PETERSIDE ECONOMIC REVIEW

Chamberlain S. Peterside, Ph.DMonday, May 8, 2006
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New York, NY, USA

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TO BE, OR NOT?
...DECODING NIGERIA'S SURVIVAL INDEX AND GROWTH PATH


...Ripple Effect

s the third-term debate rages on, not withstanding the outcome of this amendment it would have a ripple effect on the nation for years to come. Almost everyone you speak to have a strong opinion as to whether or not another term is necessary. The arguments are quite diverse and transverse a broad range of issues. Simply put, there are three major schools of thought on the third term issue; those against it strictly from political and democratic perspective; those in support, based on the premise that gains of economic reform/corruption eradication should be consolidated before President Obasanjo steps down; and those on the fence - majority of ordinary citizens could care less and belong to the third category.


The polemics is quite understandable and in consonance with true democratic process, especially one that is still at an early growth-stage. As long as things remain peaceful and issue-based - no qualms. When the discussions become violent or "something to die for" then it contravene the ethos of civilized political discourse. Some utterances of opposition politicians and hard-line critics have been rather inflammatory and underscore the prognosis of US intelligence community on the sustainability or otherwise of Nigeria as one entity, if the tenure elongation succeeds.

In other words, some experts argue (wrongly or not) that Nigeria risks breaking-up by even considering such an agenda - nothing could be farther from the truth. Based on my observation I can confidently say that whether or not the third-term agenda sails though or fails, Nigeria would remain intact for salient reasons - the country has gone beyond the stage of disintegration or break-up in its life-circle. I will try to factually substantiate that hypothesis with the use of my so-called "Survival Index" shown in the chart below. After critically observing the situation, I arrived at that conclusion, as reflected in the chart by analyzing a multitude of factors (such as political history, socio-economic, ethno-demographic and global trend). I scored each factor based on a 10-point scale. Then weaved those scores together to create the econometric model that supports the assertion.

As you will notice, there is an inverse relationship between the survival and break-up trend line. As the chart illustrates, the higher the chances of break-up the lower the probability of surviving as a single entity and vise versa.

PROBABILITY OF NIGERIA SURVIVING VERSUS BREAKING UP

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...Political & Historical Factors
True, the amalgamation of Northern and Southern Nigeria in 1914 by the British was a marriage of convenience (orchestrated by an "intruder") between people of dissimilar background, aspiration and heritage. That misnomer was fraught with potential pitfalls, thus the ensuing imbalance became amplified, culminating in the civil war of 1967-1970.

The civil war was the highest point in the break-up scenario, so you would expect that the civil war, successive coups prior and after the war or incessant outbursts of religious intolerance/killings will lead to the end of that " unholy union" - unfortunately for most skeptics that hasn't materialized. Therefore, the longer the ethnic groups live together and work-out their differences after every heated squabble, the less likely that they will ever break-up. The festering crisis in the Niger Delta today presents the most serious political challenge facing Nigeria since the civil war, albeit not as threatening to the union as religious fanatism, but not insurmountable.

After four decades of enduring very difficult conditions it is unlikely, yet unproven that the relationship would falter. In fact the nightmare of history, nay Nigerian civil war during which millions of lives were lost is not yet forgotten, despite the fact that a majority of the population never experienced the war. Indeed how many Nigerians are psychologically poised to go through the ugly ordeal of civil war - refugee crises, hunger, disease and utter chaos? Despite the weeping and wailing about marginalization most would prefer their current status.

This simple question diminishes the chance of break-up today more than ever. Even the long suffering natives of Niger Delta are not asking to secede, all they want is more share of the oil wealth and a better life like the politicians in Abuja.

...Socio-Economic Factors
The experience of the last two decades has shown the overwhelming dominance of market forces. Reforms in Nigeria during the last few years is fast opening-up the market and dispelling doubts that Nigerians are capable of improving their condition. Recent strides like privatization, liberalization of the foreign exchange regime, banking consolidation, fiscal discipline, external debt deal, rising external reserve and sovereign credit rating are all dividends of home-grown reform spearheaded by Nigerian technocrats. Never in the annals of that country has such a dramatic shift been achieved within such a short period. Over time more people will benefit from that change process.

The question remains when/how these gains will trickle down to the poor masses. You could argue that the threat of political instability whether within the Niger delta, in the East or in far-flung Northern regions is a direct consequence of perennial deprivation. Naturally the longer that situation subsists the higher chances that the nascent democracy will remain fragile and be prone to manipulation by politicians.

The bedrock of stable democracy world-wide is a vibrant middle-class and Nigeria can hardly boast of that despite its abundant resources. The fact that sporadic violence has become commonplace no-thanks to abject poverty is still not enough reason to expect that the country would necessarily disintegrate - civil unrest, yes. In fact, the chances now is quite remote (as my chart indicates), compared to before, for the apparent reason that there is significant financial resources that has been amassed in the last 3 years that could be utilized to address urgent social needs. By last update the external reserve is nearly $35 billion and rising as oil price remains high, plus $1,5 billion savings from annual debt service payment - Nigeria has never been in a better financial shape since independence.

If sensibly deployed these assets could literary douse the "flame of national discord" and elevate living standard in the country instantly. So the argument could be made that except the Niger Delta region that might become well-off, anecdotal evidence suggests that no other region will fare better economically, politically or otherwise if they ceased to be part of the federation today. Why jump from frying pan to fire, - why would any part of the country walk away leaving behind a humongous sum of money at such an opportune time? After all, economic prosperity and access to opportunity is the sine-qua-non for peaceful co-existence in all normal societies. The situation in Nigeria has virtually been exacerbated by the fact that people have for long been down and unable to afford even the basic necessities of life, hence clamor for " resource control" by various groups and concentric forces remains the underlined motivation in Nigerian politics and military coup-de-tat - improve life quality across-board and the problems will fizzle-out.

...Ethno-Demographic Forces
The last census figures when published will buttress certain demographic assumptions about Nigeria; that, after forty years of co-habiting the geographic expanse called Nigeria, people have continuously been integrating, that a growing portion of population could hardly be identified as belonging to one ethnic group or another, and that prolonged inter-regional migration and inter-ethnic marriages as well as commerce is helping to gradually erode "imaginary" boundaries.

Race, ethnicity and religion are characteristics that define every nation or sovereignty, but young nations in Africa that are in existence for relatively short period continue to cling hard on that. Over bearing allegiance to ethnicity or religion is the most serious impediment to political integration in Nigeria. This becomes more grievous against the backdrop of widespread deprivation. Leaders as well as common people still see themselves first as part of their ethnic or religious group and then as Nigerians. That situation steadily inflames the fragile polity. The mindset of some Nigerians has been skewed in such a way that at the slightest aggravation there is the instinct to " break-away".

There is no short-gun solution to this problem except that the longer the groups co-mingle the deeper they will assimilate and the more their commonalities rather than differences become accentuated. You have to agree that the ethno-religious and tribal problems are inherent features of Nigerian society, nonetheless, the country has grown from infancy through adolescence and currently undergoing mid life crises.

If Nigeria can wither the storms at this cross-road of history, there is a high probability of it succeeding into the future. That probability was less pronounced in the 1960s and hit a low mark during the rule of General Abacha. Now that the country has transitioned into democratic governance, steady economic improvement and rule of law will help soften the blow on the citizenry, while providing little room for distractions. Meaning lower chance of break-up.

...Global Trend
There are several analogies of violent and peaceful dissolution of states over the last two decades (like Czech/Slovakia Republics, Russia or former Yugoslavia respectively), yet most civil wars even in Africa have ultimately been peacefully resolved and the factions continued to live together as in Nigeria, Angola, Mozambique, Rwanda, Burundi, Uganda, Democratic Republic of Congo, Liberia, Sierra Leone, etc.

It is safe to say that democracy is currently on the match in Africa. In the last few years two-third of African countries have organized democratic elections. Most Africans are wizening up and want to live better. As empirical evidence around the world in post-world war II era suggests, the mechanisms for peaceful conflict resolution is becoming more sophisticated while pro-active effort and early intervention by the international community have often helped nip crises in the bud.

Realistically, Nigeria's political situation is unstable but far from catastrophic. There is hardly a formidable secession movement that could succeed today without international support. Chances are that a more unified international community (devoid of Capitalist-Socialist dichotomy) can hardly afford a disintegrating or conflict-riddled Nigeria, given its population and strategic position within the continent and in the global arena. Any crises now could throw the already tense energy market into a tail-spin. Therefore, on a scale of 1 to 10, the chance of Nigeria splitting-up today is 3 as opposed to 9 in the 1960s.

As recent report by Investment Bank - Goldman Sachs suggests that Nigeria could become one of the twenty largest economies by 2025 all things being equal. The truth in that, lies in the fact that Nigeria like other highly populated emerging markets such as China, India, Indonesia, or Brazil will go through peaks and troughs, yet given the enormous resources it is unlikely to summarily dismember vis--vis some less-endowed countries. The strong and "invisible hand" of the global market, coupled with technology is helping countries leapfrog and solve developmental problems in far lesser time than had been deemed possible.

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.