Global Economic Crisis: Nigeria and National Strategy

In the last 30 days, the global financial markets have been rocked by the credit crisis in the United States and the ripple effects on major economic centers in Europe. The recent $850 billion (did someone say there are plans for an increased package?) Bail-out plan by the Bush Administration, which got congressional approval by reluctant republican and democrat members, indicates that the economic principles that we all crammed in high school are no longer tenable in a world where the excessive consumption patterns of specific economic blocs create panic and throws quaint economic theory in the bin. Closer to home, many Nigerians were aware but technically oblivious to the implications of the unfolding crisis. Thankfully our economy has not developed the linkages with the globalization train that the U.S., Europe and South Asia has been trying to board the rest of us on. Indeed, the NSE has lost 30% of its value since the beginning of the year but the fundamentals of the Nigerian economy remain strong. The telecom sector is now the fastest on the continent with more subscribers than in South Africa, domestic gas consumption is improving kudos to President Yar’Adua’s directive in that regard, annual economic growth is projected at 6.9% and the regulators have pumped in close to $10 billion to steady the American Contagion on our capital markets.

OK, we can hold off popping champagne and patting ourselves on the back until we have a clear plan of action on how we mitigate the impact of the global crisis. First of all, it’s a good thing that the CBN and SEC were quick in assembling major banks to pump enough liquidity into the domestic economy. However, the push seems to be driven by major players on Broad Street without a clear plan for how manufacturers and other business men and women are able to get affordable interest rates on their loans. It is ridiculous in the middle of a Nigerian economic expansion and falling rates (albeit government induced) in the EU and the United States that loans are offered at 15-29%!! How in the world do we expect sustainable infrastructure financing and the achievement of Vision 2020 goals (2020 ke? Na yam?) if banks who declare significant amounts in profits refuse to have decent rates for the business community? Don’t get me wrong, I have no issues with the financial community; I just feel it is imperative that Abuja wakes up and develops a nimble and proactive economic emergency plan so we don’t get caught with our pants down like in the 1980s when oil prices dropped dramatically and put Nigeria in a serious conundrum.

It is unfortunate to see some economic planners make comments that we should stick to the status-quo and avoid interventionist policies. I am not an anti-lassie faire activist by any means, but I do know when inaction can impact the personal funds and investments of millions of Nigerians. If the economists on Aso Rock do not realize it yet, the ‘great’ United States of America has abandoned its own idea of being a capitalist society and the Bush administration has adopted more interventionist policies than the average American ever dreamed of. With the US government buying shares in major financial institutions like Fannie Mae, Freddie Mac, AIG and possibly others; the US has taken solace in radical economic socialism that is warranted due to the excesses of Wall Street, Main Street and an incompetent Congress. With over $60 billion in global funds, Nigeria currently has the 24th largest foreign exchange reserve base in the world and is in a position to do some significant financial restructuring on the local economy. With this leverage in play, economic planners and politicians (oh yes, we need them to get this done too) must sit down and hammer a comprehensive plan to protect our long term economic development goals. Indulge me and consider some ideas that might help.

First of all, REALLY restructure the financial industry. The 2005 restructuring of the banking sector was great and indeed our banks have done excellent work, building networks across the world and dominating the ECOWAS region. However, the bane of the financial sector is inadequate innovation and shabby regulatory regimes. When the CBN maintains the responsibility of monitoring such a vast financial community, we are unduly burdening this entity whose main function is monetary in nature, with matters that are irrelevant to its constitutional authority or that it lacks the capacity to properly oversee. In that regard, I support Senator Nkechi Nwaogu’s push for a revamping of the work of the Central Bank and the creation of other quasi-government entities to handle other non-banking institutions. Innovation also has to be the name of the game and it starts with the most important person in the Nigerian financial industry: the customer. It is rather disappointing that the financial planning industry has not taken off in Nigeria, not because of a lack of entrepreneurship by our men and women but a regulatory environment that stifles such innovation and relegates financial advisory services to the background. The Nigerian customer is gradually becoming a sophisticated investor and the government must not leave us to the antics of people like NSE boss Ndi Okereke-Onyuike who tells the investing public what companies to put their money into (has anyone told this lady the meaning of “conflict of interest”?) and encourage the creation of self-regulating bodies outside the NSE and SEC that enhance professionalism and a commitment to fiduciary responsibility.

The second point of action is a comprehensive infrastructure development policy. The silly statement was made in the 1970s that Nigeria had so much money that we didn’t know what to do with it, we all know where that mindset got us don’t we? In the 21st century, we have a great opportunity to right the mistakes of the past and put our money where our mouth is. I am happy with President Yar’Adua’s plans for a systematic infrastructural development plan across the country but what I would prefer is the integration of that plan with an honest and CORRUPTION-FREE electric power policy. We have decent funds in the foreign reserve account in a currency that is rapidly losing value and we should take advantage of falling prices worldwide to acquire the skills, equipment and companies that would build the roads, railways, hospitals and power plants that keep our economy strong. Also, Abuja must commit to using Nigerian expertise and businesses during this phase. Enough money has been wasted importing half-baked personnel from other countries while Nigerian professionals run multibillion dollar companies and projects across North America and Europe. If there is a deficit in our skill base, we welcome any company to make their money and at the same time, have the opportunity of joining us in making our republic more prosperous. Skill transfer should be the number one priority for foreign investment in Nigeria and if foreign contractors refuse to commit on that point, they should be shown the road to any of the international airports.

Last but not the least; the National Economic Empowerment Development Strategy (NEEDS) document (an alternative to the treacherous Structural Adjustment Program (SAP) policy of the IMF that sapped the life out of many Nigerians in the 1980s and early 1990s) should be made an evergreen document for every Nigerian child, woman and man. By evergreen document, I mean government must attempt to make sure that the goals of NEEDS meet the needs of us all without favouritism to some and the exclusion of others. The document prepared in 2004 must address the changes in our society and adopt the requisite strategies. Ask the average Niger Deltan if NEEDS works for them and I guarantee you that their response would be negative. Poverty across the country is a problem but the case of Nigerians in the north and the Niger Delta is a pointer that we are living some people behind. If we don’t want economic disenfranchisement to breed unrest and domestic terrorism, we must force our government to invest heavily in education, hospitals and environmental protection in those areas. I don’t want to live in a country that places a premium on others and excludes certain groups. If Nigeria and Nigerians do not get this right, the problem of poverty could be replaced (God forbid) with communal violence. It is my understanding that most Nigerians would hate their country to be labelled as terrorist safe havens like Pakistan or Afghanistan. In that regard, I urge policy makers in Abuja to push for reforming the NEEDS document to have focused solutions on helping poor communities across the country and following through on their implementation.

This crisis like many in the past would come and go. The question at the end of the day would be: who would be declared winners and who would bear the tag of loser? In an age where geopolitics is integrally intertwined with economic fundamentals, Nigeria must “wise up” as my paddy from Benin puts it and start to place Nigerian interests at the forefront of all policy decisions. As technocrats and the ordinary Gbenga and Zainab wonder if Abuja would work for the local economy as hard as the American and European governments are doing for theirs, I pray and hope that the answer is a resounding yes. God bless the Federal Republic of Nigeria.