BY LEKAN SOTE
It’s good for you to know from the onset that no economy has a surfeit of material goods to satisfy the wants and needs of every citizen in a political realm. That must have informed the classic definition of economics, which is said to be the rational allocation of scarce resources.
Like Charles Dickens’ orphan, Oliver Twist, human beings will always want some more. If you ask Africa’s richest man, Aliko Dangote, he will tell you there is something else that he is desperately looking for.
Because of the scarcity of supply of all commodities, that is, agricultural produce or industrial manufactures, every society devises a procedure for managing demand made by all economic agents, meaning the producers and consumers.
You would have noticed that those who supply finished goods initially demanded for the raw materials, supplies and overheads that they transformed into consumer goods that are demanded by those said to make effective demand.
But suppliers will never be able to supply everything that is demanded. And whatever is supplied will be subjected to the principle of equilibrium, which leads to an acceptable price as it provides a meeting point for demand and supply.
Recent swings in food prices are demonstrating that demand is finding it difficult to cope with scarce supply. A recent report indicates that a bag of garri Ijebu and a bag of ewa (beans) oloyin that were respectively sold at N11,700 and N32,125 in March 2022 were sold for N15,000 and N35,700 in April 2022, an interval of just one month.
As always, the International Monetary Fund, which never sees anything good in the economies of developing nations, is just too happy to announce that food insecurity is already staring Nigerians in the eye.
“Three major elements that work against Nigeria’s capacity to produce what it consumes are low technological capacity, paucity of financial capital and inadequate human capital, all caused by unimaginative leadership that fails to appreciate the submission of Obafemi Awolowo, first Premier of Western Nigeria, that Man is the beneficiary of his own benevolence
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One must admit though, that the insecurity resulting from the nefarious activities of renegade insurgents, bandits, (who have now been designated as terrorists), and cattle herders who prey on farmers; and thereby collectively discourage farming, helps to justify IMF’s claim.
Three major elements that work against Nigeria’s capacity to produce what it consumes are low technological capacity, paucity of financial capital and inadequate human capital, all caused by unimaginative leadership that fails to appreciate the submission of Obafemi Awolowo, first Premier of Western Nigeria, that Man is the beneficiary of his own benevolence.
To turn a phrase credited to a motivational speaker and writer around, you can only get what you give. Or to put it in the way of the religious brethren, you can only reap what you sow. If you sow cassava you will not reap cocoyam.
What this means is that Man, as an economic agent, uses resources available to him to provide for his material needs. So if Nigeria cannot come up with appropriate macroeconomic policies to produce its material needs, its citizens will have to do without– or import, if they have the money.
A recent Central Bank of Nigeria quarterly report on Foreign Exchange Flows into the Nigerian economy shows that Foreign Direct Investment (FDI) into Nigeria dipped by $9.58 or 31.7 per cent, from $30.2 billion to $20.62 billion.
This leads to a two-fold problem: There is lower availability of foreign exchange to pay for all categories of economic inputs that have to be imported into the Nigerian economy. Also, adequate capital won’t be available to fund the nation’s economic activities.
What this means, in real terms, is that there are reductions in investments in revenue-generating assets, (make that plant, machinery, manufacturing raw materials, supplies and overheads), necessary for the production of all categories of consumer goods.
If you believe Prof Barth Nnaji, former Nigerian Minister of Power, who says that Nigeria must generate, transmit and distribute at least 100,000 megawatts of electricity per day in order to produce the material needs of its more than 200 million citizens, you probably know that the less than 4,000 megawatts currently generated won’t pass for more than a mustard ssed.
This electricity infrastructure deficit limits agricultural and manufacturing productivity. And the scarcity of goods that is caused by that limitation raises the costs of whatever consumer goods the economy tries to produce.
Only the pockets of economically harassed rich and poor Nigerians can eloquently tell the tale of the woe that emanates from the high prices of consumer goods that result from the scarcity in the economy.
Olamilekan Adegbite, Minister of Mines and Steel, who admits that Nigeria has about 70 per cent road infrastructure deficit, may be hinting at more than he realises. Accountants say assets, that include infrastructure, are capable of producing future streams of revenue.
Economic output in a country is directly proportional to the availability of infrastructure. Indeed infrastructure is the foundation of the economy of any nation. And an economy can only be described as being modern from the extent and scope of its infrastructure.
All forms of transportation –road, rail, maritime, air, even the Internet– are basic to the productivity of any economy. An economy prospers according to its capacity and ease of moving goods across space over time.
American writer, Vance Packard, argues that roads, (or transportation in general), define the modern city and its economy. You will see rapid growth in the economy of Lagos State as soon as the Lagos Metroline (railway system) goes on stream in the first quarter of 2023.
An economy with low productive output must resort to importation to make up for its needs. It is needless to add that such an economy will necessarily be in need of foreign exchange– to fund its imports.
By insisting that European countries that want to buy its gas must pay in Rubles, Russia’s currency, Russia is definitely ramping up demand for; and causing artificial scarcity of, the Ruble. Of course, the loss of value suffered by the American dollar will be the gain of the Ruble that is probably on its way to becoming an international currency. That will be the classic play out of the economic aphorism that increased demand for a commodity, even if it is the currency of a country, causes scarcity. That scarcity, in the case of the Russian Ruble, raises the currency’s exchange rate.
Still on the dearth of transportation infrastructure: There is a great agony associated with the clearing of imported goods at the Tin Can Island Ports whose capacity is only one-third of goods freighted to Nigeria.
As goods stay almost forever in the ports, whilst also attracting demurrage, obsolescence and spoilage, all categories of goods, initially stuck in the ports, will eventually get into the market at exorbitant prices.
It’s a no-brainer to add that increased demand for foreign currency needed to pay for imports will inversely weaken the currency of the importing economy against the currency of the economy that is doing the exporting.
It gets even more compounded when business is so bad for corporate entities and government agencies who receive very little revenue, and therefore have difficulty in getting enough local currency to procure the foreign currency needed to finance the importation of needed goods.
Nigeria’s political leaders and their economic planners must challenge themselves to find novel ways to acquire the technology, capital and manpower needed to produce the material needs of the people and wean Nigeria’s economy away from the port of imported consumer goods.
