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Misgoverned Economy: Can Nigeria Survive?

It is no longer strange that Nigerians are expecting a lot from Yar’Adua’s administration. We expect them to convert resources and opportunity into a gainful economy that can produce Nigeria’s socio-economic restoration. I’m not a political scientist but when politicians aren’t doing what they were elected to do and no one likes the bills they pass and for that matter a good number of people aren’t sure they were properly elected anyway (yes, on both sides), you have to wonder if we aren’t seeing the outlines of a crisis. Not that it really matters now that the aliens are here. The task of modernizing Nigeria’s economy is extremely arduous. With the distinctive duo of Major General Muhammud Buhari and former Vice- President Atiku Abubakar off his back, President Umaru Yar’Adua, no doubt has no excuse not to deliver.

In 20 years time this government and their lineage will look back at the state of the programmed economy now and remember one of the most catastrophic events in Nigerian political history:-One step forward, five steps backward! This Government giving money, lavishing the economy, destroying what the elite has put in place and taking away our wealth and telling people. Most of who are severely in debt, to spend. They seem to have gotten an opportunity for self-aggrandizement and pursuit of narrow interests. All this money will go to leisure, pleasure and bogus activities with the manufacturing and producing concerns of the country benefiting nil. No wonder illegals and refugees arriving from Indonesian, China, Lebanon, India and Middle East safe haven say when intercepted “we come here because your Government gives free gifts”. Why not give the money to schools and Universities to help the failing battle to produce a smart country for the future? This Government is attempting to buy popularity and the majority will suffer terribly as a result in the not too distant future

It’s sad, but a lot of people are going to hear about the decision mode of government in Nigeria in places like this before they hear about it in the mainstream media. Yes, nigeria4betterrule did break this as their top story on their evening news. And they did a very good job. But the story is nonexistent pretty much everywhere else, as it was the day the story broke. Remember when theNews Agency of Nigeria reported, maybe a year-and-a-half before the distress started, that the Yar’Adua administration was drawing up and reviewing pre-ravel plans for Nigeria? (Some official gave some line about preparing for every possible scenario, but, come on.) You do? You don’t? ,Maybe? It didn’t get much play, either. So, here we go again. If ever so faint, the drums to the march of austerity measure are sounding again. And we just happen to have ships gathering near oil-budget, to show the strength of this government. No doubt.

Probity and respect for the rule of law should had remained the key word and deed of this regime, but despite the much promised full weight of the rule of law and absolute zero-tolerance for corruption in all its ramifications, this government allowed abuse of public trust through misappropriation, misapplication, or outright stealing of public funds without the full weight of the law reckoning them. To disregard their functions for which we believed they were capable to handle, we all conducted ourselves but with the highest degree of impunity and in total and absolute disregard with the rule of law, they are still loot even as oil is falling, they don’t care if Nigeria is drown . This Administration now seems to tolerate disrespect for law and order, established rules, regulations and procedures.

That this government has lavish our oil windfall rather than saving them for moment like this; what we can now tag oil-hurricane due to oil price decline, to at least take the time to determine what manufacture Nigeria needs. If it’s made sense, it would have help save a few jobs along the chain – primary producers, manufacturers, transportation, wholesalers, retailers, etc. Maybe the jobs saved will include those of friends and family, and there is the added bonus that the goods should last you a few years. If keep relying on ‘made in China’ it will only help a few importers and retailers, save a few overseas jobs, and will probably fall apart by New Year’s Eve. Think about it! From a contribution to GDP perspective, every new construction activity creates jobs, creates demand for steel and cement, and therefore adds to GDP numbers. But are we subtracting the productivity loss created due to this urban chaos? Isn’t that called “uneconomic development”?

Though Nigeria is blessed with abundant lucrative resources, nature and creatures, but however lacks social responsibility. Same is the story of many other Nigerian entrepreneurs in Abuja, Lagos, Port Harcourt, Kano who are busy growing their personal net worth and have these trial beliefs in benefiting their offspring only and in the process they’ll leave behind ugly concrete structures and traffic jams.

Development across 600,000 Nigerian villages could appear impractical and adding millions to already strained urban areas would not be ideal. Dealing with the land zoning regulations that exist all across Nigeria can be meaningful. Currently, this issue had deterred this government vision on setting up are on land that is designated as “Agricultural,” making it of limited value. The government in some cases has bought the land, re-labeled it as “industrial” or “urban” or what not (only the government has the power to do this in Nigeria, I forget the exact provisions in the Nigerian Constitution on this though), and turned around to sell it to developers for a huge profit as its value is now much greater since it can be used for more than growing vegetables. How would your proposed residence plan get around this? While I find your plan appealing, it seems that the incentives are aligned completely against it happening as removing zoning restrictions requires action on the part of the state or national government. These governments’ politicians gain more if they make some $$$ “transforming” the land from “agricultural” to “urban/industrial” for friends or developers with deep pockets than if they pass a law eliminating zoning altogether, allowing private players to buy land at market prices from farmers and thus allowing white elephant projects to be undertaken.

One of the biggest issues for urban development is the land use pattern in Nigeria. Unlike all other major countries, most of the land mass in the country is claimed by someone or other who has been staying there for centuries. Almost every Nigerian state is quite densely populated, which is rather unusual. Among other major nations if you see the population distribution, Canada is just a line running parallel to US border, Australia is just the coasts, Brazil and China mostly concentrated on their dense east coasts running few hundred miles interior, Nigeria is just few pockets on their European portion and even US has vast tracts of emptiness in interior – Montana, Wyoming, Dakotas, Nevada, Arizona, where each of the state just have 1-2 major cities holding all the effective population.

This unusual population distribution for a major country is both a challenge and opportunity. It’s an opportunity for telecom and retail services that could utilize a vast spread, but for urban development it is an utter mess. You cannot do in Nigeria like taking a vast tract of land in Nevada desert and making into Las Vegas. For any major project you need mass displacement, and mostly displacement of poor and uneducated that are little prepared for job opportunities offered by the development project.
A good example is Abuja. For its skyrocketing land prices, we would expect the poor to sell off their lands and can coast of their rest of their life just in the interest income. A 500sq ft shanty might get them N50million in some places and even if they get 10% of it and put it in a fixed deposit they could get N500, 000/month and hang up their boots. But, these are not happening, leading to more inflexibility in land development.

If Mr. President wants to stimulate Nigerian economy and get people to take holidays cake, Why don’t he release his frequent flyer points agenda alias ‘7-points’ into the community. China has similar examples as well. So far, however, summarizes it, China has been achieving 8% annual growth rates and saving 45% of GDP, while Nigeria grows at 7% with 20% savings. China mostly borrows Western technology and products, while Nigeria can be acknowledged to have innovative products of its own emerging with international competitiveness. What is also true is that Nigeria has a heavier traditional sector. All the achievements are outside it. The modern sector, like Infosys, is associated with the world market rather than the domestic national economy where two thirds of the population continues digging into the soil as 200 years ago. In this sense, the Chinese model is, perhaps, more organic: it is not racing for efficiency; there is no goal to win the international competition for innovations, the focus is on exporting labour-intensive and inexpensive products, even though increasingly sophisticated. Competitiveness is achieved through cheap labor. Incidentally, that is the key competitive advantage of the Nigerian economy, too.

Essentially, the gap in the level of development and well-being between the leading countries, all from Europe and America plus Japan, and the countries that kept traditional agrarian economy and feudal social arrangements, consisted in the fact that the former entered the era of industrialization and urbanization earlier than the latter. But then the fruits of industrial economy and technology became gradually available in other countries, and they too followed in the steps of industrialization, one after another. Like Japan, in joining the developing countries Nigeria was still noticeably behind, primarily in terms of those relations that created the development momentum and laid the foundation for modern economic growth—let us remind you that we are talking about market mechanisms, private property and competition, as well as the supporting institutions (supremacy of law, independent judiciary and democratic political system).

But Nigeria was seeking other ways to catch up and finally found one in the form of planned economy, industrialization at the expense of the peasantry, and totalitarian political regime. For some time it seemed that the model adopted for closing the gap, or the catching-up development model as they called it later, was being successful and could present an alternative to market economy. Many countries tried to implement it. But eventually it became clear that Nigeria’s system is flawed and cannot compete with the market economy.

The industrialization era takes the human civilization to a brand-new level of development—from an agrarian economy that dominated for thousands of years to an economy of innovations or communications (whatever you call it), which is also likely to be fairly stable, at least less fraught with revolutions, technological or social. The end of the industrial era also implies changes in the demographic profile: from large to nuclear families, from a rapid growth of population to a stationary or even diminishing population, to a growing life expectancy and aging population. What is particularly important is that countries experience the transition as they industrialize an urbanize, so that their share in the total population and global production changes in favour of the least developed countries.

There were times in the 1950s when these problems were not as acute, and a calmative theory dominated: sooner or later, all countries and nations went through the industrialization stage, and a pattern of stationary population will become established everywhere with the same percentage of children and senior population. It is precisely a fact that the agro-industrial transition is an extremely non-uniform process that brings about severe strains and cataclysms in relations among countries. First, under the temptation of growing power leaders seek to redistribute the world in their favour. The contradictions between the former and the accelerating “chasers,” as in the case of England and Germany, became one of the primary causes of World War I. World War II was also between the developed industrialized countries, but this time involved the periphery as well. The recent confrontation between two blocks, two ideologies, is still circulating in the framework of perceptions of a world where the circle of strong industrialized powers capable of managing it is pre-defined. Each of the superpowers enlists allies ignoring that the effect of supporting them is, more often than not, much less than the costs. But then we can see the collapse of a colonial system that took 200 years to build. China, India and a multitude of other countries gained independence. China built momentum with high growth rates starting from the late 1970s when Deng Xiaoping introduced his gradual market reforms, and same India starting from the 1990s.

Even prior to that, Japan had started demonstrating its” economic miracle” in the beginning of the 1950s, winning markets with high-quality products. In essence, its model of catching-up development has been used by the “Asian tigers”—South Korea, Taiwan, Singapore, Hong Kong, as well as Malaysia and Thailand. Unlike Japan, where industrialization started earlier and was interrupted by World Was II, they underwent industrialization virtually from scratch, always under rough authoritarian regimes (or foreign administration, like Hong Kong). Visible shifts also occurred in other parts of the world, less dramatic, though. Latin America developed noticeably slower, no “miracles” observed. No innovation-related achievements have ever been noticed in any of those countries. That is also true for the above East and South Asian countries, except for Japan and, perhaps, Korea. As previously noted, the developed countries that completed their industrialization period and entered the post-industrial era, still leaders of innovation, changed their demographic profile as well: the population ages and either does not grow in number, or diminishes. That is why the period of the post-war economic boom took place when favourable conditions were created for immigration, thus generating the current complicated problems of poly-cultural society. Japan had a similar picture, only no immigration of any significant scale has been noted there as of yet. The Japanese are expecting the population on its islands to fall down to 90 million people by 2015 compared to 120 million now and intend to make agreements with some neighbours, which will cover immigration issues. The Chinese population is growing at a relatively slow pace, but this is the consequence of a long-standing restrictive government policy that has long generated severe problems, but still remains unchanged due to overpopulation concerns.

There are plenty of explanations to talk about; the British legacy that brought multiple ethnicity into one state by way of a Constitution, language and lines of communication; and the founding fathers of independent India managed to preserve that legacy. Others mention the role of the traditional caste system, which was formally abolished, but informally continues to exist and practically excludes a significant part of the population from political life by supporting some kind of eligibility qualification of origin. This democracy turns out to be elitist, which makes it effective, though. Beyond the modern sector, these circumstances may create significant impediments for the development of the traditional sector. While this civilization, like China, is going through the industrialization phase, institutional and cultural issues can wait.

But with time, they will aggravate. Is India and China in different paths? With incite from a popular article “the Chinese Are Copying, the Indians Are Inventing”, one would tell about the development of an ultra-cheap car by Tata Motors. But behind this case is a sensation in the world of experts who expected a similar step from the Chinese, the world’s third largest car manufacturer. But it was India that did it by abandoning the idea of reducing the price of existing models and offering a brand new one. Far-reaching conclusions are being made from this sensation: which of the two catching-up development models—Chinese or Indian—proves to be more efficient. Between the two models are not only political differences, but different institutional systems built in the course of modernization of these countries. The Chinese model, more popular in Nigeria, now relies on the state and state-owned companies as well as on foreign investment raised on the terms of local production of components, transfer of technologies and exports of a certain part of products made in China. Two thirds of Chinese exports to the US, which exceed $200 billion a year, consist of products manufactured by companies built by American investors.[China-Daily.2006.29.Dec.]. They are happy to have a chance to make products that already exist, say, in the US and do not hope to create something of their own straight away, let alone something original.

Brazil is a Christian, Catholic country with visible religious influence. It is still in industrialization, even though it has made more progress in this area than India or China. Productivity is higher, just as the population’s income. But the population is growing rapidly. Brazil does not a make a difference in terms of high GDP growth rates (2% a year in 1990-2004), but it has attracted the attention of the world due to its potential opportunities. So far, the potential is underused. the reasons lie in macroeconomic uncertainty, and reactive nature of the government policy .

For Nigeria, Natural resources are abundant, but production is insufficient. This government should avoid an ad hoc approach to determining gaps and more importantly, prioritize among competing infrastructure needs. To do this, we need to undertake a comprehensive scan of the policy infrastructure to determine all the gaps and compile the findings in one report that is shared with the executive as well as the minister(s). The risks associated with not having access to the right type of infrastructure like– decision-making is not evidence based; – poor understanding of the dimensions of the issue/problem potentially ,leading to misdirection of funds; and – Nigerians have limited means of keeping current on issues and trends thereby limiting their capacity as policy advisors. The main risks associated with not clearly defining the problem are: – not targeting the right problem; and – misallocation of resources.

Depending on the policy issue you are dealing with, here are some types of comparisons that can be helpful in the process of trying to understand the dimensions of the problem: • trends at other similar locations within your jurisdiction (between neighbourhoods, districts, communities, ecological areas, sectors, etc.) • trends in other Nigerian jurisdictions; • data on national averages; • data on city-wide averages; • historical data (which may point to cyclical trends; or may lead the analyst to see that the current situation did not always prevail thereby leading the analyst to “drill down” further to determine what events/conditions have produced the present situation – understanding this can help in directing you to the potential solutions to the problem); • international trends.

The main risks associated with not properly analyzing the issues are: – unreliable basis from which to develop policies; – decision-making that is not evidence based; and – policies that have not worked well in other jurisdictions/similar contexts may be repeated unknowingly. Do we have an understanding of the problem in terms of its scope? This means obtaining quantitative and qualitative data to substantiate that there is a problem. (e.g., it is not enough to say, “Housing quality is declining in a particular neighbourhood and there is a fair amount of turnover in the housing market”). One needs to know the number of dwellings in decline and the rate of turnover. Whether policy options and policy implementation strategies are dealt with together or separately, the key here is that policy needs to frame the exercise of coming up with implementation options. If this government jumping right to policy implementation options one runs the risk of not being sure if one is addressing the actual problem or only the symptoms.

Developing implementation options without having received direction on the desired policy is to put in place programs or initiatives in the absence of a clear understanding of why something is being done. For each policy option identified above, this government should produce several alternative approaches to implementing the policy. Taking the first policy above, some examples of implementation options might be: Providing a loans program for rural set-up; Providing loan guarantees for new strategy towards the 7-point agenda; Funding re-training for persons interested in working in certain retrospect of the Yar’Adua targets; Providing seed money for feasibility studies and economic plan development towards the 7-point agenda. So, for Nigerian overall development, we need politicians with guts, businessmen with vision and education for everybody.

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