Nigeria Ranked Top 20 Economies By 2050 – How will this happen?
You are one of a KIND, and I mean it from the depth of my ‘shallow’ heart – which is deep – Got It? Keep it up Bro.
Most things in life starts by/with TALKING before the WALKING. Some may believe TALK is CHEAP, well, they probably did not know how Oprah Winfrey started. She has ‘Talked’ her way to billions. Nigerians THINK, they start to WALK before They TALK: NO-NO.
Nation building is a product of IDEAS laced and backed by leadership enabled with legislations and constant evolution of policies, regulations and laws. The world’s great experiment is USA, and it is still evolving. In Nigeria, this sense of ‘this is how we have been doing it’, is so pervasive and counter productive, it encourages laxity, embracing dying and antiquated traditions, with attendant consequences against ‘Can-Do-Spirit’.
Leadership is like ‘Relay Race’, one must run their distance and hand off to another runner, who is cheered for a while until that runner is off on their own.
On the subject of Economics, Economic Development, Financing and policy development and supports needed to advance a nation’s agenda, they are all mutually inclusive. The subject of economics involves all subjects and expertise in it is fluid. Most so called Chief Economists in US hardly possess degree in the subject. Rather, they are persons who understand how to measure the pulse of a nation and tie such to policy agenda to make it happen. At the end, it is about the welfare and well being of a people. Most policies honored in the world today, came from persons who hardly went to school or studied the subject of economics.
Here is an example, the idea of 65 years as retirement age, was arbitrarily chosen by US FDR in his New Deal agenda for US in response to the Great Depression. He lifted a conclusion from a study done by German psychologist Dr. Bismarck, who at a time concluded that 55 years is reasonable to retire given that then average life span was less than 50 years. So for FDR, given earlier retirement could place burden on government resources due to Social Security benefits, therefore, FDR added 10 years to the 55 years concluded by Dr. Bismarck. Since then, 65 became a number most look to for retirement.
Now fast forward – 21st century, given improvements in medical treatments and enhanced living standards, the new normal is that 65 is now new 40, therefore, there is discussion to change retirement age to higher number. Who will do the change, a president backed by an act of national assembly or congress. This is Economics in motion dictated by changes in human needs.
During Reagan, interest rate was so high it was choking US economic development since cost of money was unattainable – excessive. Reagan, someone who did not finish college, but responding to cries from the people, decided to lower interest rate for capital projects to make cost of money affordable. By such act, America exploded on the world stage. Differentiation on interest rate for consumer goods and capital ones, were determined since capital ones are needed to make an economy hum, was lowered to single digit while consumer ones considered un-secured or collateralized debts were allowed to float – double digits. Usury law was passed to make sure excessive interest rate is not charged on certain debts. Again, a change that came as a result of political leadership and not because some one had PhD in Financing or Economics.
My mom of blessed memories taught me Economics and Financing before I read my first book on the subject in 1975, at Merchants of Light School Oba. My all time favorite text book was written by O. A. Lawal – I think called ‘Principles of Economics’. The manner it was written lit a bulb in my head. With that were books on History of Economic Geography my Uncle was sending from US, which broadened my scope on the subject about – people and place. That I made ‘A’ in Economics and Geography in school cert was a foregone conclusion because of the soft education I exposed myself given my library. Since then, I got hooked on the subject. I do not hold myself out as an expert but, I can hold in-depth discussion on the subject and given my run for Mayor of Dallas, leadership and policies debates, I have sharpened my iron.
That said, I like to join Green Dim on some of the points raised. His comments are noted by ‘GD’ and underlined while mine are’EO’. Here we go and I hope you have braced for the ride.
‘GD’ – First, they are just forecasts which assume that all or most of the underlying assumptions(I call them baby steps) would be met. When it comes to Nigeria, that is a huge, huge assumption.
‘EO’ Forecast is made as a looking-ahead plan laced with ‘assumptions’. The assumptions must come true in order for the conclusion to make sense. It is a road map, often used by demographers and social scientists to take a stab at the future. Given that such do change, it is more reasonable to do near, short and long term plans. The near term is more like ‘probability’ while short and long terms are considered ‘possibilities’. However, in the case of currency stability and utility, it is very useful. In US, a mortgage can be for 30 years at fixed rate. The reason for this, it gives confidence to the investor, lender and borrower that the value of the dollar is good for such duration. The attendant result given that mortgage payment is an annuity, stabilizes investors’ confidence. Some of the characters of money/income are being stable and regular. In the case of Nigeria, Naira is a basket currency – porous, lenders will not go pass one year and will use interest-only rates to effect loans. Higher interest rates denote lack of confidence and high risk in an economy.
‘GD’ – As regards your question for why we need the large foreign reserves, I can offer a more reasoned explanation, although I think that there are more qualified central bankers in Nigeria who can answer this question, including our able Nigerian Finance Minister, Dr. Ngozi Okonjo-Iweala herself.
‘EO’ There are ‘C’s with regards to borrowing – Character, Creditworthiness, Collateral. Money is never free even when given by philanthropists. Character denotes the person – Creditworthiness – person’s attitude to contracts and obligations and Collateral – in the case of default, what will the lender lay hands on. In modern times, CREDITWORTHINESS is emphasized. Read the book – Trust by Henry Fukuyama, a compendium on the world’s 7 developed nations. He noted the reason they developed is because of ‘TRUST’, and not really material resources. In Texas, there is what we regard as ‘Gentleman’s Agreement’, a man’s word is HIS BOND. Can anyone say that about Nigerians?
Maybe sometimes ago and here are examples. Back when I was at UST, we sent photographic films to be developed in UK and when the pictures came back, we purchased money order from Nigeria Post Office, and sent payment. UK merchants trusted Nigerians, and Nigerians received goods and services, on a promise to pay basis. Before the war, cars were purchased on what CFOA and SCOA, then called ‘Hire-Purchase’, because those that bought cars worked hard to pay back. Landlords did not demand 2-3 years advance payments. But once Nigerians breached and violated that TRUST with their service providers and walked from agreed and implied contracts, the West reacted and Nigeria was dunked and slammed.
Mrs. Okonjo-Iweala, with all her education and experience working for World Bank, has never worked for a profit making institution whereby longevity and viability of the establishment is predicated on performance. World Bank is not a profit making body and as a result, hardly an example one can offer as resounding experience to hang a hat on. In 2011, World Bank’s total outstanding loans amounted to less that $300 billion for nearly 100 countries they lend to. Same year, it committed to about $43b in new loans and was unable to fund nearly 70% of it. Compare and contrast – Bank of America makes about $1b loans daily, meaning its outstanding loans alone, are bigger than that of World Bank. World Bank is an institution – lender to distressed nations on choke hold enabled by machinations and manipulation of the its stakeholders. World Bank does not have stock or listed on any stock exchange. Mrs. Okonjo-Iweala’s experiences are worthy but in the scheme of things, they are hardly acknowledged by heavy hitters in the lending – capital and credit markets. She is a FLAT.
‘GD’ – I started my banking career in 1982 at Mellon Bank (now BNY-Mellon) as a Country Desk Manager for Europe, Middle East, and Africa. Those were the days when Chief Ebitimi Banigo (former MD of International Merchant Bank, and founder of Allstates Merchant Bank) sent his employees to our bank in United States for credit and banking training. I have since moved on to other careers in banking, including international bank consulting in USA, Nigeria, and Ghana.
‘EO’ Banking in US by 1982, was more on a regionalized and community basis. Branch banking in US effectively was nurtured in late 80s – 1988 to be exact in response to FSLIC/FDIC banking challenges and collapse leading to system failures of US financial institutions. Yours truly, Ejike E OKPA, was an Asset Manager for US Federal Savings and Loans Insurance Corporation precedessor to US Federal Deposit Insurance Corporation as Receiver for all failed bank assets. I was promoted Regional Appraisal Manager, March 1989, and given repsonsibility of handing liquidation of failed financial institutions’ assets in FDIC Regional Office over 8 states, headquartere in Dallas. Same year, I was extended an invitation to testify before US House subcommittee on banking on how to handle asset liquidation; an unprecedented invitation to a Nigerian who has been in US for less than 4 years, and not even a US citizen – all memos to that are still in my possession. Given that majority of failed institutions were in Texas and surroudning states, the activities were more. However, come early 1990s, the east coast started witnessing same challenges and I was involved in Bank of Boston, Fleet Bank, Chemical Bank, Bank of New York, assets liquidation, by then a consultant. I traveled throughout the east coast states doing work on failed bank assets. Again, I challenge any Nigerian in US to offer similar experience.
In response to the failure of financial institutions, US congress responded with FIRREA – Financial Institutions Reform, Recovery and Enforcement Act of 1989, which drastically changed how banking and asset valuation and appraisal are done. I am sure Mr Dim may not have been exposed to these experience. I have serious mileage in this sector.
Chief Banigo, with all due respect was trained in deposit acceptance banking, old form of holding deposit on promise and payable on demand. When in the early 90s Nigeria was experiencing collapse of merchant banks because of pyramid scheme and BCCI -Bank of Credit and Commerce International, one of the largest to fail in Nigeria, Nigeria leadership was clueless on how to respond to such system and structural challenges. I can share thoughts I offered to Nigeria NDIC on how to manage the failure but there were no takers. Even now, Nigerian banking is still largely deposit acceptance with limited financial services offered. Not to offend anyone, anyone with banking experience prior to 1985, who has not upgraded is OBSOLETE. Banking is a very dynamic sector, whose relevance is often driven by changes in policies and laws. Catch-the-rear approach of Nigeria, is why Nigeria economy and financial sectors are in dire strait. What has kept Nigerian banks propped are devalued Naira.
‘GD’ – The answer to your question (why does Nigeria need the reserves?) is fairly simple – the size of one’s bank account ( or one’s credit facilities) remains one of the most important yardsticks for measuring his or her ability to borrow money, repay it, and pay for purchased goods and services.
‘EO’ – Nigeria needs the foreign reserve as a hedge against future purchases – imports and payment accounts. There is a Rule of Thumb in nations current account system. Exporters look to 90-day window for payment on Bill of Lading – Current Accounts, and such is denoted by how much money is in the ’till’. Since Nigeria lacks creditworthiness and its government backing is worthless – unbankable, Cash-As-King – old fashioned way, comes in to the rescue. Most developed nations do not have ‘reserve’ because money is ‘air’, its utility and usefulness, is enhanced by contracts and obligation to honor, which is ingrained in their tradition and culture. On personal finance, foreign reserve is like US ‘CD’ Certificate of Deposit offered by banks. When one’s credit is shot, the banks may ask for a CD and collateralize such for a loan. In such case, one may buy down interest points, in its absence, one borrowing is like getting money from ‘Mafia’. But how many people have large CDs to be able to borrow?
Therefore, creditworthiness is KEY to extension of credit; the new form of money. Back when Naira was a stable currency, Nigeria foreign reserve was non-issue to foreign investors and that was shown in the number of multinational corporations that sought foothold in Nigeria between 1972 and 1980. For the world to show Nigeria such love moving in companies, was unprecedented in the history of most nations coming out of war. What happened in Nigeria during this time window, could be likened to mini-Marshall Plan, even though the west did not call it that. Nigeria was a welcomed and respectable member of the world. But when Gowon allowed corruption or turned blind eye to it, evidenced by the saga between Joseph Tarka and Godwin Dabo, cracks began to show in Nigeria leadership, governance and corporate credibility with a citizenry encouraged to ‘get-something-for-nothing’. Remember East Central State Sole Administrator Ukapbi Asika’s popular – ‘onye ube ru olu, o’ ra ra ma’, ‘who he turn it is should enjoy’ culture.
Anyway, I can go but you get the gist/picture.
Economics is as good as the leadership of the country using and relying on the opinions and views of those offering the subject. No country with WEAK leadership will be a beneficiary of economics even if everyone is as educated as Mrs. Okonjo-Iweala, and other doctors and doctorates in the federal and state cabinets.
Finally, regardless of what degrees one hoist, ability to BLUFF outside interests are key to a nation surviving. If not, the vulture culture of pouncing and preying on weak nations, is aided. There are examples of nations that defied World Bank and IMF prescribed solutions, sought organic and internal policies and made it.
Nigeria leadership is persuaded and swayed by citizens who hoist experience from WB and IMF, as if they have badge of honor and credibility, and as a result, rewarded with plum federal appointments. Well, when the desirable is not available, the available can fake their way to becoming desirable by design and default.
Matters Arising –
Ikenna, since this BLOG is popular, I suggest an annual BLOG seminar and conference in Abuja whereby topics are presented and thereafter, there is face time. You can raise money and use the proceeds to fund ‘Nigeria Project – A Greater Tomorrow Initiative’.
If you are interested, I will privately share a road map, and make it a real source for go-to ideas. I am a Next Generation Fellow of The American Assembly, a project of Columbia University, tailored on issues nurtured to expand ideas on how to enhance public discourse in US.
With hundreds in the BLOGsphere, you have captive audience and I am sure, some would like face time; just like curiosity brought us together – Dallas visit. Think about it, there is electricity in here and you can make it a magnet.
I welcome informed counter, if not, I will not respond. Knowledge is not gained only formal education, informal education, often is more effective than classroom.