Nigeria Matters

Yar’adua’s Regime: Getting Slow Or Getting Slog?

I have read Nigerian dailies and marvel why our president, Mr. Umaru Yar’Adua could bear “baba-go slow” as a label. Our destiny lies in our own hands, and I know that we all share that view. I shall not elaborate the agenda that lies ahead any further, but I can foresee the need to work together for us to prosper, if we so wish and as we have already started, to design the more specific policies that will be needed. I am also confident that, once Nigeria has clearly begun to set its house in order, we will find hands to support in this task.

Before the country was colonized by Britain, during the second half of the 19th century, the various nationality groups that currently make up Nigeria were largely an agricultural people. They were food self-sufficient and produced a variety of commodities that were exported overseas. British colonial administrators amalgamated (joined together) the nationality groups in 1914 into a larger economy for exploitation for the benefit of British industrial classes. Under colonial rule, Nigeria remained an agricultural country, exporting raw materials to Britain and importing from it finished goods. Therein lay the origins of the dependence of Nigerian economy on commodity markets of the industrialized Western world for its foreign exchange. While the industrialization of the country was discouraged, rudimentary foundations for a modern Nigerian economy, however, were laid. Colonial economic policies shaped future independent Nigeria‘s economy, particularly in marketing, labor supply, and investment. The process of colonial rule and formal economic exploitation ended in 1960 but left Nigeria a relatively strong but undiversified economy. Thereafter, Nigerians were poised to remedy this defect and to build a self-sustaining Nigerian economy comprising agricultural, industrial, and service sectors.

From independence in 1960, the state took up the direction and planning of economic growth and development. Education was progressively expanded at all levels to reduce the rate of illiteracy and to provide the requisite skills and labor force for development. Infrastructure of roads and communication networks were constructed far beyond what was inherited from colonial rule. Hydroelectric dams were built to generate electricity. Secondary industries and automobile assembly plants were established to create more employment opportunities. Because of the paucity (small number) of indigenous (native or local) private capital, these activities were undertaken and financed by the government, often with foreign assistance from such countries as Britain and the United States. Foreign oil companies, such as Shell-BP, Exxon-Mobil, Chevron, Agip, and Texaco, operate in partnership with the government in the oil sector, the mainstay of Nigeria‘s economy. The capital-intensive oil sector provides 95 percent of Nigeria‘s foreign exchange earnings and about 65 percent of its budgetary revenues.

Because the established, government-owned industries and businesses were often inefficient and corrupt, productivity was low at best. In particular, mismanagement and corruption were endemic (characteristic of) in the successive governments and throughout the nation. However, the gravest problem was caused by the government’s decision to stress the industrial sector above all others. Caught in a web of competing demands for scarce resources, the officials took the path of rapid, large-scale industrialization at the expense of the agricultural sector, as well as light manufacturing. They directed the bulk of investment capital towards the promotion of what Western advisers captioned “industrial take off.” This decision to abandon the known—agriculture—for the unknown—rapid large-scale industrialization—was a fundamental error. The capital and the skill needed for rapid, large-scale industrialization were not sufficiently available. Thus, an unskilled workforce and insufficient funds severely handicapped the industrial sector. Also, Nigeria‘s neglect of the agricultural sector aggravated already problematic food shortages. Nigeria had raised enough food to meet domestic needs during its colonial period and in the decade following independence. However, it experienced food shortages in the 1970s and 1980s, which necessitated the importation of food from foreign countries. Among the imports were palm oil (from Malaysia), of which Nigeria had been the world’s largest producer and exporter, and rice (from the United States) which was considered less nutritious than Nigerian brown rice. Once Africa’s largest poultry producer, Nigeria lost that status because of inefficient corn production and a ban on the importation of corn. Furthermore, it is no longer a major exporter of cocoa, peanuts, and rubber.

Economic Reforms in Nigeria had been introduced in 2003, that is, during the administration (second term) of President Olusegun Obasanjo. The reform program started on the basis of the National Economic Empowerment and Development Strategy. The aim of the Nigerian government was to improve the macroeconomic environment and to control the public expenditure management. Stress also had been given on the structural reform. This direction was deemed necessary for these reasons: (a) During 1999, most of the human development indicators of Nigeria were not good in comparison with the other least developed economies,(b) Nigeria depended strongly on the oil export business which led the country towards macroeconomic volatility, for the oil prices were not stable all the time. (c)The annual Gross Development Production had been decreasing for a long time, for example, during the period of 1992 – 2002 the average annual GDP growth was 2.25%(d) Volatile fiscal spending were making the country’s macroeconomic conditions unstable (e) Private investments were not coming in this volatile economic environment, and the government’s expenditure was raising (f) The employment rate in Nigeria was low. Moreover, the domestic business climate was also getting worse because of this unstable economic situation(g)The amount of domestic debt was increasing and so was the rate of inflation. In 1999, the inflation rate was 10.4%, whereas in 2003 it climbed up to 21.8%. The Nigerian citizen’s average income per capita was very low, below 300 dollars.

Our business is a business in new, reviving Nigeria. We may not only lay the basis the nation’s economy, but also we shape the social base of the country — its middle class. For us, as well as for all citizens of our country, such values as a life in Nigeria, national revival, freedom, family, the order and stability in a society, social and interethnic partnership, mercy and validity are important. It is characteristic, that high rates of economic growth are provided mainly not due to the traditional raw branches, a favourable conjuncture and the high prices in the world market on separate kinds of raw material and materials, and due to serious structural shifts and an intensification of the manufacture advancing developments of branches, focused on release of ready competitive production and rendering of modern services.

Due to what factors and preconditions for last years will reach high and steady economic growth? Certainly, it is a complex of factors – political, economic and social. But in a basis of each of them – the national model of market reforms developed by the President of the country. One of primary factors – stage-by-stage perfection of structure of the economy, most full was equitable interests of the country. Structural reorganization and increase in a share of branches with deep

Hopefully, we will see governments elected in succession here, with competing parties and feelings of participation from all parts of the country. Yet this present period is critical. Unless a firm foundation is established now, politically and economically, there is no guarantee that democracy will survive nor economic hopes realized.

That is why the international community is watching the Nigerian economic reform program so closely. Now encompassed in the National Economic Empowerment and Development Strategy (NEEDS), it lays out a program of fiscal reform, transparency, countering corruption, investment in badly needed infrastructure, revival of agriculture, investment in health, and opening opportunities for the private sector. As these reforms move forward, the Nigerian government hopes that the international community will respond with significant reduction of Nigeria’s debt and increases in foreign investment, especially in the non-oil sector.

A second barrier is that such reforms, largely macroeconomic, do not translate into immediate benefits for the population at large, the majority that is experiencing severe poverty. Indeed there is pain for many in the short run, with higher fuel prices, unsettling changes in key institutions like the banking sector, and continuing unemployment. The results of macroeconomic reform are always slow to bear fruit for the economy as a whole. It is one reason that such programs are often abandoned before such gains are realized. In Nigeria, the problem is compounded by institutional obstacles – and I include in such a euphemism corruption — to delivery of services and public investment, obstacles that exist from the federal government on down through state and local governments. In sum, people do not feel that the reforms are for their benefit if they are real at all. There are exceptions, of course: Governors and local governments that are making serious investments in infrastructure, water, education, and industrial development; federal programs that are adding to the power grid revive agriculture and improve access to safe drugs. But these programs are not extensive enough to overcome the sense of déjà vu, of continued economic torpor, and of favoritism in the access to riches.

Is this skepticism justified? Like most complex questions, the answer is mixed. There has been real progress on reform in Nigeria in transparency of budget allocations, in improved revenue collection, in fiscal discipline, and pending reform of the financial sector. Steps are being taken to monitor government contracts and to bring to justice those engaged in financial crimes. Growth may reach 5% this year, though some of that has to be credited to climate. Inflation is trending downward. Plans are under way to audit the entire oil sector, as a prelude to Nigeria meeting the criteria of the Extractive Industry Transparency Initiative, to which Nigeria was an early signatory.

On the negative side, there are still exceptions made to the rules for favored interests, sometimes with trade decisions, sometimes with contracts or other transactions. Hardly any who have been charged with corruption involving government transactions have been convicted. Privatization has slowed. Questions continue about the proceeds from the oil sector, some perhaps exaggerated or based on rumor, but some based on the government’s own investigations. The pathway to private investment, as this conference has detailed, remains filled with bureaucratic and financial obstacles. Problems of infrastructure – power especially, but still also telecommunications, roads, and railroads – make Nigeria increasingly less competitive in a globalizing economy. Above all, as pointed out earlier, poverty remains the overriding fact of life for most Nigerians.

Then there is the state of justice. To reduce corruption, achieve transparency, and strengthen accountability, there must be justice. Nigeria’s once proud system of justice, in particular the judiciary, has lost much of its luster. That feeds the skepticism about the anti-corruption drive as well as the prospects for personal security. Restoring the independence and capacity of the judiciary would also restore confidence to Nigerian and international business that Nigeria is a predictable investment environment in which commercial and investor rights are protected, and disputes are resolved in a fair and unbiased manner. Perhaps this is an area that Nigeria’s strong bar association and legal community can take on as their cause.

The problem of food shortages and imports was addressed in the late 1970s and early 1980s. In the late 1970s the military government of Olusegun Obasanjo embarked upon “Operation Feed the Nation.” His civilian successor, President Shehu Shagari, continued the program as the “Green Revolution.” Both programs encouraged Nigerians to grow more food, and urged unemployed urban dwellers to return to the rural areas to grow food crops. The government provided farmers with fertilizers and loans from the World Bank. The food situation has stabilized, although Nigeria still imports food. A related problem which has not been completely resolved is the pollution of water in the Delta region and Ogoniland by oil companies. Water pollution disrupts farming efforts and has been a source of friction between farmers on one side and the national government and the oil companies on the other.

The oil boom which Nigeria experienced in the 1970s helped the nation to recover rapidly from its civil war and at the same time gave great impetus to the government’s program of rapid industrialization. Many manufacturing industries sprang up and the economy experienced a rapid growth of about 8 percent per year that made Nigeria, by 1980, the largest economy in Africa. The growth, however, was not sustained. The new oil wealth did little to reverse widespread poverty and the collapse of even basic infrastructure and social services. The iron and steel industry, started with the help of the Soviet Union, still has not achieved a satisfactory level of production. The oil boom also provoked a shortage of labor in the agricultural sector as members of the rural workforce migrated to jobs in the urban construction boom and a growing informal sector. When the price of crude oil fell and corruption and mismanagement still prevailed at all levels, the economy became severely depressed. The urban unemployment rate rose to 28 percent in 1992, and crime also increased as 31.4 percent of the population lived below the poverty line.

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