OIKONOMIA WITH LEKAN SOTE
Now that it appears that the government of President Bola Tinubu is ready to make good on its promise to rev up the economy, it is apt to encourage him to look at growing the economy from within.
While nothing is wrong with attending the G-20 Meeting in India and his next effort to woo investors in Riyadh, Saudi Arabia, it is not quite enough. This was confirmed by the President’s remark at a recent retreat for ministers, presidential aides and senior civil servants.
The President (somewhat) acknowledged capital flight with the remark that investors who accompanied German Chancellor Olaf Scholz to Nigeria asked “whether they can bring their capital, repatriate their dividends, or, if not satisfied, take their capital away.”
Something is wrong with the government’s fetish for the blind invitation of Foreign Direct Investors to bring in capital, technology, expertise and managerial capabilities to exploit the primary resources of Nigeria.
This policy prevents local enterprises from effectively competing against foreign investors who come with cheaper funding and the advantage of large-scale production that spans throughout the world.
Those who run Nigeria’s economy seem intent on expanding the economies of the metropolitan countries instead of expanding the number of the local merchant class.
The President should take the counsel he gave to ministers, presidential aides and civil servants to “let (their) achievements be home-grown.”
The 50 million citizens that he intends to take out of poverty should become entrepreneurs.
When former President Olusegun Obasanjo said that Nigeria was a trading post for the metropolitan economies, he meant that Nigeria was a mart for the exchange of consumer goods between local buyers and expatriate sellers in foreign economies.
See how the Nigerian economy works: Foreign investors bring their capital to engage Nigeria’s labour and infrastructure to exploit Nigeria’s primary resources that they ship back to their home economies to be returned as consumer goods.
Imported capital is used to pay royalties that governments use to pay government workers and government contractors. Both, in turn, use the money to purchase consumer goods that have been imported into the import-oriented Nigerian economy. That is one way that the capital that the foreign investors bring into the country returns to their home economies.
The Western economies create artificial scarcity of their currency so that it will not be easily available to the peripheral Third-World economies. Ironically, they compel Third-World economies to rack up an inventory of their currencies to finance imports.
The pretext of the metropolitan economies to encourage the so-called import-substitution strategy for the peripheral economies is the other way they return their capital to their home economies.
They do this by simply over-invoicing machinery, supplies and intermediate raw materials used in the production of consumer goods locally.
Ask anyone who has been involved in running local plants of multinational corporations in Nigeria.
They float a special purpose “shell company” as a middleman between the firm that is based in Nigeria and its foreign suppliers.
If Tinubu wants to help Nigerian enterprises own Nigeria’s economy, he must be intentional in doing certain things: First off: Work with the Central Bank of Nigeria to further strengthen the banking and finance sector by raising the share capital of Nigerian banks.
When the banks are more liquid, the resultant excess supply of cash over the demand for cash will almost automatically lower interest rate.
Thus, the local enterprises will be able to effectively compete with their foreign counterparts that already trade with cheaper funds.
In addition to being able to buy their raw materials in bulk and gain the economy of large-scale purchases, foreign businesses also enjoy the advantage of lower bank interest rates on funds they bring from their home countries.
“But if the electricity sector is still as epileptic and undependable as it is at the moment, Nigerians can kiss economic growth goodbye”
The bigger edge that foreign-owned enterprises have over their local counterparts is that they instantly make a gain just by bringing in capital from their home countries. They instantly gain from the foreign exchange rate regime that does not favour the local enterprises.
The government must also invest in the triple resources of education, science and technology to rapidly develop the personnel and know-how necessary to move the economy to a position where it can effectively compete with the economies of the metropolitan countries.
Along with these is the need to grow and support the merchant class that will run the economy, which is going to be market-driven and dependent on private sector initiatives. There can be no other way to do it.
During the period of the Meiji Restoration that was initiated by Emperor Meiji toward the last quarter of the 19th century, Japan invested in rapid development of human resources, science and technology.
Tinubu must walk the talk in his assertion that, “The education of our people is a must.”
It certainly was no surprise when more fuel-efficient Toyota automobiles, powered by nascent Japanese technology, began to effectively compete and knock off American automobiles from America’s domestic automobile market.
It’s the same way Indian nationals, who took advantage of the first-class science and technology education offered by the India Institute of Technology that was established by Indian Prime Minister, Pandit Nehru, are ruling the science and technology industry of the world today.
A Japanese business consultant, Kenichi Ohmae, reports in his book, “Beyond National Borders: Reflections on Japan and the World,” that “Japan rose from the ranks of semi-developed nations, catching up and finally aligning itself with the advanced industrial nations, whose economic growth, in the meantime, was far slower.”
Ohmae notes with what must be an obvious gloat, that “Japan was the first non-Euro-American country to do so.” Well, you can’t argue with success, as former American President Ronald Reagan would put it.
It goes without saying that Nigeria must rapidly acquire adequate infrastructure that is needed for the effective and efficient performance of the economy. That is another silver bullet to prepping Nigeria’s beleaguered economy for peak production performance.
But it seems the best (or most optimal) route to meeting the infrastructure needs of Nigeria is to travel the regional route.
For instance, railway lines and electricity supply should first be integrated within geopolitical zones, before linking them with coterminous zones– where possible and necessary.
The Commission for the Development Agenda for Western Nigeria seems to have an idea of, at least, integrating the railway system of South-West Nigeria- to link 44 cities. Tinubu should encourage this laudable plan in all the geopolitical zones.
But if the electricity sector is still as epileptic and undependable as it is at the moment, Nigerians can kiss economic growth goodbye. This is certainly the most basic infrastructure for Nigeria’s economic growth and development.
Something else that the government must do is to work with the marketing, advertising, public relations and branding industries to be able to engage with the real sector, to nurture global brands that can compete with products manufactured in metropolitan economies.
And yes, there is the teeny weeny detail about logistics, the doppelganger of transportation.
The government must have a plan to assist the private sector in developing the immense logistics capabilities necessary to move goods from the manufacturing plants to the targeted consumers.
Nigeria should not remain in the trading post role that Adam Smith assigned to Third-World economies.
