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45 YEARS LATER:
IS NIGERIA AT THE THROES OF POLITICAL DISINTEGRATION OR ECONOMIC REVIVAL?

…Sober Reflection

irthday anniversary is usually a time for sober reflection. As Nigeria clocks 45 years since it attained political independence this moment calls for deep introspection by everyone irrespective of where they are. By all accounts, 45 years of age should be a major milestone in anyone’s life, however the economic reality of Nigeria’s current state is nothing to write home about. For the most part, Nigeria is saddled with a myriad of intractable problems, which to a large extent is self-inflicted. If you look around the country, it is easy to notice the result of this prolonged stupidity and incompetence. Quality of life in real terms for most of the population has fallen precipitously over the last two decades as unemployment and social tension takes crises proportion.

The significance of this number is that estimates indicate that life expectancy in Nigeria is now about 45 years while the ratio of population who are gainfully employed remains dismal. Most families can hardly afford “one good meal” a day. Looking at the condition during my recent trip, I wondered how the place is still standing given the extent of decay, prolonged stagnation and utter deprivation visited on the polity - the caption of the next section reveals the reason why.

…Poor But Happy People
Earlier in the summer, a US intelligence report suggested that Nigeria could disintegrate within the next 15 years, which comes as no surprise judging by the plight of the masses and socio-political instability. That prediction however underminds one fundamental fact, - the sense of resilience and survival instinct that Nigerians possess. An international opinion poll actually revealed that Nigerians are the happiest people on earth, just as another survey showed that they are the most religious inhabitants of the planet. All this explains the sense of hope in the face of such crippling poverty and political tension - for how long more is impossible to predict.

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Nigerian people were taken for a ride by an ignorant and self-fish oligarchy that perpetuated themselves in power for over 30 years. Yet critics lay the blame for the current morass squarely on the doorsteps of this administration. Some political pundits aver that were this administration more sensitive and effective in tackling the problems, the situation might have improved markedly.

In my view, we must realize that Nigeria’s problems are deeply rooted and multi-dimensional. Contrary to the seeming blanket critism, I dare to say that the economic team over the last 2 years has actually performed better by understanding the enormity of the problems and therefore taking corrective measures to find lasting solutions. The results of sweeping changes like public sector rationalization, deregulation/privatization, banking reform, fiscal discipline, due process and fight against corruption is gradually but surely yielding fruit.

…Gradual But Measurable Progress
Policies at the federal level have become more focused, as macro-economic indices over the last 3 years have been improving. Just to consider a few examples:

1. IMF statistics put the growth rate last year at over 6%, not withstanding that it is estimated to slide to 3,5% next year, as opposed to countless years of negative economic growth rate during the 1990s.

2. As we speak, Nigeria sits on a war-chest (foreign reserve) approaching the $30 billion mark, which is a direct result of tight fiscal policy and bold resistance to sharing oil-windfall with the state governments. Even at that, the country has secured a historical deal with its creditors that could help eliminate huge debt load.

3. Statistics show that the federal government over the last few years has saved over a billion dollars simply by strictly monitoring its procurement, contract award and disbursement system, through the due process office.

4. Already a large chunk of inefficient government enterprises have been offloaded to core investor groups through privatization, just as the telecommunication sector has been deregulated leading to an unprecedented growth and improved efficiency in commercial activities.

5. The fight against financial and economic crimes has been very protracted and assumed an unexpected serious dimension. This is leading to the eradication of the scourge of advanced fee (419) as miscreants are now on their guard. According to a popular saying in Nigeria these days “The fear of EFCC (Economic and Financial Crimes Commission) is the beginning of wisdom”.

6. Transformation in the financial sector, - banking/insurance consolidation, capital market modernization and pension reform are bound to deliver phenomenal multiplier effect on the productive sector and bolster volume of business activities. Already the cost of funds has started to dwindle thanks to a gradual accumulation of long-term investible assets. At 6%, interest rate for six-month commercial paper has fallen to a level never seen in the annals of the money market. Naira exchange rate has hovered around 135 to a dollar for over 2 years.

7. The government has come to grips and is finally determined to boost power supply before its tenure runs out. Recently a mega power deal worth over $550 million was signed with General Electric (GE) to supply turbines for new power generating plants to be constructed in a deregulated market environment.

…How Sustained?
All the steps elucidated are lofty and bode well for the country. It would translate to prosperity over the long run. However, the key concern is that, unless reform efforts are sustained in the near term, the benefits will not trickle down to the grassroots.

Which brings us to the burning issue of succession come 2007. This administration is tackling huge obstacles by laying a foundation; however the issue of longevity and consistency of economic policy is a major concern for most domestic and international business decision makers. Key players would rather sit on the sideline and observe how things unfold until after 2007. Nigeria’s opportunity for extricating itself from the vicious circle of poverty might be at hand. Actualizing that is a function of how well policy makers navigate the obstacles that confront the country today and the years ahead. The history of the Asian tigers like Singapore, Malaysia, South Korea, Thailand, or even China speaks volume of how to strive for economic progress. Sustained, disciplined and focused policy approach is the sine-qua-non for long-term growth and political stability. Nigeria’s story will be no different.

…Defying The Odds
Given the fragile nature of her political terrain and underdeveloped economic structure, it is apparent that Nigeria has not fully turned the corner yet. There exist serious quagmire along the way and chances are that a new administration will still need to work long and hard to reap the gains of this reform if the process is not derailed. If Nigeria reverts to status quo, with unrestrained spending and disjointed policies, the situation could quickly deteriorate. A significant foreign reserve of over $20 billion would make the impending power struggle a do-or-die-game. The money could become too hard to resist by the sticky hands of politicians and I fear that it might become business as usual unless white-collar crime enforcement is jointly strengthened both at home and abroad.

Without a doubt, no government has the monopoly to good ideas. You can’t discount that a far-sighted administration might have better policies or even learn from some of the current mistakes. But the watchword should be “if it is not broken why fix it”. Unnecessary experimentation with economic policies might not be wise. Some of the sound policies embedded in the National Economic Empowerment and Development Strategy (NEEDS) that are already showing positive signs must be allowed to run their course under the current policy makers, while new blood could be injected in other areas.

For Nigeria to stay intact and become a formidable emerging market in 10 years time, it has to surge beyond the self-centered bickering over the next few years, otherwise the much taunted US intelligence report might become a self-fulfilling prophesy.

Chamberlain is the Founder & President of New Era Capital Corp. and MyCompleteFinance.com, a New York based financial services group. He was previously a Financial Advisor in the Global Private Client Group, of Merrill Lynch.