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It is often said that you don’t get rich by working hard, but by working smart. That theory, however, is not yet a law; it is still a theory. Nigeria is a rich country, but the majority of its people are still poor. How can this majority be lifted out of the poverty pit? Is it through hard work or is it by smart work. I think we have to decide the path to be trodden out of this present economic forest. Do we have to create wealth for our people on the factory floors or will it be on the trading floors? By the factory floors, I mean and it includes, manufacturing in factories; planting a seed and multiplying it under the soil as in agriculture; Chemical fusion like plastics; fishing and fish farming; poultry; animal husbandry and many more. In all of the above, physical materials (raw materials) are reengineered in the factories; under the soil; inside living things as in poultry or animal husbandry; and chemical reactions, like plastics. The trading floors, however, are merchandising as in trading, banking and stock market exchange.
These two options are what I think the economic committee assembled by Yar’adua should first consider, deliberate upon and recommend to the president. After which, Nigeria should decide the best economic path to tread. From what Soludo (solution), or is it the Central Bank, submitted for consideration, it is the merchandising path, yet again. The CBN seems to have come up with a master plan for the naira, which I also welcome; as argued in my last article. However, it looks like the economists involved in the project have missed a fundamental issue. They seemed to have not considered the size of Nigeria’s population. Trading in whatever form, banking; stock trading; and general trading, is smart working. Yes, this is a formidable path to tread, but unfortunately, due to our large population that has no industrial base, we do not yet qualify for that path. If you look at countries that have become capital centres around the globe without a strong industrial base, such as ours, they have very small population. These are countries like Switzerland, Lichtenstein, Luxemburg, Singapore and Cayman Island. They are all city states, with a combined population that are less than Lagos, but have high par capital.
To me, the CBN is dreaming. To hope that the naira, as it is, will become the choice of medium of exchange for the region in not too far future, is a mirage. Does it not expose the emptiness, in thinking, of brilliant-classroom economists? They are saying that Nigeria will be the bank for the region, mm! Will any sane person, without a gun to his head, put his money in an overstaffed bank that has poverty written over the bankers’ faces? I do not think so. Nigeria has a huge population (overstaffed) and a par capital that reflects poverty. Will a sane depositor not know that his money is not safe, in such a bank, and that it will disappear immediately? That is the situation that exists when there is a huge population with nothing concrete on ground. Any suggestion that thinks ours could be different is a delusion. Socially, merchandising without a strong industrial base is not progressive. It does not create enough jobs for a teeming population like ours. Furthermore, people are sceptical that should CBN go ahead, the black market would blossom. States, collecting their allocations in dollars, would patronise the black market. Local councils would then have to wait until their allocations had been xeroxed in the black market by the governors. Maybe there would be no need to steal government money anymore at that level. Governors would make money in the black market.
If Yar’adua is sincere about engaging our teeming population in gainful employment, should he not favour the factory-floors option? My untrained economics sense informs me that there is no other way for now. Does he have the political will to create this path that will lead most Nigerians out of the economic woods or forest? For a start, there are serious political consequences for this option. What will happen to the Igbo traders, the stock exchange and the banks if he chooses the factory- floors option? There will be wealth movement to the manufacturing and agricultural sectors. The merchandising option, that we currently operate, has been on since the introduction of SAP in July 1986. Traders have become billionaires but very few jobs have been created. It is logical. How many workers does a trader need to man a warehouse that contains a billion naira goods? Compare that to the number of workers needed to manufacture goods worth a billion naira. This should be at the back of the president’s mind. For posterity, how many Nigerians will he be able to escort, on his watch, out of the economic woods? One path, we know, is broad and allows many people to come out of poverty; the other path is narrow and allows only a trickle.
So far, the social and political aspects of the country have been debated, but what about the country itself? How does Nigeria accumulate wealth, such that it could be counted among the greats? Wealth generation has its peculiarities – a big size to support manufacturing, or a small size that can provide services for others, or both manufacturing and services. A small sized country, like Ghana, could provide services, but ours should primarily be on manufacturing and agriculture. We could create wealth for our people on the factory floors. I have argued that unfortunately, because of our huge population, we are not yet ready to get rich by working smart. It has to be by working hard. Every Nigerian will have to imbibe this and be committed to it. Labour unions, manufacturers, and even traders and trade unions should see it as the only way, considering the size of our population, to multiply our national wealth. I do not think we should continue to allow other people to multiply wealth on their own factory floors, only for us to live on commission for disposing their products. That is not an economic economy.
Should the factory-floors option be decided, there would be massive wealth shift in Nigeria. For the manufacturing/agricultural option, the returns are usually slower but solid, and that is why it does not appear as smart. Such option does not flourish in a regime of unreliability, which is ok for merchandising. Trading is dynamic and that is why variable exchange rate has favoured only the traders. They have nothing to lose; they live on commissions. The source of materials and operations must be predictable for manufacturing. The bidding as it were for the value of the naira would need to be discontinued. The naira will have to be fixed to the currency of world trade, which is the American dollar. We were once that way and that was before SAP, but it was abused politically. I have often maintained that Babangida, when introducing SAP, chose the wrong solution. How to efficiently allocate scarce foreign exchange was our problem. That was our major headache, so we chose the market forces to determine that. We could have chosen to bid for the use of the scarce foreign exchange, instead of bidding for the value of the naira to purchase the scarce foreign exchange – I hope this is understood.
What that means is that company A, B, C and D in a particular sector of the economy will bid openly for the use of the scarce foreign exchange. The criteria could be the envisaged wealth to be created by each company and the number of employees to be added in a particular year. It could carry penalties for non-compliance. Considerations could also be given to products for local consumption or for export. We would have adequately allocated the oil receipt to industries to multiply the oil revenue by up to five times of its original value (increased GDP) and only then can the traders do their thing, which is commission taken. That will mean reducing the influence of the banks on foreign exchange. Earlier, I had mentioned the political will. From 1986, majority of those that had directed our economy had had sympathy for the traders, mostly due to personal gains. It is an irresponsible defiance of the public interest. The biggest casualty here has been Nigeria. The country had lived short of its potentials. The uncertainties associated with bidding for the value of the naira, forced those who could, to take their wealth outside and investors also ran away. Would-be investors have been reluctant to commit their citizens’ money in Nigeria as investments, except to trade and not for long term production, such as manufacturing.
Why did Soludo suggest that the states would be paid in dollars? There is only one logical reason and that is to get their support in the Council of States for his project. Some of the governors, you bet, would have started calculating how much they would make personally, in the exercise. Unless the local government, the workers, and contractors would also be paid in dollars, the suggestion seems fraudulent. It, however, affirm my definition of Nigeria’s foreign exchange as it were. Our foreign exchange is nothing but the selling price of the dollar earning by the major seller, the government. It is why nobody is bold enough to address it. The traditional means of generating funds to run government, taxation, is nonexistent. Oil receipts account for 90% of our earnings and about 85% of the GDP. The Federal Government in Abuja, that controls the oil receipt, then sells the dollar to Nigerians at a value that is determined by some few madmen in the banks on behalf of crazier men or women. It is determined according to affordability – can you imagine that. So, embezzlers, commission takers and traders and other people with equally cheap money, who can afford to buy at any rate, bid for the dollars. Those who manage to bring some goods back in return get taxed at the ports, but capital flight (with no goods in return) attracts zero tax by the government of Nigeria – what a waste.
Samuel Akinyele Caulcrick is the author of "The Devil Must Be Laughing".
ISBN: 1-4241-2196-5
Email: saceekay@aol.com.
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Posted by Robot| 22.08.2007 20:59