Our Next Collective Concern – The Begging Questions

If electing our leaders were considered the civic duty of every citizen, how about the direction of a country's economic policy. The recent happenings in, firstly, Greece; then Ireland; Spain and most likely Portugal in the Euro Zone are evidence that the average citizen should not wait until it gets real serious before showing concerns about the economy. There is enough complicity with the West by our so called economists concerning the direction of our economic strategy. And for the rest of us, I may be wrong; we are not showing enough interest on what should be our main concern. The labour and trade unions should be at the forefront on the dangers of the path being trodden. We are not earning enough to feed our massive population.

My arguments may seem unimaginative to most people: but any Nigerian that believes that we are not on the path of economic suicide should have a rethink. If we are lucky, the price of oil will continue to rise. Unless we urgently address three key areas – Exchange Rate Mechanism; Tax Reform and Insurance Reform – we will continue to day dream towards a vision of becoming an economy power. Most Nigerians from the president to the least informed, for example, believe that a magic wand of uninterrupted supply of electricity would propel Nigeria towards the vision 20-20-20 at a speed that competes with the speed of light that eludes them presently. Many Nigerians even think that is what is preventing investors to flood our shores.

For the avoidance of doubt, investors have two key concerns – potential for return and the safety of funds – period! When foreign investors determine that a particular country meets these objectives, demand for assets denominated in that currency is sought. One may start thinking why we are being excluded by foreign investors. Nigeria, with a huge potential for profit for any investor, has not attracted any foreign investment because of its zero score for security of funds. This is not political instability alone, but chiefly the effect of our exchange rate mechanism. A currency, like naira, which value is determined though auctioning provides the lowest safety for invested funds.

Let it also be clear that invested funds by a foreign investor are most likely loans from the banking system of the investor's home country, which in effect is the savings of the people of that country. Funds to be invested have to be converted into the local currency of the recipient country at a particular exchange rate. At which point, there should be no problem; provided that down the line, the attrition to the value of the investment is not due to the instability of the currency. However, if the value of the recipient country's currency is determined (exchange rate mechanism) through auctioning and not by productivity, then the safety of the invested funds is jeopardized. It is the one reason why no investor heeded Obasanjo's worldwide begs for investment in the Nigerian economy.

Let us even see where foreign investors have moved to in the past 30 years and where they have divested. I will concentrate on two countries. Take China – China has the same lowly priced labour like Nigeria, yet investors flooded China, but divested in Nigeria. China did not initially have enough electricity power (China still commissions generating stations every two weeks to meet demand), but investors helped build China's power. However, investors have not seen reason to invest even in power in Nigeria. Yet, the two countries satisfy the objectives for substantial returns. What is Nigeria doing wrong?

Let us compare the other key concern of the investor – the safety of funds. While China has a fixed exchange rate to the American dollar (the world currency of trade and the safest currency), Nigeria floats its currency through auctioning (which could easily be a victim of whims and caprices of cheap money – product of inflated contracts). This means that a foreign investor in China will down the years still have the value of its investment in a derivative of the American dollar just as it were. Whereas a similar foreign investor in Nigeria, would most surely, have lost the value of its investment in real dollar due to the exchange rate mechanism of auctioning. Daimler Benz claims that they invested S200 million U.S. dollars in the plant, in Enugu, but could only sell it for $50 million U.S. dollars – an investor's nightmare.

If a Nigerian still dream that luck or wishes will bring genuine investors to this country in this regime of the present exchange rate mechanism, let him put himself in the shoes of a foreign investor. Let the Nigerian think of a taking his hard-earned money to a country where they will gamble with his money, because Dutch auction is nothing but that. No serious company doing business in Nigeria has permanent structures on the ground in Nigeria. Why don't companies like MTN have permanent structures on the ground in Nigeria, in spite of their massive profits – instead, they rent properties and rent airwaves. It is OK to invest in quick fixes and cart away your profit and not put anything permanent on the ground.

As I breezed into the open, after Customs, at the Murtala Mohammed International Airport in Lagos, last week, I had a sad feeling for the future of Nigeria. This is about the massive crowd outside at the airport. I was returning from attending my son's graduation at Buffalo, New York, U.S.A. In all the airports I visited outside Nigeria, the number of the traveling public outnumbered those that were waiting outside by 30 to 1. However, in Nigeria the ratio is reversed. My son had attributed the phenomenon to unemployment. He said those loitering around motor parks and airports in Nigeria ought to be in the factories, probably on their second shift; and would have been too tired to go and welcome a visitor or see them off. Why will anybody say this economy is growing? Well, the price of oil is growing.

Samuel Akinyele Caulcrick