John Campbell

Africa in Transition

Campbell tracks political and security developments across sub-Saharan Africa.

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Nigeria: What if Globalization Reverses?

by Guest Blogger for John Campbell
December 28, 2012

People protest on a street in Kano before the suspension of a nationwide strike by labour unions 16/01/2012. (Stringer/Courtesy Reuters) People protest on a street in Kano before the suspension of a nationwide strike by labour unions 16/01/2012. (Stringer/Courtesy Reuters)

This is a guest post by Jim Sanders, a career, now retired, West Africa watcher for various federal agencies. The views expressed below are his personal views and do not reflect those of his former employers.

According to Fortune Magazine, investments in foreign held assets are decreasing. Joshua Cooper Ramo points out that, “figures on investment in assets held overseas, probably the best indicator of enthusiasm for globalism, are drifting down toward 40 percent from more than 50 percent in 2008.”  Ramo further notes that during “most of the past twenty years trade has raced ahead of global economic growth,” but in the last twenty-four months, it has slowed and, “this year, globally we’ll be below the twenty year average rate of trade growth yet again.”  According to Ramo, “We find everywhere signs of a world turning inward and of an era when the inside will define success and deliver growth—for companies, for nations, even for your career—in the way the outside once did.”

If true, and if sustained, where would such a trend toward an “inside world” leave Nigeria?  The country has, and does, depend heavily on export markets and foreign investment to maintain its oil industry, which provides 95 percent of the country’s foreign exchange earnings and 80 percent of its budgetary revenue.  Moreover, trade integration is believed to contribute to economic performance.  Nigerian officials have considered “deeper trade integration as a means to foster economic growth and alleviate poverty,” according to some researchers. Yet the country’s National Bureau of Statistics reports unemployment at 21 percent, implying, says the Leadership newspaper, “policy failure.”

Economic shortcomings are paralleled by stalling anti-corruption efforts.  Transparency International ranked Nigeria 139 out of 179 countries surveyed, making it, the second most corrupt country in West Africa. Security continues to deteriorate.  Nigeria is now the seventh-most terrorized country in the world, according to the Global Terrorism Index.

Ramo argues that when globalizing eras end, they “generally take nations that don’t adapt for a very unpleasant ride.”   Operating on old ideas, their leaders typically fail to grasp dynamics of the new age.  This is what revolutions are made of, he suggests.  If so, Nigeria may be closer to the brink than previously thought.

Post a Comment 2 Comments

  • Posted by Chike Chukudebelu

    A few points.

    1. Nigeria’s GDP figures (and most economic indices) are not correct. So I think we should wait for the current re-validation exercise to be concluded before we make any value judgments.

    2. Nigeria’s unemployment rate is regrettably low & much of it is due to a failure to invest in infrastructure, energy & the real sector of the economy – this is what gives SMEs the confidence to employ.

    3. The West is still extremely important but still extremely risk-intolerant – thus, not always a great sort of investor for highly profitable, yet highly risky environments like Nigeria. Fortunately, for Nigerians, emerging market investors are rising in importance and have to sort of risk-tolerance that we can use.

    4. Nigeria “has been on the brink” many times since 1966, and while this analysis may be true, it doesn’t tell young Nigerians like me anything new.

    5. Nigeria might depend heavily on oil, but Lagos is demonstrating that it is possible to depend less on oil revenue, while steadily building on property rights, proper taxation & efficient governance.

    Western analysts (typically) dwell on the negative, but an exploration of how Lagos (acts or) can act as a laboratory for good ideas in governance is not out of place. What if due to increased agitation and the examples of governors like Adams Oshiomohle in Edo and Fashola in Lagos, Nigerians begin to demand and obtain better governance?

    Western analysts almost never consider positive narratives.

  • Posted by Chike Chukudebelu

    This article got me asking questions: http://www.nigeria-magazine.com/article/nigerian-economy-largest-africa-overtakes-south-africa-146-billion

    It claims that the Nigerian economy may have overtaken the South African economy. While this may not be true, the Nigerian economy may be significantly bigger than we think & neither the Nigerian government, the US government, John Campbell, his many contributors or my humble self know its true size.

    I hope we are humble enough to admit that.

    Now a few thoughts:

    1. Nigeria passed through a terrible economic crisis in the 80′s & 90′s. Some of the most successful private businesses like fast food outlets, local software companies, Nollywood etc. were formed during the crucible. We learned how to cope well with economic hardship.

    2. Browse through the pages of national dailies; British & Canadian universities advertise everyday. They are not stupid, they know that Nigeria has a sizable middle class that can afford to send their kids to university abroad.

    3. I actually live in Lagos, the road network is vastly improved, but the rate of growth private car ownership is significant. I also traveled to South-Eastern Nigeria and encountered traffic jams and the kind of investment in consumer products that can only be driven by a large local consumer base.

    4. There is a limit to what anyone who depends on figures can know about Nigeria. A lot of data is simply not documented. I have worked in business consulting and it is extremely difficult to get a true picture on anything – the data is simply not there.

    5. Western consultants (& especially Western diplomats) are extremely limited in their knowledge of Nigeria. There is no way to come to grips with Nigeria’s informal sector and very little presence outside Abuja and Lagos.

    For example, Enugu is the major administrative city in South-Eastern Nigeria (an area with a population greater than 20 million – greater than many African nations). There is virtually no US presence there, neither is there any US presence in the Middle Belt or even in the far North. Increasingly, US diplomats depend on “what they are told”, not the hard facts on the ground.

    6. This is not to say that there aren’t potential problems, but before make projections, we need to understand what exactly drives the Nigerian economy. I.e:

    a. How large is the informal sector and what drives it?
    b. What is the interaction between the formal and informal sectors?
    c. There is tangible evidence that the provision of electricity has improved. If these improvements are sustained, what would the impact on productivity be?
    d. What sort of innovation is occurring in the Nigerian private sector and what is the likely impact on productivity (or are Nigerians fundamentally incapable of innovation)?

    e. Is the World “actually turning inward”? The US can afford to “turn inwards”, the Europeans may be consumed by their internal crisis but Chinese & Indians have population pressures that will force them to venture outwards. The Chinese will be increasingly important to Nigeria/Africa (as the number of Nigerian businessmen who does the “China run” attest to).

    7. I may not be totally correct, but the picture is a little bit more complicated than we think. Nigeria has fared very well for a nation that suffered from both Boko Haram and a devastating major flood. Why? How resilient is the Nigerian state/economy? Do we actually know what we are talking about?

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