adminEjike Okpa II
It has lately been reported that Nigeria has become Africa’s biggest economy. Nigeria does not have economic development; but mainly a transaction economy that is fuelled by consumption of imported goods and reliance on foreign goodwill to achieve its basic needs. If more than 75 percent of what Nigeria needs to survive as a nation is imported, can such a country be considered as growing and developing? When there is hardly any city or state that can supply water to its citizens 24-7, and public servants are owed outstanding wages, and pensioners have seen the real value of their pension gone, Nigeria is on a make-believe trajectory.
In Ibadan, the entire city goes without power for days. Just imagine that: and Ibadan, Oyo State, is a major population centre. No Nigerian bank stock is worth an equivalent of $2 per share. The total mortgage notes in Nigeria, a country of 160 million people, is 20 000.
There is outstanding housing need of 16 million, and no developer in Nigeria builds 1 000 housing units a year. Do the maths. Housing, as a significant component of any economy because of its socio-economic benefits, is annoyingly lacking given that since 1914, no government in Nigeria in collaboration with the private sector has built 100 000 housing units annually. Why so?
The government is playing with numbers and banking hope on mineral resources/reserves which are unearned income. Since the US importation of Nigeria’s oil has dropped from about 22 percent to its current import of 16 percent, Nigeria has had to scramble to find buyers. Spain is now the leading importer of Nigeria’s oil. Spain, a country that is struggling, is the importer of Nigeria’s main commodity that affords the government 85 percent of its overall expending. Do you understand the implication of such a relationship? Spain is hardly a member of G-8. She is neither a developed nation nor a third world country — she is a floater.
Since oil transaction is often carried out on IOU basis, what does Spain have to offer Nigeria? Longer payment terms and seeking support from EU to help facilitate balance of payment arrangements. As a country with weak finances, Nigeria’s strength to borrow/trade (current account) is based on its foreign reserve. The Naira has been having problem sustaining its value. If Nigeria is that buoyant, how come 85 percent of its refined oil need is imported? Its currency, the Naira, since 1999, has lost about 210 percent value. Since Finance Minister Okonjo-Iweala’s debut, the Naira has lost almost 40 percent, and Nigeria’s bank debts are not easily tradable assets as a majority of the debts are not well collateralised or secured by verifiable assets.
Hinging growth on rate of change of GDP as a volume while the fundamentals are missing is voodoo economics and that has been prevalent since 1999, as the leadership tries harder to convince Nigerians they are up to the task of delivering the most populous black nation in the world. Is the economy stupid? One may say YES in the case of Nigeria. But do not take my word for it. Go to the street and look at the people and see the agony and suffering.
Many college graduates in Nigeria, after more than a decade, are not able to afford a 2-3 bedroom home, a car and a job that match their education.
Mark you, many Nigerians who have a job, are well underpaid such that any number of those employed, a good half are sweating it trying to make ends meet. Here are three basic aspects of economic development: job creation, stabilised interest rate and stable currency. A major fluctuation in any of the three factors makes an economy stand on a faulty foundation — quicksand.
That is why Nigeria’s Naira is a weak currency — it has lost tremendous value and Nigeria’s banks cannot afford to make loans on amortizing schedule.
Instead, they do so on interest only, with hefty up-front charges and payments. And the desire of Nigeria businesses to source credit facilities off-shore placed additional pressure on the foreign reserve such that Nigeria is not able to meet its 90-day current account requirement. The resultant effect is that the Naira is on a wide and wild swing. How can one sing about a growing economy with an interest rate that runs in doubt digits, such that it is hard to get a loan that goes beyond a few years?
The absorption rate of capable employable Nigerians is less than three percent of jobs produced as a result of the growing economy. And given that many Nigerians are in default professions — jobs different from what they went to school for — it means that many Nigerians are just getting by and causing employers more money on training because they are not squarely placed in their field of study.
One can understand the frictional unemployment rate that exists in every economy. But when more than 80 percent of a nation’s labour resources are “floaters” — underemployed or marginally employed — labour as a critical factor for productive existence is seen as not throwing off benefits for sustainability. The gains are imagined than actually measured. If one lies about catching fish pretending to throw fish into a bucket, they will go home empty handed.
Whither South Africa?
While the new statistics were expected to affect perceptions of both South Africa and Nigeria, economic commentators did not foresee this casting South Africa in a bad light. “Because it’s a re-basing exercise, not sudden growth . . . I don’t know if anything will fundamentally change because of this. When you look at broader challenges, road congestion, governance issues, Nigeria still has a lot to catch up with South Africa,” Charles Brewer, the managing director of DHL Express sub-Saharan Africa, said. DHL has operations in both economies, which are its biggest markets in Africa, where it has operated for more than 35 years.
The Nigerian economy has grown faster than South Africa’s over the past few years in terms of volume. Its GDP growth averaged 6.8 percent between 2005 and 2012, reaching a high of 8.6 percent in the fourth quarter of 2010. After the rebasing exercise, in which it expanded the number of sectors captured in the data to 46 compared with 33 in the previous series, Nigeria’s nominal GDP rose by 89 percent to $510 billion. This passed South Africa’s GDP of around $350bn, and beat analysts’ expectations. The South African ministry of finance said this was a positive story for the continent. “South Africa has been and will continue to benefit from faster economic growth in the rest of the continent… South Africa will continue to nurture mutually beneficial trade and investment ties with Nigeria and other African countries,” it said.
A healthy Nigerian economy would be beneficial if domestic companies were able to strengthen their business links with the country, as it was a market for value-added goods, Neren Rau, the chief executive of the SA Chamber of Commerce and Industry, said.
“This development is also an important signal that South Africa is not the only investment destination in Africa. South Africa will now face stronger competition from Nigeria for foreign investment.
Although Nigeria’s rise has been seen as the awakening of a competitive continent, South African economists said the two countries were not directly comparable in most parts. — African Executive/iol.co.za
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