…far from the madding crowd.

The Nigerian Economy: Lessons of History


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It is difficult to understand the Nigerian economy without looking at her past no matter how offensive it may be to some scholars who say we have looked back enough. Their claim may be politically correct but ideologically wrong. In the realm of economics and most human endeavours, the present is essentially a product of the past. Therefore, we believe it is fair to understand how the Nigerian economy was shaped by colonial exploits and how the handlers of the emergent system has failed in their effort to manage the economy for the benefit of the citizens. All functional economies today, irrespective of ideological leanings, are built on solid ideological foundations, without which groping is a matter of course. Thus, we must of necessity, drag the past into the present in order to take a look into the future.

It is a fact that before the coming of colonialism, the people of the geographical expression called Nigeria were engaged in all manner of productive activities aimed at conquering gloriously their environment and were producing for the purposes of commerce and consumption according to the dictates of their historical evolution and situations. In their education as humans they produced what they needed and traded what they didn’t need until their course of history changed with the advent of the twin disasters called slave trade and colonialism. The first one a human hurricane, and the other an economic and administrative dismembler. In the pursuit of the motives of these twin evils, Africa lost its prime population, able workforce of not less than one hundred million mobile men and women to the slave enterprise from which roots the seeds of colonialism germinated.

Whilst slave trade took away the labour force, colonialism killed the local economy by redirecting it away from its trajectory into path of perpetual dependence and appendage of the lords of the manor. For example, the African came to face the fact that he was to produce cash crops not for the expansion of his local economy but to support in totality the factories of Europe and had to consume a trickle of his primary products of cash crops. The questions yet to be answered by those who wish to shove history aside are many: were Africans not producing soap, biscuits, and machetes or were they not living in houses and having administrative system before the event of the exploiters? Who produced the cash crops that were carted away to Europe in exchange for the finished products? Why were the factories for the conversion of the cash crops into finished products not set up in the places were the crops were being produced. Why has this set-up remain essentially the same today in the name of free trade?

The transition of the Nigerian economy like other African economies of colonial entanglements has not been encouraging as there was no departure from the structure of the old colonial economy and the new one at independence. It was still tailored to produce primary products for the economies of the ‘mother’ countries. For instance, even oil which seems to be a high technology based process is designed for the exportation of its crude products. Between 1960 and 1973, the government of Nigeria pursued the economic policy of import substitution, aimed at reversing the trend of export of cash crops and crude products. This invariably meant that the colonial industries in places like Liverpool and other Western capitals were ask to set up factories with legislative cover to produce what they were importing into the country. In effect, instead of UAC producing omo detergent in United Kingdom, it was literally compelled against its wish to set up a factory to produce the detergent locally. Under this economic philosophy, the multi-national trading outfits took over the Nigerian economic space under heavy protection by the government and kept massaging the egos of the Nigerian elites that the economy was on the road of growth but it was a false trip. The policy, which clearly has no ideological basis has been blamed for bringing government officials into hobnobbing with capitalists. This has been the bane of the Nigerian economy till date because it is difficult, both in the past and present, to point to one successful Nigerian entrepreneur that is not seeking for one concession or patronage from the government.

Luckily for them, two intervening factors helped to divert attention from this incompetent and unnationalistic economic paradigm – the Nigerian Civil War and the rise in oil demand by emerging post-World War II industries fuelled by the Marshall Plan. Allied to the oil demand was the introduction of the Petroleum Act of 1967, which put oil and mineral resources into the hands of the central government. The state could then boast that it prosecuted the Nigerian Civil War without having had to borrow as if it is the acceptable norm to borrow to finance a war. Indirectly, the foundation for the oil curse was laid by the neglect or failure to build an economy, which could stand on its two but further maimed and hamstrung with such strange concept as import substitution.

At the end of the Civil War and as part of the post-war reconstruction, the Nigerian political elite came up with another strange idea called indigenization of the Nigerian economy. To effectuate this, the Indigenization Decree of 1973 was put in place. Its essential philosophy was to transfer 60% ownership of the multi-national companies doing or about to do business in Nigeria to Nigerians. Again stripped of its patriotic flavour of favoring the natives it was a deluding piece of legislation as it did not put the Nigerian economy under Nigerian business men in the strict sense. What it succeeded in doing was to produce a set of Nigerian business persons who were not actually for the creation of value but became front men with big pockets for the purposes of commission collection from their foreign partners. This policy effectively marked the beginning of official corruption as it became fashionable to appoint Nigerian proxies in lieu of foreigners. The government also officially entered into the business arena: civil servants became business owners and managers. This ill foisted on Nigeria by the political opportunists of that time has continued to plague our commonwealth and is not likely going to be squarely handled by the power that be today. We run a rent-economy oiled by state apparatus.

The underpinning philosophy behind import substitution and/or indigenization was that foreigners were going to help develop the economy either as individual investors or as partners. As it is evident, the whole idea about foreign investors parroted ceaselessly by Nigerian business elites and their political counterparts is a song that has long been soothing to the ears for its obvious crassness. But who will call the falcon to order? Like the dog bound to go to the grave with the owner, the oil glut of 1983 and the attendant fall in the price of crude oil in the international market devastated many local economies. Nigeria was not spared the economic vicissitudes of this tragedy.

With the seeming collapse of the socialist model of economic management stemming from the events of the 1990s in Eastern Europe the alternative voice in terms of governance whether political or economic thinking descended into doldrums giving rise to a set of new elite thinkers. They are best described as members of the Washington Consensus Think Tank. Miguel Rodríguez a former henchman of the Washington Consensus, from Venezuela did offer an explanation of what the whole policy of Washington Consensus is all about:

The programme was comprehensive in its design. It included complete trade reform, elimination of all trade restrictions, and reduction of tariffs to a narrow band; elimination of all exchange controls and adoption of a free float that would permit an exchange rate compatible with the development of non-traditional exports; price liberalization; the restructuring of the public sector with widespread decentralization and privatization of parastatal enterprises; a comprehensive tax reform; a new policy to set public sector prices at efficient levels; the restructuring of the financial sector, featuring liberalization, increased competition, and strengthening of the regulatory framework; modernization of labour legislation, including the creation of pension funds and the restructuring of the social security system; elimination of restrictions to foreign investment; restructuring of the external debt; an overhaul of the policy of external financing; and a new social policy that would eliminate the system of massive generalized subsidies (many of which went to the rich) in favour of targeted subsidies directed to the poorest segment of the population.

The project of the Washington Consensus fell on the twin doctors of Bretton Wood economic order or disorder (depending on where you stand), the World Bank and International Monetary Fund (IMF) to visit the economic theatres of most Southern countries. What are doctors good at if not for prescribing workable and unworkable solutions? After all, the human person must be used where necessary as the guinea-pig in advancing or retarding human existence. As it is commonly universal, every system has its believers and within the Nigerian system the two Bretton Wood enforcers had at its ready services at different times the likes of Olu Falae, Chu Okongwu, Kalu Idika Kalu, Alhaji Abubakar Alhaji, Anthony Ani, Adamu Ciroma Paul Ogwuma and some young Turks (Ngozi Okonjo-Iweala, Nasir El Rufai, Oby Ezekwesili, Prof. Pat Utomi, Charles Soludo, Sanusi Lamido Sanusi) who would come to full maturity in the new millennium. The fundamental elements of Structural Adjustment Pogramme (SAP) are perfectly in sync with Miguel Rodriguez prescription notes.

All that Bretton Wood is saying can in summary be memorized by any lay-about and regurgitated as the popular cliché says; the state has no business being in business. How true we shall soon see.  One other key element in the Bretton Wood prescription list is the issue of over valuation of the currencies of developing countries relative to the United States Dollar. They were required to devalue their currencies so as to increase the marketability of their commodities in the international markets. Again this policy about devaluation has till date failed to address the fundamental question; because most of these economies are mono-product in nature, which supply is largely inelasticity.

The neo-colonialists of this age, the Bretton Wood institutions have graduated in the name of a new world order and under the tag of promoting wellbeing to positioning their personnel as regional managers of most local economies in Africa, Nigeria not being an exception. Most times, the leaders of our countries wait for them at the national airport tarmacs and help them lift their magical suit cases as they tag along. After many years of endless experimentation and conjuring the sorcerer heads back to the Washington school of Consensus to renew his/her power. And new set are sent back to continue the experiments that have so far yielded no positive result, at least for Nigeria.

From the summary of what we have seen, Nigeria has traversed three models of economic policies, namely: Import Substitution, Indigenization Programme and Structural Adjustment Programme within the orbit of capitalist economic system. The political elites of 1999 to date have toiled with such concepts as Vision 20:2020, National Economic Empowerment and Development Strategy (NEEDS), 7-Point Agenda, and Transformation Agenda and National Economic Recovery and Growth Plan, but still, the economy has remained skewed on the path of retrogression. We concede that it may be appropriate to look out for the interest of liberal thinkers and argue that the problem is not with the economic model of capitalism, but other intervening variables. As the liberals will say, what is the magic of the Asian Tigers like India, Singapore, South Korea and others? We wish they will not add Japan, as we can quickly tell them that Japan did profit from primitive accumulation resulting from held colonial territories. Because for many years, the Japanese turned her Asian neighbours to her fiefdoms for purposes of colonial exploitation. And we believe it is only somebody who is intellectually mendacious that would deny the role of colonial capital in the origin of the wealth of the Western world.

What the Asian Tigers did was to depart from the model we have seen with Nigeria of partnering with foreigners without raising two key questions, which are: what is the nature of the partnership between the foreigners and the locals, and who will control the new economy? As history could bear out, to build the new partnership required, that the foreigners did not have a field day investing in all manners of enterprises that the locals had a comparative advantage. Even when the locals did not have the comparative advantage and foreigners were allowed in, there was a strategic thought-out process to train the middle-class of such Asian Tigers with the projections that they would invest in the long run in such areas where they were initially disadvantaged. A good example of this is the story of Singapore made popular by Lee Kuan Yew.

In effect, there is no way you can build a national economy, without a certain level of nationalism that seeks to curtail the influx of foreigners and what they do in the local economy. This is because even if the foreigner is the most righteous man on earth, his righteousness cannot overshadow his motive which is how to make profit. To think otherwise, is to misunderstand the fundamental essence of colonialism. And as Thomas Jefferson said; the foreign investors are mercenaries seeking for profits for the benefit of the motherland. The operators of the Nigerian economic system seemed not to have heeded this advice because there is a piece of legislation that promotes the idea that foreigners can run rough-shod over the Nigerian economy all fuelled by our desperation for foreign investment. The law is the Nigeria Investment Promotion Commission Act, CAP 117 Laws of the Federation of Nigeria.

Purchase of the shares of the domestic company by a foreign company.

A foreign enterprise may buy the shares of any Nigerian enterprise in any convertible foreign currency.

Incentives for special investment

For the purpose of promoting identified strategic or major investment, the Commission shall, in consultation with appropriate Government agencies, negotiate specific incentive packages for the promotion of investment as the Commission may specify.

Investment guarantees, transfer of capital, profits and dividends

Subject to this action, a foreign investor in an enterprise to which this Act applies, shall be guaranteed unconditional transferability of funds through an authorized dealer, in freely convertible currency, of –

dividends of profits (net of taxes) attributable to the investment;

payment in respect of loan servicing where a foreign loan has been obtained; and

the remittance of proceeds (net of taxes), and other obligations in the event of a sale or liquidation of the enterprise or any interest attribute to the investment.

This law talks of investment in any enterprise, and any enterprise means that it could be in buying and selling of confectionaries. This perhaps is the reason why multinational retail outfits have all setup shops in Nigeria. And our leaders from federal to local government queue up to commission such retail outlets and in full celebration praise the owners of such retail outlets for investing in the local economy. Meanwhile, the products they sell are all imported, indirectly killing the local economy. This is to the extent that the whole idea, of import substitution or indigenization has been rendered useless.

Again, while we may concede that foreign investment may be desirable, what we have seen with the experience of Nigeria is that there is no foreign investment taking place in the true sense of it as the foreigners are simply scamming the Nigerian government and ruining the local economy. The rules of engagement have to be redefined. The most recent glaring example was the case of Etisalat. Some Nigerian smart-alecks had convinced the Nigerian government and used the Etisalat franchise to acquire a telecommunication license to operate as a Global Service Mobile (GSM) operator. After few years of operation, Etisalat, it emerged owed a consortium of Nigerian banks the sum of N12.9 billion. When asked to pay, it withdrew the franchise. Where then is the foreign investment in this narrative of Etisalat? A consequential further enquiry may be that the monies borrowed to Etisalat may have been the money of the government, as the banks are only strong to the extent of government funds in their vaults. This is not the first time this kind of thing is happening as we do recall that the old Econet (Airtel), which was substantially funded by the governments of Delta and Akwa-Ibom States.

Whereas the political class is currently embroiled in the debate over restructuring of the geographical expression called Nigeria, merely for appropriation of power, we think the bigger question or debate should focus on the restructuring of the Nigerian economy. The economy as it stands today is a ship without a rudder. It goes with the wind and this has put the citizens under various forms of shocks and hopelessness. We must develop an economic ideology or philosophy, which every dick and harry must know and understand. We must build an economy with emphasis on the welfare of the people and their industry: using our strength and avoiding the continuous slavery being foisted on us in the name of openness, competitiveness and globalization. As a people, we must make informed choices as to which trajectory to follow. These require visionary leadership which the current political class clearly lacks and are unable able to provide to say the least. We need an alternative government.

Our concluding thought is that there is no closure of the argument that the only available options for nations like Nigeria for development is to journey through the orbit of capitalist development. This is because as Fidel Castro once asked, where has capitalism worked? Obviously, it has not worked in Nigeria in the past 57 years of her independence. It is time to seat chart as a people and chart a path for our economy.

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