|PETERSIDE ECONOMIC REVIEW|
|Chamberlain S. Peterside, Ph.D||Saturday, August 12, 2006|
New York, NY, USA
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TRIGGERING THE CATALYSTS
…HOW TRANSPORTATION SYSTEM, POWER SUPPLY AND HOUSING SECTOR COULD TRANSFORM NIGERIA
…The Tripod of Prosperity
he role of infrastructure namely; power, intermodal transportation network and housing can not be overemphasized, yet these crucial elements have historically not received commensurate attention in the planning process in Nigeria. They have been long ignored much to the detriment of the economy and populace. The result of that neglect is written all over the face of Nigeria and well-documented in local and international press.
In the midst of burgeoning oil industry, other sectors were simply forgotten just as policy-implementation was myopic, haphazard and inconsistent at best. Time and again experts have analyzed and highlighted the fact that, the bane of progress in Nigeria remains the underdeveloped and decaying infrastructure, most of that has fallen on deaf ears or dumb minds.
To be fair, during the early to late 1970s some attempt was made, albeit short-lived, to build a robust infrastructure base, - we all recall that most of the airports, seaports, power plants and Lagos spaghetti-like road network and overhead bridges were constructed as several dual carriage and cross-country highway contracts were awarded at that period. Even a new capital city, Abuja was conceived and built from scratch in no time. But the railway system didn't fare better, either due to outright sabotage by haulage companies (as legend has it) or no thanks to poor maintenance culture/budgetary constraints. Over the years the skeletal network fell into disrepair. Based on statistics, Nigeria’s railway system consists of a measly 3500 kilometers of narrow gauge single-track lines. The last extension was done in 1958-1964.
Over the years power plants, roads, bridges and the likes have all become dilapidated. The fact that earlier ambitious infrastructure development effort helped trigger the first external debt-burden in the 1970s with the first jumbo-loan, or ensuing oil glut worsened Nigeria’s financial condition didn't help matters.
That seems to be changing now, what for the sudden improving fortunes of Nigeria, thanks to spiraling oil prices and colossal external reserves. For the first time, there seem to be purposeful and knowledgeable leadership in the economic front. The real challenge however remains how consistently and sensibly financial resources and accumulated external reserves can be deployed to tackle pressing infrastructure deficit, without stoking inflation.
Against this background, you might say that the railway rehabilitation program unveiled recently by the government could be a welcome development if efficiently and steadfastly implemented. During the first phase according to President Obasanjo, over $8 billion will be spent in modernizing and expanding rail network. The potential multiplier effect of such an investment can't be described in simple terms.
It goes without saying that, the pillars of economic progress in any society, including Nigeria is the transportation system, electricity and housing, so beyond railway rehabilitation, proper attention should be directed to other aspects because, these vital pieces of infrastructure could have a direct correlation with improved standard of living, massive job-creation, increased productivity and sustainable development in the long run.
Both in the emerging market countries and former socialist bloc, there was a head-over-shoulder advantage in this respect. Russia or Eastern European countries despite all their difficulties during the early reform era had a functioning rail system, well-maintained road network and cramped but plentiful apartments in urban areas – as any visitor to those countries would have noticed, surprisingly streetlights came on at night in Moscow, Warsaw, Budapest or Prague even in the heat of socio-economic crises during the 1990's. Little wonder why within a short while these countries have been able to almost catch-up with Western Europe and ascended to European Union (EU) membership – without a virile infrastructure platform these countries could have had an unimaginable long hard road.
China today builds as much power generating capacity every year that matches the whole power supply of Britain. In less than 10 years it has constructed millions of kilometers of modern highways and its seaport capacity is said to be doubling every few years since the 1990s. You can't argue with the humongous impact that is having on their emergence as a global economic powerhouse – you have to work doubly hard to beat that.
…Time to Pull the Trigger
Despite all the income-generating prowess, the oil industry in Nigeria has not proven its capability to meet the yearnings of a teeming population nor has it sufficiently energized growth in non-oil sectors, especially when most of the proceeds were misused and misappropriated. Thankfully however, this same industry is now serving as a cash-cow that could lubricate the wheel of rapid industrialization. If in most developing countries the problem is dearth of investable assets, in Nigeria today the issue should be how to prudently invest the soaring financial resources to catalyze long-term economic prosperity.
If policy-makers at the federal, state and local levels take the right step in building capacity around key identified sectors – modernizing and expanding the road/railway arteries, generating/distributing sufficient electricity and nurturing a vibrant housing market through fiscal incentives and financial instruments, Nigeria might well have solved 60-70% of its debilitating problems and setting the stage to rise and walk.
The onus is truly on the economic managers and subsequent administration to build upon recent gains, vigorously ramp up infrastructure facilities, whilst ensuring that most of the external reserves are not squirreled away by the sticky fingers of some politicians, senior public officials and fraudulent contractors.
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.