These are the limitations of each option

August 20, 2018by Tope Fasua0
  1. Infrastructure – It is very true that our infrastructure has collapsed. A lot of what we rely on today were inherited from colonial powers. Corruption has seen to it that we were not able to add much more. The big issue here is that we don’t have enough of our own liquidity to leverage on, in order to build needed infrastructure. Therefore we would have to borrow massively. If we borrow massively, how do we repay? What if future cash projections don’t pan out the way we expect? Also, what are the assurances that infrastructure will definitely increase productivity, or that government will be able to generate taxes and rates from such increased productivity? Long shot. In times past we have seen where infrastructure did not lead to growth as expected. The Economist even did an article on Pakistan and how massive investments in infrastructure did not yield the expected rise in GDP levels, or anything else. Nigeria has also had more than its fair share of waste.
  2. Education – Many intellectuals believe this is sure bet; that once we increase allocations to education everything else will fall into place. Again I believe this is a long shot, even though investments in education – just like Agriculture – should not even be debated. Any nation worth its name should invest massively in the education of its people. As a matter of fact, Nigeria has two challenges here. At the basic level, we have the highest number of out-of-school children in the world at almost 15million. Everything must be done to get all these children – without exception – back into school. Everything! No amount of money will be too much to spend there. Then at the top level (higher institutions), I don’t believe that funding is as much a problem as the urgent need for them to be reorientated towards contributing to society. In fact the academia should take charge. Knowledge is absolutely important these days. All the large companies of the world are knowledge driven, and a lot of them started on university campuses. Most of the researches in our universities and polytechnics as well as research institutes and specialist colleges, just go to waste. Yet in those countries which we borrow from, these are centers of innovation spinning money today. So, merely budgeting higher for education especially at tertiary level in order to create ‘world class institutions’ as desired by many, is a weak proposition if not accompanied by a mentality change which can begin to happen now. The morning tells the day.
  3. Foreign Investors – I think many Nigerian professionals, especially in the finance space, have turned themselves to campaigners/canvassers for foreign investors. Some are totally convinced that all that needs to happen is for us to bring them here to build companies. They believe that if we do that we would have snookered the world and played a fast one. The problem -if they were sincere – is that they express these opinions openly, and so to the hearing of these same investors who are actually the smartest people in the world. I can assure you that no one goes where they would be had, and our experience with these investors so far is that they are always a step ahead. That is why in spite of all the efforts and rhetoric in this area, nothing has changed over the decades. I don’t believe there is any ‘free’ money anywhere or Angel investors going around hoping to rescue inefficient and wasteful countries from their self-imposed misery. I just read a report where President Obasanjo said he traveled to 97 countries as Nigeria’s president. Goodluck Jonathan also traveled to many, and the man we have there now, basically lives abroad. All their travels in search of investors have amounted to little if our current situation is anything to go by. Just as the president travels, so also do all our state governors who have signed countless MOUs around the world. It’s all a bloody waste of time. One would ask instead, whether it is possible to reboot Nigeria’s economy with Nigeria’s own cash flow. That I believe is what we should be aiming for. We cannot allow corruption to reign freely (with attendant capital flight as most corrupt proceeds make it abroad), and also watch as the nation loses all its possible revenue, while we chase foreigners to come and do the job for us. Won’t work.
  4. Natural Resource Extraction – This has been another core focus for most of our leaders. For some reason Nigerian leaders believe it is wise to prioritise the extraction of ‘what God has given us’. The problem here is that we just extract and sell, raw. I believe that the owner of the resource is the owner of the technology with which the resource is extracted and developed. That is why we are left carrying the can today with our crude oil story. We didn’t know that God put crude oil in the ground so that Nigerians may enjoy, until the white man came and told us that that resource had value. The white man came with his seismography and drills, and there was already an international market for the resource, dominated by the Rockefellers of this world. It’s just like the diamond stone did not have value until the Rothschilds hyped it and invested in the stories around diamonds. Until we are able to extract resources with the technology that we build, and also add value to them by processing to the level where we extract every likely usage, we have not started. I would say that rather than scramble about looking for more things in the ground, we should instead focus keenly on how to develop indigenous technology, especially among our youths. The Swahili saying goes that the best time to plant a tree is ten years ago, but the next best time, is today. A leader must learn to initiate profound policies that are extremely important to the medium to long term survival and sustainable prosperity of his country. The folly of our current approach is obvious; that is why we export crude oil, and import refined PMS and everything else in between. That is why we are in trouble when the price of crude oil goes down – because government starts to gasp for breath as its finances erode (especially since they use the cash flow to purchase all sorts of nonsensical conveniences for themselves) – and we are also in trouble when prices of crude rises since people will protest the rising cost of PMS and other products, and inflation will increase. Indeed it is time for us to start sterilizing the proceeds of natural resources from our budgets and to live on whatever the organization and re-organization of our society can generate.
  5. Market Economy and Privatization – Some Economists cannot be convinced; they swear by the power of the markets. Sometimes they sound very convincing especially because we can see the failures of inefficient markets here, as exemplified by several government interferences. They adjure that we just leave everything to market forces to sort out and all will be well. But what we have here is not just the failure of inefficient markets but major disappointments when markets have been allowed free reign. Another problem with this approach, if a leader will choose that route, is that Nigeria is certainly not yet at that level where we can leave everything to market forces. I believe it is a fatal misreading of economics for us to believe that a lot of what exists in the wonderful textbooks and is being pushed by multilateral agencies and their associated academia, can fit in here. As a matter of fact, we have always walked this route since the mid 1980s, with disastrous consequences. Indeed we have privatized many things but only a few have worked. Advocates of this approach usually point to our telecoms sector – the only likely success of the lot, which also has its own quirks when properly examined, plus it is a fluke. Anyway, they make it sound so easy. Over 80 licenses have been issued over time for the private sector to build refineries. Only a couple of them progressed with it. Dangote is the one we know. Matter of fact, Dangote may have gone ahead out of partly nationalistic reasons not necessarily because the maths add up. What if his biggest refinery in the world is overtaken by alternative and green energy; by innovation? This is one instance that puts a lie to this myth that foreigners are waiting around with their cheques. No. Foreigners are very smart and usually do a much deeper analysis than anyone else. A leader who decides to focus on giving markets all the independence they need, and who believes that the market will solve all his country’s problems is in for a shock. Ditto, a leader who knows his onions must realize that as good as privatization is, a people TRUE VALUE is measured by how they manage public utilities. Some of the biggest utilities abroad in countries that work, are still in the hands of government one way or another. Some of the privatization experiences abroad have also ended very badly – like the privatization of Power in California under Governor Gray Davis, which saw ENRON ripping off the people. This was what led to Davis’ removal and the ascension of Schwarzenegger. The privatization was summarily reverse. Google it.
  6. Fiscal Productivity – Now it’s getting closer home for me. A president that focuses on fiscal productivity will go far but not as far as he/she will go if I analyze the next option. What needs to be known regarding fiscal productivity and efficiency is that it is not limited to just taxes. The focus is usually on taxes though. But we are saying that the country hemorrhages from every pore in its body. We should be talking of the taxes, rates, duties, fines, levies, and proceeds of natural resources, that the country loses to smart Alecs in government and their friends on a daily basis. As we talk about the need for the people to register for and pay their taxes – which is great – we should also remember that our approach needs to be broad and all-encompassing. Nigeria does not account for anything; from the crude oil being mined from its bowels on an hourly basis, to the assets purchase for the public’s use. As I once wrote, we are a wastrel’s paradise. The fact that we don’t account for what we have and are not serious about going after what belongs to the country is why Angola’s budget is twice ours, and South African’s national budget is at least 6 times ours. The budgets are driven by the revenue. Even at $25Billion for 2018, Nigerian fiscal authorities are bragging that they can only generate about $20Billion, while the balance of $5Billion will have to be sourced elsewhere through borrowing. In South Africa, their $120Billlion budget is funded almost 95% through internal revenue. How can we claim to be the biggest economy in Africa when SA can generate 7 to 8 times our revenue? The singular downside here is that those in government are not quite ready to buckle down and live by example. The Centre for Social Justice led by Eze Onyekpere has compiled a list of frivolous items that made it into the 2018 budget and there is no whimper from the government. A certain agency is to spend N1.4Billion fumigating its office this year alone, while another is to pay subscriptions of almost $2Million for its staff. Just in case they don’t know, our leaders must be told that nowhere else in the world is money spend this way.

Investing in the People – Beyond providing education which people get in schools, there is a need to invest strongly in the people. There is a need for us to UNLEASH our manpower. I believe that the strongest investment we can make, which will tick all the boxes, is an investment in our people. Let us take for an hypothetical example, if Nigeria’s 30million unemployed people could be engaged one way or another, and each of them could generate value of say $5,000 per annum, that is an additional $150billion added to our GDP straightaway from a zero level. And it is an amount that will grow, as well as unleash more productivity in other sectors because these people will have liquidity to buy things and other sectors will do much better. We should be talking of an additional GDP level of $500Billion in a short period of time, which could take us beyond the One Trillion Dollar mark. How do we achieve the unleashing of the potentials of our people? That will be through a combo of several approaches as I will explain below. But it is important for us to ruminate over the sheer potentials locked up with our people, and the immediacy of the impact if we focus on that section of our economy which is presently latent. The thing about human capital is that it can take on a life of its own, because human beings can do unbelievable things with a little encouragement, guidance and leadership, while natural resources can only obey instructions. It is certainly not as dynamic and creative as human beings could be. Again we can see that the world’s top companies are ideas that young people put together and that value has shifted from inanimate things like natural resources to what the mind of the individual can create. If we want to get our own from the waves of capital and wealth that occurs from time to time, we have no choice but to look into the minds and brains of our people. It is a tragedy that our richest people are comedians and musicians as well as politicians and civil servants whose claim to fame is their access to the commonwealth. It is not like that elsewhere.#revolutionofideas,#ourideasmustwin

by Tope Fasua

Tope Kolade Fasua is a Nigerian ex-banker, entrepreneur, economist and writer with 28 years of work, business and policy analysis experience. He is the founder and CEO of Global Analytics Consulting Limited, an international consulting firm with its headquarters in Abuja, Nigeria, and footprints in the United Kingdom, USA and United Arab Emirates. Fasua has authored numerous columns on newspapers and six books. He currently keeps regular columns on policy analysis issues with Premium Times and Daily Trust newspapers.

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