking ethics. The result now is catastrophic. Global economy is on its kneel. Unemployment rate in the west has risen. Economic contraction has replaced expansion. Jobs are outsourced like never before to cheap labour, consumer spending is low which in turn has shot up social security for the unemployed. All these without an ounce of doubt portend little revenue for government and high expectation for government on the path of citizens.
The Western world having been trapped in her own nest shouldn’t be hoisted by her own petard. It was her making. She opened up the Pandora box. She should bear the brunt just like it was pointed out that recession is not new to global economy. The world has gone and come out of it. This would not be the last. My worry is to disillusion economies dependent on the US and the West for help/bail-out.
The West is going through all facet of reforms be it macro-economic or micro or even foreign to get herself out of economic quagmire. If would only be tom folly to posit that a man in danger would still afford to rescue another man in dilemma. Yes for a capitalist mode of economy, it’s all about exploitation; Moving and swerving to where labour, raw materials are cheap. That presupposes ordinarily the failure of one should be at the advantage of the other. That explains the loss of job before the outset of economic meltdown. Job growth for the US then was starkly insufficient for growing population. Manufacturing industries were leaving her shores for developing economies. Jobs were outsourced; being in realization of the aim of capitalism called exploitation (capitalism would even disregard theory of consideration for aim of greed/avarice). She brought out a policy for the wealthy in issuing tax cut even when foreign policies were of great expenses. Banking is greed and its unquestionable thirst for avarice is enunciated in its attempt for making super-abnormal profit forsaking nobility.
Globalization in tandem with trade market liberalization is now a huge pain in the ass for the European Union. European banks had provided an important helping hand in sponsoring the US housing bubble of the 2000s. It was later made clear that European banks had behaved especially recklessly in their gamble in foreign lands by tolerating a huge short dollar position that was outside the purview of European central bank and the US Federal Reserve (Bilbow, 2012).
That act of recklessness which banking is noted for created a financial contagion for the European Union. As bubbles were bursting in the US, more bubbles eventually burst in the euro zone which led to financial impairment. When a bank/insurance company has about 50% of its capital wiped out, it then depicts it as technically insolvent and chronically illiquid. The policy of fixing individual nation’s economy is fully operational as United States runs a deficit in budget due to massive stimulus packages pumped into the automobile industry to reduce unemployment rate. The structure has created huge deficit that got her president thinking on reducing the huge deficit to disallow passage of debt burden to future generation. Policies to bring back job to the US economy are underway with loads of incentives and tax rebate ready to be offered.
Decrease in defense budget of the US-for her defence budget is greater than the cumulative of what the whole world spends- is underway for the redistribution of spending to domestic and pivotal areas of her economy. Foreign diplomacy has been made the window of opening up of economic trade for more export for the US economy. The bilateral agreement/relations are having a segue from defence to economic trade. If the mighty US economy could be going through this trying to bounce out of economic recession, then nations especially Nigeria who are ready to kow tow to the US whims and fancies are suffering from illusion of bail-out.
The US is quite effete in bailing countries out even as already stated. When she had the power (way back during the heydays of budget surplus and economic prosperity) she decided to offer exploitation as a sine qua non for exploration.
The Euro zone which has a unilateral monetary policy has had her number 1 biggest economy based on size i.e Germany reneged on the stability and growth pact guiding the zone.With the European central bank(ECB) being the issuer of Euro-zone currency, member countries commitment to monetary policy is a dissideratum. In terms of inflation rates, wage to labour size, Germany having suffered for a while on deficit budget, reneged on the monetary rule of embarking on relative base disinflation(Bilbow,2012).ECB’s one size fits all monetary stance became relatively tighter for Germany than in countries with higher wage and price inflation.It has paid Germany by stimulating non-euro net export: being a converse trend from the regionally concentrated export experienced before and during euro-appreciation that made non-euro exportations unfavourable.It secondly gave Germany the comparative advantage of being a safe haven as interest rate and labour are cheap. With the seeming rise of Germany as a new super power in the euro zone, other members are crying fool for bail-out and economic rejuvenation. Germany’s discontinued obeisance to the SGP caused more harm to her counterpart in the increase of cross boarder trade and shift of labour. With Germany now left with a singular choice of either writing-off the bad sovereign debt marredd by other Euro zone member or bailing her own banks that are tedinically insolvent, it is most reasonable that a bail-out to her bank is the next port of call while she would prefer calling the shots to other members in term of relief or economic renaissance. This is the michiavellian method Germany used in making herself economically relevant in the euro zone.
All the aforesaid is to point to the mind of the reader the need for self evaluation. Proof of the Western grapple with the unherent doom caused by her own making is enough to promptly accept the Western incompetence in helping Nigeria for economic transformation. With the US trying to regain her lost power of economic dominance with new implementation of industrial repartration policy embarked on and also to urge deficit spending to keep unemployment rate falling to a considerable level by the President,it is therefore plausible that aid accorded Nigeria within this period of economy reappraisal would be paltry than it used to be even if there would be any.Afterall, as at the time of economic prosperity, aid received during them never transformed Nigerian economy.It was to whet the apetite of government and provide the keys for economic hegemony on Nigeria. Little wonder the growing concern of the United States about Nigeria and her security challenges,the raison de tre being economic interest/investments.
The EU has not fared better, with growing concerns for austerity, it is most certain her primary concern is to retrace her steps and begin an economic rejig. Days of pouring reliefs to Nigeria are temporary over although we too know well that the aid received are way too small for turning the ignition of economic transformation.
The Nigerian economy seems to have been left in the lurch. Solutions to her recurring problem of stagnation are beyond the reach of the West. The thought, search and look out should change and emphases should be on home grown solutions that would foster the much needed economic renaissance.The search for help from the West is quixotic; the looking inward for bail-out is mostly expedient bearing in mind of individual nations inventing policies that would suit her whims and fancies for accelerated development.
4.0 PRESENT ADDRESS OF THE ECONOMY DEPICTS INEPTITUDE
A continual repetition of same methods continually gives the same outcome. Her potential endowment in both national and human resources has been made unrealisable in terms of greatness due to the ineptitude on the path of government. How else would you justify the culture of squander mania that has become the norm of the government since post-independence, apart from corruption that her administrator indulges in, her account of outright wasteful spending on the international scene is plausible proof? It is always and has always been the manner the past administrators flex muscle to re-enact the illusion of her (Nigeria) being the giant of Africa.
Grants to the Angolan authorities by the government of Muritala Mohammed to the tune of $20m lends credence to my assertion even when the country was yet to take her rightful domestic policies authenticated. South African relief fund for the credit political support of anti-apartheid standing to the credit of more than $20 million never brought about any economic development to the country. Her peace keeping troops deployed to various trouble spot in Africa were of gallantry and self-assertion with even little or no respect for Nigeria.
This not only coughed substantial doles from her exchequer, it innocuously plunged her to insolvency with no economic gains. Nigeria with her past attitude of noblesse oblige is even more hated, loathed by allies she helped way back. She is accorded no deference but stack opprobrium. This policy of squander mania unfortunately is yet to be addressed by the current president of Nigerian with his acquisition of ten jets in his presidential fleet. While we talk of high unemployment rate and infrastructural decay, approval for the new N2.2bn banquet hall in the presidential villa was granted by the Federal Executive Council.This travesty of priority exudes the placement of inconsequentiality over national importance. Nigeria, which we know and are aware of, gains nothing at international meetings. Rather other world leader would strike bargains for economic trade knowing full well her penchant for importation due to her comatose manufacturing sector.Our President well abreast of this, still attends those kinds of international meetings or foura with high level delegates costing a hell on tax payers’ money. President and his cabinet are all tarred with the same brush of squandermania as exemplified with a minister of petroleum decision to spend N6.5billion for sensitization on the petroleum industry bill.
With profligacy showcasing high sense of ineptitude, its joint accord with absence of strong/viable institutions to checkmate waste has been a complementary reason for such ineptitude. It is almost incredulous so to speak that half a trillion dollars has been siphoned from public treasury to unscrupulous business icons since its exploration.One can only ponder on the perceived development it would have had on the Nigerian people had this sum of money been spent on for economic transformation.
All worrying and abhorring is the astronomical increase in emoluments of political office holders. It has been proven that an average Nigeria parliamentarian receives more pay than his America counterpart notwithstanding the level of development in American and that the American counterpart outstands his Nigerian counterpart (he achieves more with less while his Nigerian counterpart realizes less with more).These outrageous emoluments/salaries/entitlement have nothing to do with service delivery but a share waste of public money. Most of Nigeria revenue has always been to whet the appetite of her political office holder while leaving modicum for developmental process.This issue of outright profligacy and lack of strong institutions to checkmate financial recklessness further corroborates the woes of Nigerian being economically subservient to the west. This high degree of profligacy has caused tension in the polity and increased incidents of violence and killings. Everyone wants to get into a political office to enjoy the appurtenances and frippies of office by hook and cook. Records of electoral violence and post-election violence are a pointer to this.In all major elections held in Nigeria, the incumbent political parties possess an unfair advantage over other parties by the use of state resources attached to their offices in support of their campaigns. The resources in most cases are to cow, intimidate and subdue their opponent thereby making the election incredible.Elections are not won on the basis of robust debates, lofty ideals or plausible ratiocinations; they are won on the amount of money you spend on electioneering, recruitment of thugs and subversion of electoral norms. These are the progeny of profligacy and lack of viable institution.
Man likes doing things with impunity. He loves to enjoy laxity and latitude to the fullest. He hates being checkmated or regulated. That accounts for the principle of lassie faire, individualism and deregulation practiced at the west. Unfortunately politicians in nation love subversion of democratic norms, infraction of law and disobedience to stipulated guidelines. All these would have been minimized/brought to its kneeling had there been strong institutions to curtain this hyper-headed monster.
As it has been rightly pointed out that the west would hold it no duty in developing or helping her on the path of development. She (the west) would only forage areas open to exploitation for her continual hegemony over Nigeria. Nigeria was hit by the global economic crisis not because of her global integration with the world economy par se but because of her economic dependence on the west. With consumer price commodity soaring high, her ineluctable dependence for massive importation further improvised her citizenship that were doing no good before the onset of the economic meltdown.
Conclusively when profligacy reigns in an economy, then development bears the brunt. If there are no mechanics in place for such curtailment or oversight, it is further compounded with impunity as there isn’t any punishment for erring defaulters. With a bad economic policy of utter dependence in terms of consumables, that singularly sells your sovereignty for economic servitude and subservience constantly depending and affected by prices at international market. This is sheer ineptitude on the part of political holder of a country that goes through this economic malaise. Nigerian being case study.
5.0 VOLTE-FACE IN GOVERNMENT POLICY: THE KEY TO ECONOMIC TRANSFORMATION
Government holds the key to any transformation of her economy. In fact wise government amiably represented with a modicum of her citizens should make this its focal point in its day to day activities. Things have really changed. The whole world is replete of good leaders. They now go into extinction leaving behind leaders of double standard and double speak that talk the talk but do not walk the talk.They talk more but achieve less. They spend more to acquire little. They make new laws to break extant ones all in a bid to carefully navigate trouble waters or satisfy greedy and avaricious intentions. Even in the developed countries, America being a case study, it has now become obvious that the principle of populism & egalitarianism which were the functional building block of her formidable economic empire are skilfully exchanged for individualism and lassie faire. Little wonder such departure from the requisite acts created a deep mark of schism between the rich and the poor. Nigeria is not spared of this malady only that it has never attained/built herself an economic edifice going by her size and resource.The propensity of her potential greatness is clearly visible but her attainment is impossible owing to her flip flop policy bereft of methodical thoughts and logical solutions. It’s not about making plenty of promises; for your ability to deliver those promises is premised on the policies you embark on whether for more economic servitude or transformation.The present crops of leader to speed up these transformations are way too unready for this patriotic duty. What judgement have you on the slap-on- the-wrist punishment melted out to financial houses who decided to pull down the mortgage business all in the name of securitization in America by her present administration? it all boils down to careful navigation so that more money will flow and keep flowing for campaign and electioneering for more perpetration in office to enjoy the paraphernalia of office. For economic transformation, there must be a quick segue from what obtains before to what is to be which should then must be logically pursued. For Nigeria a country i cherish and love so much, the first pragmatic step i presume should take place is to be disillusioned that western financial policies of privatization foisted on the country will better her lot. Without prejudice to the western world i do not blame them when they logically convey their reason for this bold assertion. They continually posit that waste, rot, bureaucracy and mismanagement exist in governmental institutions and because of such should be shifted and controlled by private hands ardent on be profit maximization, management and quick decision making.That would be true in few instances,not in all circumstances. Recall that financial/Wall Street collapse of 2008/09 made clear that private investors might be reckless in appropriation of financial resources dangling with the fortunes of people’s money and not the bank/mortgages money. In privatization/deregulation so to speak, the policies guiding them are skewed in favour for the elite and perpetual stagnation the humble. Brian Browne in his plausible postulation posited that unlike a river that flows from its Source, money always flows to its source. Little wonder that foreign investors have made a killing out of the Nigeria economy with continuous exploitation of the masses.Wealth and assets would not move to the poor rather the little the poor has would go to where more money is. It’s thereby appropriate to disillusion and enlighten government that privatization would further and improvise and deepen the economic division of the rich and the poor citizen in their economy.
5.1 Lord Keynes Fiscal Recommendations
The world over government is concerned about unemployment and employability. It means in simple terms that its active labour force has not been fully utilized for productive venture. A high unemployment rate is a casus célèbre for a good government in quest for economic transmission and because of that mechanisms are put in place for the curtailment of this bug-bear.
The last section epitomizes the ineptitude of government in handling this problem. She continually posits that FDI, increased production/exploration of oil will stem the worrisome tide of unemployment. She is also quick to show statistical evidence of the GDP growth as a corroboration of her claim of economic development. This section recommends an effective fiscal policy implementation of lord Keynes theories as a sine qua non for progressive reduction which then put in good perspective, an increase in a certain sector of the economy does not actually transmogrify to economic development rather the effective fiscal policy recommend by lord Keynes, that brings the much needed/anticipated growth.
Keynes postulations are that;
• The appropriate fiscal policy during period of high unemployment was to run a budget deficit even though the conventional wisdom is that deficit budgets were always bad.
• Policy that directly targets the labour demand gap (opposed to the output gap) is far more effective in stabilizing employment, incomes, investment and balance sheets.
• unemployment problem can be solved speedily and directly by one primary method which is direct job creation through public works
In all the above postulations, one thing worthy of note is that unemployment can be brought down to a minimal level with governmental spending on public works/industrialization.This position can be attained by the government running huge budget deficits.Nigeria incurred debt through high recurrent expenditures. This goes at cross purposes with Keynes theory. Little wonder that unemployment rate continually goes up without any sign of coming down. Fiscal policy of government should directly target unemployment through public works.Hence there is the need for a change of thoughts from stimulating GDP growth as a panacea for economic growth. (Okun, 1962) himself cautioned that GDP-to-unemployment relationship is rather weak as a three per cent (3%) growth in actual GDP brings about only a one per cent (1%) reduction in unemployment. Hence effective fiscal policy through works (that is channelling government spending to infrastructural dearth) will reduce the rate of unemployment.
Fiscal policy begat industrial policy. Industrial policy begat industrialization which dovetails actualization of government budget (either through deficit funding) with realization. Industrial policy, if painstakingly implemented and applied effectively would bridge the much needed gap of the underemployed, unemployed into active employers and employees. Hence the mystique concerning industrial policy is to be understood and properly articulated.
This term is a conceptualized developmental phenomenon. This is a policy that marshals all governmental fait and largesse for the aim of productivity, competitiveness and full employability. Without prejudice to Nigerian, it is obvious for all that her economy is fully underutilized,the oil sector contribution to GDP notwithstanding. The industrialized nations of the world despite the their quantum leap in the area of massive Industrialization-being the progeny of industrial policy- continually make this their hard target in governance. I guess it is time Nigeria tapped from this policy of economic transformation in bettering the lot of her populace. Against the perception of the free market economy of demand and supply being the market determinant, it has been found that industrial policies of government has rather promoted private businesses.
Stimulus packages of the government in 2008 and 2009 to General Motors and Chrysler forestalled the inimical consequences of lay-out and unemployment by preventing bankruptcy of such company.In this subsection of industrial policy,i consider three sectors of the Nigerian economy the most consequential namely the transportation, energy sector and manufacturing sector.
Much needs to be done in the transportation sector, the roads and the air means of transportation are the only explored ones. The rail means is comatose, that has led to the congestions and gridlock encountered in the country. Even the roads are ramshackle.Account has it that Nigerian roads are worse off than the roads in war torn countries. That explains the extent of decay and degradation. If the railway could be brought back on track, modernized and expanded, the transportation sector will witness a great deal of improvement. This would ease traffic congestion and make production pay-out accessible and reachable. The multipliers effect of this would be to cushion the skyrocketed rent experienced in the densely populated areas of the metropolitan cities. By simple logic if I can get to my place of work within 30 minutes devoid of obstruction or transportation hitches irrespective of wherever I am in the country, settling down in a rural area would be the most preferred for the retrenchment of cost and saving for other pressing expenditures. Skyrocketed rents would plummet which on the long run will redistribute population from densely populated areas to less dense areas.
Another catalyst of the industrial policy of government should be the massive investment in the energy sector. This is the precursor for a viable and formidable manufacturing sector notwithstanding other ancillaries incentive like tax rebates, stimulus packages et al being discussed in that next sub sector. The energy sector is the prime mover of a nation’s economy. We all are aware of many industries that have folded up and left the shores of Nigeria due to epileptic supply of energy (by this principally, I mean electricity). There was a time the Northern part of Nigeria used to boast of strong textile industries absorbing a good number of the labour. Suddenly apart from other problems encountered, electricity supply was the main reason for their moribund states. This created high rate of unemployment.I was told a particular textile industry could boast of 60,000 workers. Consider that kind of industry and its likes folding up and then postulate the doom of unemployment spelt on the country.
Here, the policy has to be rigorous, comprehensive and reboust. Be it the generating, transmitting or the distributing part, the investment must be massive to awaken moribund industries and entice new ones in springing. The statistic within reach recommends 40,000MW of electricity as the benchmark for power stability for both industrial and commercial activities and here we are struggling to attain a 5,000 MW which periodically fluctuates. Many writers and analysts have written extensively on looking beyond hydro and thermal (although the sickly problem with Nigeria at times is one of a quintessential paradox, which loses 40% of the gas explored through gas flaring and yet complains about the inadequate gas supply to thermal stations) to other form of energy be it biofuel, solar and nuclear.
Worthy to mention is the fact that although the two already explained (transportation regeneration and massive energy investment) in the industrial policy would definitely jump start the much needed transformation. There is still need to extend acts of bail-out to the manufacturing sector to act as complement for economic renaissance. The issuance of tax rebates to nascent industries goes long way in creating the much needed incentives for proper start-up. I was astonished when I was told by a friend a few years ago that the then minister of trade and commerce in Ghana wooed investors to his countryside on announcing the resolution of the federal government in doling out a 10 year VAT-free policy for new industries. This sign posted an enabling environment for investors cum industrialist.
(6) OTHER ANCILARY SOLUTIONS
Nigerian government needs to attend to complaints by potential investors that cost of transacting business is high. This would be the apt stimulus needed in consonance with the already discussed i.e. bail-out for ailing/insolvent ones or favourable loans to encourage production. If the stock of Nigeria economy is taken, the active players are the expatriate who are even crying for more. Indigenous participation is low in the area of the oil sector which happens to be the mainstay of the economy or in the telecommunication industry which has only Globacom as the active participant though Globacom still continues to depend on the service of expatriate. Even there must be a call for FDI; it must be skilfully bargained to involve active participation of the citizen. It must move from the win-all policy of west to win some-lose some.This should be the quid pro quo for FDI.Latest trend of happenings show that cities and towns are insisting companies into infrastructural development must build some of the equipment in their homelands. An example to buttress this fact is a Canadian company Bombardier contracted to supply train cars in Toronto, manufactured the train and cars right in the city of Toronto.
I shake in utter dismay to the massive importation of nokia phones and electronics gadgets to Nigeria yet most of the companies aren’t compelled to site their industries in Nigeria. The reduction in the degree of outsourcing must reduce drastically to enable indigenous participation in the economy which would be made manifest in the production of gainful employment. In fact the theory should be ‘never import what can be locally produced’. Any time you ponder on the clement climate and rich human resources Nigeria is endowed with, you can’t help feeling sorry for her pitiable food importation. That is bunkum. It smacks of outright foolishness by underutilising your resources and fully harnessing and keeping flow the economy of other.
Diplomacy between countries has been elaborated to encompass economic diplomacy. Gone are the days when foreign diplomacy was restricted to travel, language and military. It has gone to mean opening new doors for export and bilateral relations. Other countries like China and USA have compelled their foreign diplomats to forage avenues open for exports. Nigeria must follow suit on this if she wants to be economically transformed. Otherwise the scores of diplomatic houses cum ambassadors she has belie the economic benefits. She spends more on foreign missions but gains little from it.This concept of integrating economic diplomacy into foreign policy would open new doors for export, rapid indigenes empowerment and increased G.D.P.
Diversification from oil as the foreign exchange of the country to other sources is of utmost importance. Oil is no longer a comparative advantage for Nigeria. With on-going search for other form of energy and increased discovery of oil in other African countries, it thereby means its dependence is overdue. Diversification is needed for continual relevance.
Exploitation of underutilized/unutilized human resources should begin forthwith. Nigeria has a lot of natural resources she jettisonedin pursuit of oil which is eventually becoming a glut with dwindling price at the international market.Continual budgetary preparation premised on its price at the international market is quite suicidal. Our comparative advantage is buoyant labour size, good weather and natural resources.These should be harnessed to the fullest. Germany deflated her wage to make her a safe haven as the investors’ choice. Nigerians could do the same to reflect cheap labour and production in centuries after all she is not obliged to any pact or treaty in terms of monetary policies.
If everybody plays by the same fair rules, mind one another business and mechanisms are in place for checks and balances, then Nigerian economy would experience quantum leap and would emerge as the first on the African continent. Continual dependence on the west and her policies will become a thing of the past. Then would the reward for hard work, competence and industry be realisable. Lending based on speculation would decrease while that to the real sector of the economy will increase for good.
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