Home Analysis Fiscal federalism will make Nigeria great again

Fiscal federalism will make Nigeria great again

by Business News Report

At 53 a man is of age. In a developing country like Nigeria, at 53 a man has ground children who call him papa. But it is not the same with a nation. Nigeria at 53 is relatively young. When Nigeria gained independence in 1960, it was like a young man on a very promising journey. The journey was smooth for the first six years. Along the smooth way, it had an accident and was fatally wounded. The wound was not treated because of the pains it inflicted on the foundation of the country. It was allowed to linger on. Then gangrene has set in and now the leg requires amputation. “The Nigeria accident was the military incursion into politics in 1966.
Nigeria after Independence was on the right path of economic growth and development. It had visionary leaders who were interested in the welfare of the people. Industries were springing up in every region of the country. In the North Ahmedu Bello who held sway was occupied by setting up farm settlements, textile industries. It was the same story in the East was Michael Opera set up farm settlements and a number of manufacturing companies. In the West, Chief Awolowo apart from the popular free education he gave to the region set up a number of industrial estates which attracted several companies from abroad. It is this simple reason that the west is the most industrialized part of the country. At this time the Nigeria economy was in top shape and at take off stage in economic development. The Nigerian economy was rated along the same indices with Brazil, Indonesia, Malaysia and the rest of the now talked about BRICs countries. Then Nigeria had development plans that guided the nation. In the North was found pyramids of ground nuts and cotton were part of foreign exchange earning commodities from the north. In the west cocoa was found in abundance. It brought pride to the nation. The various regions were autonomous entity The military intervention and the discovery of crude oil in commercial quantity seemed to have radically altered the course of Nigeria economic development.While the military discarded the fiscal federalism structure of the federation and made the states to become federal allocation collector, the discovery oil made Nigeria leaders to sleep walk and refuse to plan believing that the money flowing from the ground will solve all the nation problems. As the military leaders were sleep walking and basking in the euphoria of petro dollar earnings from oil, Nigeria’s population was growing faster than the resources
Peter Drucker the management expert in his book the practice of management wrote that “Innovation is the specific instrument of entrepreneurship, the act that endows resources with a new capacity to create wealth. Nigeria military leaders did not yield to the management advice that management must always, in every decision and action, put economic performance first. It can only justify its existence and its authority by the economic results it produces. There may be great non-economic results: the happiness of the members of the enterprise, the contribution to the welfare or culture of the community, etc. Yet management has failed if it fails to produce economic results. It has failed if it does not supply goods and services desired by the consumer at a price the consumer is willing to pay. It has failed if it does not improve or at least maintain the wealth-producing capacity of the economic resources entrusted to it. During this period there was no serious investment in power and other critical infrastructure, the ones that was available were not maintained and infrastructural decay had to set in making many to feel that Nigeria is a failed state.
This is far from the truth. Nigeria is a land of ample opportunity and immense possibility. In a fast changing and evolving world, where weaklings of yester years have become economic giant and the strong of yesterday are fading in economic glory and becoming weaklings, Nigeria has a chance to make a difference. Twenty years ago, no development economist would have accepted any theory that postulated the emergence of China, India and Brazil as economic power houses. Today China is almost the largest economy in the world beating United Kingdom, Japan, France, Germany and Italy. According to the United Nations economic data the global economy Gross Domestic Product as at 2010 was $62.6 trillion. Of this the United States of America accounted for $14.447 trillion as the largest economy in the world. It is followed by China with a GDP of $5.739 trillion making it the second largest economy.
Japan the third largest has $5.458 trillion GDP. Germany which is fourth has a GDP of $3.280 trillion while France the fifth has $2.559 trillion GDP. Britain which dominated the world for decade as the economy to beat is now a distant 6th economy in the committee of nations. Nigeria is occupying 47th position with a GDP of $238.920 billion. This shows that from the peak there is only one easy way to go: downwards. It always requires twice as much effort and skill to stay up as it did to climb up. In other words, there is real danger today that in retrospect the United States of 1950 may come to look like the Great Britain of 1880—doomed to decline for lack of vision and lack of effort. Going by the current trend and projection by 2020 there will be a major shift in the global balance of economic power compared to 2010. Emerging economies will rise in importance and China would have overtaken the USA to lead the list of the world’s top 10 largest economies by GDP measured in PPP terms.

Looking at the Nigerian economy in the last few years since the return to democratic governance, from global perspective, foreign investors are now looking to Africa, Nigeria and Kenya in particular. There seems to be a tide, the type Shakespeare spoke about, in the economic affairs of Nigeria if only policymakers can see beyond their noses and take the tide at its flood to give Nigeria an economic take-off to recover from the missed opportunities in the late and early 1980s. Investors are seeing what most Nigerians are not seeing. The complaint of lack of infrastructure, epileptic power supply, low industrial base etc., are fast becoming opportunities to foreign investors.
At the Reuters Africa investors’ forum in Johannesburg early this year, foreign investors who have their businesses in Nigeria and other African countries were quoted as saying; “If you want to ride Africa’s business boom, choose your country well and be ready for bumps on the road. But the momentum is upward and you will be rewarded if you stay the course.” African policymakers and chief executives of companies operating in Africa are spreading this upbeat message, as interest in what was once dubbed the “hopeless continent” blossoms along with growth rates.
During the year Global X Funds listed the first Exchange Traded Fund (ETF) on the New York Stock Exchange to track Nigerian stocks. The head of the Fund said this is a move which will enable U.S. investors to buy high growth Nigerian shares at home. Nigeria in the eyes of funds managers and economists today is growing in popularity as an investment destination, offering the promise of seven per cent economic growth and a consumer market of around 170 million people. The Nigerian stock market index rose 35 percent in 2012 but dropped to 29 per cent this year, making it the second best performer in Africa and one of the best in the world. The index is up 29 per cent so far this year and analysts expect gains to continue as strong corporate earnings trickle in. There are a massive amount of U.S. investors looking to get exposure to Nigeria.
Nigeria’s stock exchange disclosed that it is reviewing applications from some leading global investment banks to join its trading floor, as reforms aimed at improving liquidity and transparency bear fruit. Mr. Oscar Onyema, Chief Executive Officer of the Nigerian Stock Exchange told the Reuters Africa Investment Summit in Lagos that some foreign investment banks have applied to trade on the floor of the exchange. “We cannot announce which ones yet but they are in the top ten in the world,” Onyema said of the banks that had filed applications to trade on the NSE. Rencap and Standard Bank already have traders operating on the floor of the exchange. Before the stock market bubble burst in 2008, wiping nearly two thirds off its value in a year, domestic investors owned 85 percent of shares, with foreigners owning the rest. The investment tide is afoot; will Nigerian public servants, government functionaries and elected officials stop stealing and ride on the tide of development?
Come 2014, the geographical expression called Nigeria will be 100 years old. The Northern and Southern protectorates were amalgamated by Lord Lugard in 1914. The land mass in which Nigeria is located is a land flowing with milk and honey. Many have looked at the progress made in desperation and have written off the country. But many out there are seeing the Nigeria experiment as a land of great opportunity. The United States of America recently described Nigeria as the next economic success story. Apart from its natural resources, Nigeria has a young and dynamic population made up of upwardly mobile middle class. It is this middle class that current serve as attraction to the international business community as attraction because of the huge market it represents. The experience of the telecom operators in Nigeria bears this out clearly. It is for Nigeria to put its act together and get it right. Nigeria’s economy has been growing at 6-7 per cent in the last few years without regular supply of power, when eventually the country gets the power equation right, the economy will frog leap.
President Barack Obama himself declared Nigeria as the world’s next economic success story, stressing that this was one of the major reason his government was committed to helping the country build strong democratic institutions and remove constraints to trade and investment through the African Growth and Opportunity Act. Making this declaration at the US-Nigeria Trade and Investment Forum, an event organised by the Nigerians in Diaspora Organisation (NIDOA) in Washington DC, during the year, Obama who was represented by Ambassador Eunice Reddick, said that his country expanded opportunities for Nigeria to effectively access markets and diversify its economy beyond a narrow reliance on natural resources. “As we support these efforts, the Diaspora can play an important role in contributing to a strong, vibrant and economically prosperous Nigeria” he noted.

It is not only the US government that is seeing the great possibilities in Nigeria. In 2004, Goldman Sach said that Nigeria will emerge one of the 20 largest economies of the world in 2025. This was the basis of Nigeria’s vision 20-2020 by the then President Olusegun Obasanjo administration.

Related Posts

Leave a Comment