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Essential The Africa the Media Doesn't Tell You About
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MANDE KANG
The Odum of Ala Igbo
Hail Biafra!
Ethiopia has great 5 year growth plans.
Red Africa London brehs.
The Odum of Ala Igbo
Hail Biafra!
The Nigerian economy is being moved forward by tweets, crony capitalists and phony nationalists
I Know My People
Recently I was discussing Nigeria with some friends and I asked them this question — China protected its cement industry and ended up with more than 2,000 cement firms and probably the cheapest cement in the world. Nigeria protected its cement market and ended up with one guy controlling roughly 70% of the market and one of the highest cement prices in the world and the world’s most profitable cement company.
Solve for x.
You won't find many economics textbooks or economists talking about culture these days. It is no longer part of mainstream economic thinking because it is such a loaded concept that can get out of hand quickly, especially in the hands of racists with an agenda.
But nothing stops a Nigerian from talking to another Nigerian, honestly, about the role that culture plays in shaping policy outcomes. The x in the question above is culture. It is the elephant in the room.
I Know My People
When you combine government with any type of business in Nigeria, what you get is rent seeking and cronyism, 99% of the time. This is perhaps not unique to Nigeria but the pervasiveness of it is quite something to behold. Government is not there to protect Nigerians from the excesses of businesses by enforcing proper market competition. Far from it. Instead, government is a tool by which one person captures the institutions of state to give them an advantage over their fellow Nigerians.
This plays out in comical ways sometimes. On twitter, I’ve been using the hashtag #CabalAlert to document some of this behaviour. People are forever organising themselves into all sorts of funny groups to obtain government ‘support’ in a way that allows them get rid of their competition, shaft consumers, raise prices and avoid the hard work of innovation. They also always want ‘intervention funds’ from the government, always.
I Know My People
I’ve almost finished reading Ron Chernow’s amazing biography of John D. Rockefeller - ‘Titan’. One thing that caused me a great deal of amusement was how, as Rockefeller built his monopoly of the oil industry to 90%, his kerosene prices continued to fall and fall. He crashed the price of kerosene from 58cents per gallon to 8cents per gallon. I kept asking myself — what kind of yeye monopolist is this one who was crashing prices as he owned almost the entire industry? In 1885, Rockefeller wrote to one of his partners and said ‘Let the good work go on. We must ever remember that we are refining oil for the poor man and he must have it cheap and good’. Please note that this guy was by no means a saint. His company used to bribe politicians and he used some very rough tactics to consolidate his hold on the industry. But he continued to innovate in amazing ways and lower his prices even when he could get away with doing the opposite.
Ask yourself an honest question — if you give a Nigerian 90% of any business in Nigeria, what do you think will happen? The tendency is for Nigerians to take advantage of themselves. This is the cultural elephant in the room. As a consequence, nobody trusts anybody.
The Odum of Ala Igbo
Hail Biafra!
Continued
I Know My People
I’ve previously used my mother’s experience buying a car from Peugeot Automobile Nigeria (PAN), Kaduna as an example. In the early ’80s, she managed to save up enough money to buy a brand new made in Nigeria 504. It cost around N20,000 at the time. She then handed the money to PAN and was told to wait around a year to have the car delivered. Imagine how that felt for someone who needed a car and had committed all her savings towards it? After much begging and using the influence of a senior Airforce officer who had connections in PAN, she managed to get the car delivered in 6 months.
PAN’s arrogance in those days was unbelievable. They did not give a damn about consumers. They treated you like they were doing you a favour and on a couple of occasions, they even told her to come and collect her money back and stop disturbing their sweet life. They could get away with this kind of behaviour because 504s and 505s were the official cars of government. Every year, the government was guaranteed to buy a certain number of cars so ordinary consumers like my Mum could go hug a transformer. Of course, the moment there was a change in government policy, the company died in no time. Last year, I was in Kaduna and I drove past the PAN factory where she got her car. It looked like one of the Lost Kingdoms in Tomb Raider. It is now a patient in AMCON’s intensive care unit (the treatment is being paid for by Nigerian taxpayers as usual).
But when you ask Nigerians, they will tell you that the company failed due to lack of government patronage.
I Know My People
This familiar spirit now has Innoson in its sights. Senator Ben Murray-Bruce, armed with a hit hashtag — #BuyNaijaToGrowTheNaira — has been ‘inspiring’ a previously rudderless multitude on twitter and social media as to how the difference between pap and Quaker Oats is all in the head, among other things. It’s just common sense!
Nigerians are lapping it up. The missing ingredient from economic growth was apparently patriotism. Pumped up with adrenaline and the smouldering embers of patriotism in their hearts, the people are going to buy their way out of this economic crisis.
Everytime I question the Senator’s inanity, I seem to end up on Linda Ikeji as the victim of a ‘clapback’. I’ve even been asked if I have been paid to ‘attack’ the Senator. My answer is ‘not yet’. If anyone wishes to pay me to do this, kindly get in touch and I will supply my bank details.
I Know My People
Ideas have consequences, for better or worse. The Senate President, Bukola Saraki, has also jumped on this hashtag and the thing has even found its way to CNN. The Senate has found the ‘solution’ (to a problem that did not really exist), and soon enough, anyone who dares to challenge the wisdom of the hashtag will be branded an unpatriotic apostate.
Meanwhile, the real problems afflicting Nigeria which require hard decisions will remain in their ‘tear rubber’ state. Note that Nigerians will not themselves really buy these products in any significant numbers. Afterall, nothing was stopping them from doing so previously. What people are calling for is for the government to ‘encourage’ these local manufacturers by patronising them. The approach makes zero sense but let’s all play along. For the Senate, it helps them kill two birds with one stone. They want to buy new cars for themselves, something that has angered Nigerians in these difficult times. But by tapping into the red mist of patriotism, they get to buy their Innoson cars while avoiding criticism at the same time.
For Innoson, the new favoured child, it’s also a win win. They can even sell the cars to government at a markup without worrying about feedback. They will simply divert the resources they could have used to serve consumers in a rational manner to serving the government. And a new crony will be born. It is always sweet while it lasts and it is only a matter of time until they start treating their ordinary customers like shyt. (FWIW, I wrote this on Innoson 2 years ago).
I Know My People
Nigerians do not want to confront these cultural obstacles in their way. We are special people! Nobody is asking the question as to why identical policies end up very differently in Nigeria. Generations of Nigerians have grown up with these ideas that have never been challenged before. The moment their ideas then get challenged, they get upset. There is no day now that someone does not accuse me of lacking home training on social media.
People believe government to be a magical thing that can be summoned to make deep problems (usually caused by the same government) disappear. The government too knows this and knows the exact buttons to press to divert anger away from themselves. Has there ever been a Nigerian government that did not launch some campaign to promote Nigerian goods? This does not matter. What matters now is feeling good about it all.
This cultural impediment remains unacknowledged not to talk of looking for a solution to it. That Nigerian tendency to use government to further your own interests at the expense of everyone else remains alive and well. It further begets the subculture of everyone forming groups that position them for access to government largesse. This has become the Nigerian dream —to receive a glorious intervention fund from the government. And because it is a successful strategy, it acquires new subscribers everyday. It is culture.
I Know My People
This is why banning imports to support local industries won't work. The industries will remain ‘nascent’ in perpetuity. But everyday you will find a Nigerian calling for this approach as if it is a new idea that has not been tried before. It is based on what the American philosopher, William James, referred to as ‘the will to believe’.
James’ central argument in “The Will to Believe” hinges on the idea that access to the evidence for whether or not certain beliefs are true depends crucially upon first adopting those beliefs without evidence. As an example, James argues that it can be rational to have unsupported faith in one’s own ability to accomplish tasks that require confidence. Importantly, James points out that this is the case even for pursuing scientific inquiry
That is to say, people already believe these things even before they see any evidence. So from there, it is a snowball down a hill — unstoppable.
When oil prices crashed, I retained some hope that the election of a new government with a fresh mandate would spark the zeal to remove some longstanding constraints in the Nigerian economy. This hope was clearly misplaced. Certainly, the Nigerian leadership is not up for any such challenge. They are simply marking time waiting for oil prices to go back up. They cannot provide the leadership required to think Nigeria out of this crisis.
Nigerians themselves are not really up for the challenge either. The media too have gone to hide and are now actively giving a platform to ignorance and nonsense ideas. Everybody is hoping and waiting for oil prices to go back up. The matter of devaluation is now being presented as a ‘choice’. Nigeria will only devalue if it feels like it and not whether the underlying economics of the currency have changed so dramatically that a devaluation is the only logical choice. We now have a fake ‘debate’ going on between pro and anti-devaluation people. Baba Suwe could not write this stuff if he tried.
I Know My People
This is why some of us have been shouting exports as a solution to, not just our foreign exchange issues, but our cultural problems as well. Aside from the fact that Nigeria is really a poor country with a limited market size, one of the consequences of this culture is that it stands in the way of progress and boosting productivity. Because the goal is to get yourself into a position of favour with the government, once that is achieved, the job is done. It is hard to convince someone who has achieved his goal to constantly be improving and raising their standards except when its absolutely necessary. It is far less stressful to remain a local champion and continue to milk your countrymen for every naira you can get.
But when you start exporting, that’s a whole different ballgame. The people who don't live in your country are not compelled by any hashtag to buy your stuff. If you don't constantly improve your products and processes, someone else will take them away from you. The only way to make money from such people is by constantly finding ways to keep them happy. You dont need to do this when you’re serving a local market especially when you have government protection.
These problems are hiding in plain sight. From Mexico rejecting Nigerian hibiscus exports due to fake certification, to the same Mexico rejecting 100 Nigerian containers due to poor packaging, to the EU rejecting Nigerian beans due to excessive pesticide content (because Customs spray them overzealously before they are exported), to Nigerian cashew nuts being rejected because they stay too long in the container. All these problems require solutions and if solved, they boost local productivity and earnings. But they are hard. Hashtags are much easier. If oyinbos will not eat the beans because it has pesticides in it, Nigerians will #BuyNaijaToGrowTheNaira and eat it like that.
I Know My People
When considered properly, the latest campaign to guilt trip people into buying Nigerian is the latest trick conjured up by the country’s leadership, aided and abetted by the people, to dodge anything that is too difficult. The campaign will fizzle out if and when oil goes back to even $70. The ‘debate’ in the Senate will quickly shift to what ‘benchmark’ should be adopted for the budget. The price of oil will be seen as a target, not a limit. If the price of oil is $70, they will do all within their power to set the benchmark at $69.99 so that everything can be consumed and as little as possible invested.
All told, chances are quite high that unborn generations will be battling these same challenges as today and will be coming up with the same ‘solutions’. Go on Nigeria, make me eat my words. I dare you.
Random comment I found on the internet under an article about Nigeria. It continues to disturb me since the day I read it
The people and their government are now one. Everyone wants to ‘grow’ the naira to make it ‘strong’. When the naira is ‘strong’ it will make imports cheaper so we can happily go back to our old ways of importing champagne and baby food.
I Know My People
The hand of culture is strong with Nigeria. Think of it as what the Bible says in Romans 13:14 (KJV):
14 But put ye on the Lord Jesus Christ, and make not provision for the flesh, to fulfil the lusts thereof
Or if you prefer, what statisticians call Regression to the mean. It is like a constant pull towards the status quo. If you do nothing, you will remain that way. Even if you do something and don't protect that change, you will go back to your old ways. Change is hard but it is absolutely worth doing because the rewards can be spectacular. This is what Nigeria is fighting against Nigeria. It is culture. It is flesh. It is the mean.
President Buhari, armed to the teeth with economic illiteracy, is defending the naira against its ‘murder’. Oshiomole is cheering him on. Newspapers are providing the platform. Ben Bruce and Bukola Saraki are leading a fired up army to grow the naira using the fertiliser of patriotism. Cronyism is returning. It is a time of great opportunity if you know how to position yourself. Some at the Central Bank are praying for this currency foolishness to continue so they can complete their ‘four flats’ with the proceeds of their fx arbitrage. Those who try to use facts and data to back up their arguments are shouted down and drowned out of the debate.
Welcome to the latest crisis Nigeria is going to waste.
I Know My People. This is our culture.
FF
NigeriaEconomicsCulture
Tanzania takes a bulldozer to graft
BY JOSEPH BURITE, FEBRUARY 17 2016, 05:48
Tanzanian President John Magufuli pledged to tackle corruption when he came to office in November. Since then the president, nicknamed ‘Tingatinga’ (bulldozer), has fired at least seven government agency heads. Picture: REUTERS/SADI SAID
BUSINESS is slow at Hamisi Haruna’s cafe in Tanzania’s commercial capital, Dar es Salaam, because the civil servants who used to while away the hours there now stay at their desks for fear of angering the man known as the "bulldozer": President John Magufuli.
"There are no customers," says Haruna, outside his restaurant on Sokoine Drive on the eastern fringe of the city. "This place used to be full all the time."
Since his inauguration three months ago, Magufuli has cancelled Independence Day celebrations and barred civil servants from sending Christmas cards as part of a campaign pledge to tackle corruption and curb waste of public resources. The money-saving measures generated a hashtag on Twitter that asked #WhatWouldMagufuliDo?
Tanzania, Africa’s third-biggest gold producer, ranks in the bottom half of Berlin-based Transparency International’s Corruption Perceptions Index, below other African countries such as Ivory Coast and Mozambique. Per capita income in the country of 49-million people is $955, while the sub-Saharan African average is $1,638, World Bank data shows.
On his first day at work, the president conducted an impromptu tour of the finance ministry’s offices, where he demanded to know the whereabouts of officials whose desks were unoccupied.
While Magufuli is soft-spoken, he earned a reputation as a hard-driving boss and was nicknamed "Tingatinga", Swahili for bulldozer, in his previous position as the country’s minister of works. "Who sits here? What is his name?" Magufuli asked officials at the finance ministry in Swahili, footage aired on the state-owned Tanzania Broadcasting Corporation showed. "You’re the boss here, where are the others? They’ve gone to drink tea?"
Magufuli has fired at least seven government agency heads since coming to office on November 5, including the head of the country’s anticorruption body, the chief of Tanzania’s railways and a top immigration official.
The dismissals signal the president’s intent to stamp his authority on the new government, says Ahmed Salim, an analyst with Teneo Intelligence. Under Magufuli’s predecessor, Jakaya Kikwete, perceptions of corruption in Tanzania had increased over the past four years, according to Transparency International.
Calls to Edward Hoseah, who was the executive director of the Prevention and Combating Corruption Bureau, went unanswered. Attempts to reach Reli Assets Holding for former MD Benhadard Tito’s contact details were unsuccessful.
Magufuli is "trying to distance how his government will do business compared to his predecessor," Salim says. "However, because corruption in Tanzania is a systemic issue, it is unclear how the high-profile sackings will translate to a real decrease in corruption in the public sector."
The president’s efficiency drive has also focused on tax collection. Takings exceeded 1.4-trillion Tanzanian shillings (R9.9bn) in December, beating the government’s target by 12%, according to Finance Minister Philip Mpango.
In November, the president suspended the head of the Tanzania Revenue Authority and ordered a probe into hundreds of shipping containers with goods worth 80-billion Tanzanian shillings that went missing at Dar es Salaam’s port. About two dozen port employees were fired or suspended.
Improved tax collection means Magufuli can deliver on his campaign pledges, says Finance Ministry Permanent Secretary Servacius Likwelile.
The Treasury has spent 37.5-billion on school grants, 46.3-billion on water projects, and 80-billion on an electricity plant in Dar es Salaam over the past three months — money that wasn’t previously available.
The economy may expand 7.2% this year, compared with 7% last year, according to the Treasury.
The government intends to cut its budget shortfall in the fiscal year beginning July 1 and increase spending.
The reforms will have to cut deeper if Tanzania’s mainly agrarian economy is to transform into an industrial one, says Haji Semboja, an economics professor at the University of Dar es Salaam.
"The economy is weak because laws are not well-enforced. We remain a consuming economy dominated by imports," he says.
While many Tanzanians laud Magufuli’s zeal, curbing corruption will require overhauling the civil service’s entire work culture and moral fabric, a task that will be impossible for the president to execute single-handedly, according to Nicholas Lekule, manager for policy and budget analysis at Policy Forum.
"The way he operates, his move is more of a one-man show and as such it may not yield much," says Lekule. "What is interesting, however, is that some public officials have been held to account, which may instigate some sense of accountability."
Bloomberg
Tanzania takes a bulldozer to graft
BY JOSEPH BURITE, FEBRUARY 17 2016, 05:48
Tanzanian President John Magufuli pledged to tackle corruption when he came to office in November. Since then the president, nicknamed ‘Tingatinga’ (bulldozer), has fired at least seven government agency heads. Picture: REUTERS/SADI SAID
BUSINESS is slow at Hamisi Haruna’s cafe in Tanzania’s commercial capital, Dar es Salaam, because the civil servants who used to while away the hours there now stay at their desks for fear of angering the man known as the "bulldozer": President John Magufuli.
"There are no customers," says Haruna, outside his restaurant on Sokoine Drive on the eastern fringe of the city. "This place used to be full all the time."
Since his inauguration three months ago, Magufuli has cancelled Independence Day celebrations and barred civil servants from sending Christmas cards as part of a campaign pledge to tackle corruption and curb waste of public resources. The money-saving measures generated a hashtag on Twitter that asked #WhatWouldMagufuliDo?
Tanzania, Africa’s third-biggest gold producer, ranks in the bottom half of Berlin-based Transparency International’s Corruption Perceptions Index, below other African countries such as Ivory Coast and Mozambique. Per capita income in the country of 49-million people is $955, while the sub-Saharan African average is $1,638, World Bank data shows.
On his first day at work, the president conducted an impromptu tour of the finance ministry’s offices, where he demanded to know the whereabouts of officials whose desks were unoccupied.
While Magufuli is soft-spoken, he earned a reputation as a hard-driving boss and was nicknamed "Tingatinga", Swahili for bulldozer, in his previous position as the country’s minister of works. "Who sits here? What is his name?" Magufuli asked officials at the finance ministry in Swahili, footage aired on the state-owned Tanzania Broadcasting Corporation showed. "You’re the boss here, where are the others? They’ve gone to drink tea?"
Magufuli has fired at least seven government agency heads since coming to office on November 5, including the head of the country’s anticorruption body, the chief of Tanzania’s railways and a top immigration official.
The dismissals signal the president’s intent to stamp his authority on the new government, says Ahmed Salim, an analyst with Teneo Intelligence. Under Magufuli’s predecessor, Jakaya Kikwete, perceptions of corruption in Tanzania had increased over the past four years, according to Transparency International.
Calls to Edward Hoseah, who was the executive director of the Prevention and Combating Corruption Bureau, went unanswered. Attempts to reach Reli Assets Holding for former MD Benhadard Tito’s contact details were unsuccessful.
Magufuli is "trying to distance how his government will do business compared to his predecessor," Salim says. "However, because corruption in Tanzania is a systemic issue, it is unclear how the high-profile sackings will translate to a real decrease in corruption in the public sector."
The president’s efficiency drive has also focused on tax collection. Takings exceeded 1.4-trillion Tanzanian shillings (R9.9bn) in December, beating the government’s target by 12%, according to Finance Minister Philip Mpango.
In November, the president suspended the head of the Tanzania Revenue Authority and ordered a probe into hundreds of shipping containers with goods worth 80-billion Tanzanian shillings that went missing at Dar es Salaam’s port. About two dozen port employees were fired or suspended.
Improved tax collection means Magufuli can deliver on his campaign pledges, says Finance Ministry Permanent Secretary Servacius Likwelile.
The Treasury has spent 37.5-billion on school grants, 46.3-billion on water projects, and 80-billion on an electricity plant in Dar es Salaam over the past three months — money that wasn’t previously available.
The economy may expand 7.2% this year, compared with 7% last year, according to the Treasury.
The government intends to cut its budget shortfall in the fiscal year beginning July 1 and increase spending.
The reforms will have to cut deeper if Tanzania’s mainly agrarian economy is to transform into an industrial one, says Haji Semboja, an economics professor at the University of Dar es Salaam.
"The economy is weak because laws are not well-enforced. We remain a consuming economy dominated by imports," he says.
While many Tanzanians laud Magufuli’s zeal, curbing corruption will require overhauling the civil service’s entire work culture and moral fabric, a task that will be impossible for the president to execute single-handedly, according to Nicholas Lekule, manager for policy and budget analysis at Policy Forum.
"The way he operates, his move is more of a one-man show and as such it may not yield much," says Lekule. "What is interesting, however, is that some public officials have been held to account, which may instigate some sense of accountability."
Bloomberg
Tanzania takes a bulldozer to graft
If this actually happens...
How come no one bats an eye at Equatorial Guinea? The richest African country via GDP per capita.
EQ is a family run dictatorship where the vast majority of people are in poverty despite their (oil) riches
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Those who are studying Arabic with english subtitles
Those who are studying Arabic with english subtitles
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The Odum of Ala Igbo
Hail Biafra!
http://blogs.premiumtimesng.com/171154-2/
President Buhari, We Are Killing Jobs Not the Naira, By Akin Oyebode
Premium Times February 16, 2016 President Buhari, We Are Killing Jobs Not the Naira, By Akin Oyebode2016-02-16T07:52:45+00:00 Opinion Comment (4)
In a recent interview with the BBC, President Buhari said:
“I have asked the Central Bank Governor and others to sit and see if they can convince me to murder the Naira.”
He also said:
“Most of our young people can’t get jobs; one of the biggest dangers we face.”
For Nigeria to meet its job creation target, the government needs to solve the supply side challenges impacting the exchange rate in order to make the economy more competitive.
During the campaign that led to his election, the president’s party highlighted job creation as its major economic goal. In many discussions, a target to create three million jobs was promised, to ensure the bulging youth population is engaged in productive activities. If various estimates are to be believed, approximately five million Nigerians come into the workforce annually, yet in the same period, the country struggles to create more than 1.5 million jobs. This is why unemployment and underemployment in Nigeria are now at 9.9% and 17.4% respectively.
For Nigeria to meet its job creation target, the government needs to solve the supply side challenges impacting the exchange rate in order to make the economy more competitive.
How the Naira Lost its Shine…
The economic principle of demand and supply is simple. If demand for the dollar increases in Nigeria, it becomes more expensive to “buy” dollars, since this demand will create the scarcity of dollars. Also, if the supply of dollars reduces, even if demand for it stays the same, a scarcity will occur, which will lead to a rise in the price of the dollar.
How does Nigeria fit into this narrative? In 2015 the official price for buying $1 was roughly N200. At this price, we are made to believe the demand for and supply of dollars is at equilibrium. Since then, a number of things have happened to the supply of dollars to Nigeria:
1. Oil prices have crashed: According to the NBS: “in Q3 2015 Nigeria exported mainly mineral products, which accounted for 86% of total exports.” This means crude oil accounts for over 80% of all exports and remains Nigeria’s foreign exchange earner. So, the drop in oil prices has reduced Nigeria’s foreign exchange earnings by almost $50 billion; ouch.
If the naira is over-valued, exporters don’t have an incentive to bring their foreign currency proceeds back to Nigeria.
2. Non-oil exports are struggling: At a conference organised by the CBN and the Nigerian Export-Import Bank (NEXIM), the CBN Governor said non-oil exports dropped from $10.5 billion in 2014 to $4.4 billion in 2015. If the naira is over-valued, exporters don’t have an incentive to bring their foreign currency proceeds back to Nigeria. So, non-oil export earnings dropped by $5 billion in one year; ouch.
3. Foreign investment is shrinking: According to a Nigerian Capital Importation Report recently released by the NBS: “The total for 2015 was recorded at $9,643.01 million. This represents a 53.53% fall on the previous year, when the total was $20,750.76 million. So, foreign capital invested in the Nigerian economy dropped by $11 billion in one year; ouch.
The combination of these events means foreign exchange supply in Nigeria has dropped by over $60 billion in one year. To minimise the impact of the drop, the CBN responded by spending almost $11 billion of its reserves to defend its reserves; and when it realised the ineffectiveness of that decision, it decided to manage the demand for foreign exchange with several short-term policies.
…despite the CBN’s best intention of pegging the exchange rate, most Nigerian businesses now buy the dollar at N300 on the Black Market, a 50% premium compared to the official rate.
But the laws of demand and supply don’t change overnight. If the supply of a commodity, in this case, the dollar, drops by almost 50%, then the price of the product will rise. This is why despite the CBN’s best intention of pegging the exchange rate, most Nigerian businesses now buy the dollar at N300 on the Black Market, a 50% premium compared to the official rate. This reflects the decline in supply, and follows standard economic principles.
… While Nigeria Faces Significant Economic Challenges
The weakening exchange rate is compounded by the challenges facing Nigeria’s economy. Within a decade, Nigeria dropped from 101st position to 124th position in the World Economic Forum’s Global Competitiveness Report. Labour productivity, estimated at $3.50/hour by the NBS, lags comparable in emerging markets, whose productivity measures are between $10/hour (Brazil) and $29/hour (Turkey). Nigeria also ranks in the 169th position out of 180 economies on the World Bank’s Ease of Doing Business report.
These numbers suggest Nigeria will struggle to attract the necessary investment if a different set of policy initiatives are not developed and implemented.
Private Sector Capital Holds the Key to Nigeria’s Competitiveness
Nigeria needs capital to improve its infrastructure stock, with power, transport and housing all in need of critical investment, despite dwindling Government revenues. The government needs to eliminate its dominance in critical sectors like rail, air, power and the oil industries.
In the oil industry, the JV entities should be incorporated as private companies, with government retaining a minority stake. We must invite private sector participation in the management of our airports, waterways management and rail operations. Finally, the government should deregulate the transmission grid and encourage private sector participants in an area that is currently monopolised by government.
By providing a transparent and best-in-class framework to transfer existing assets, and enabling a new set of laws to govern and protect future investment, we can commence the long awaited journey to becoming a competitive economy and attractive investment destination.
These deliberate acts not only reduce the strain on government revenues, but more importantly, they encourage an inflow of domestic and international capital to critical drivers of economic competitiveness.
By providing a transparent and best-in-class framework to transfer existing assets, and enabling a new set of laws to govern and protect future investment, we can commence the long awaited journey to becoming a competitive economy and attractive investment destination.
How Our Exchange Rate Policy Can Stimulate Growth and Improve Job Creation
1. To attract capital, we must create the right environment for those investments. In addition to the oft-repeated political risks and threats to long term growth, if the naira continues to trade at an artificial rate of N200:$1, rational investors will not consider Nigeria as a destination. This means the supply shortages of the dollar will probably get worse, not better, unless oil prices improve;
2. By ensuring the naira trades at its fair value, the government also eliminates speculation and perceptions of volatility. For example, MTN Nigeria and GTBank, who both have foreign currency debt obligations, have explored the possibility of paying their creditors early. Such moves suggest a belief that devaluation is inevitable, and will further worsen investor confidence. Even individuals are seeking ways to pre-pay school fees, or book holidays in advance. If the naira is properly valued, such demand side pressures will reduce, while those holding foreign currency in expectation of a devaluation will no longer have an incentive to do so, improving the supply side;
Nigeria can use its exchange rate policy to drive a coordinated trade agenda that makes domestic products more attractive, without adjusting import tariffs.
3. Assuming that our currency is fairly valued, and the supply of dollar increases, it will inevitably mean the price of buying the dollar will reduce over time from roughly N300. This is important for small businesses that will get the foreign exchange needed to buy their input and machines at cheaper prices, improving the cost of doing business, and making their products more competitive;
4. A weaker naira also makes local goods and services more attractive. While Nigeria might not be a major exporting nation, we must not ignore the large domestic market. When a country’s currency weakens, it will inevitably increase the price of imported goods, which will force most people to look for domestic alternatives. A weaker naira might be bad for those looking to import Honda and Toyota cars, but it will certainly make more Nigerians buy Innoson vehicles. Instead of spending months negotiating lopsided trade agreements, Nigeria can use its exchange rate policy to drive a coordinated trade agenda that makes domestic products more attractive, without adjusting import tariffs.
We know the president means well, and genuinely believes the current policy is what best suits Nigeria, but as Saint Bernard of Clairvaux famously said, “hell is full of good intentions.”
These are reasons why President Buhari must review his current stance on the exchange rate. A weaker currency does not imply he is “killing” the naira. However, an artificial exchange rate, which we currently have, might spell the death of many businesses, some of which have started laying workers off.
In a country where 20 million people are either out of work, or in jobs below their skills levels, the government must do everything to allow businesses create jobs, including an exchange rate policy that stimulates business. While the CBN’s exchange rate policy did not create Nigeria’s economic crisis, the decision to support an artificial value of the naira is gradually making it worse.
We know the president means well, and genuinely believes the current policy is what best suits Nigeria, but as Saint Bernard of Clairvaux famously said, “hell is full of good intentions.”
Akin Oyebode is a trained Economist and finance professional. He writes at medium.com/@akinoyebode.
This opinion piece is the second in a six-part series that hopes to steer the current exchange rate debate towards a focus on facts, taken from economic theory, history, and evidence from Nigeria and other countries. The authors hope that Mr. President will read these pieces and reconsider his stance on the Naira and the broader question of economic growth.
