Nigeria: Looming Bankruptcy


I can’t stop wondering why we do this to ourselves and to the future of our children. No one can tell me that even common sense is not enough to guide us. If other countries are getting development right because they are pragmatic in their approach, where’s our pragmatism to development?

I have always said it time without number that economic development is the simplest thing any serious nation can embark on. If it is not rocket science, why are our leaders and our so-called economists pretending that it is?

In 1791, Alexander Hamilton, without even an elementary knowledge of economics, including caring less about Adam Smith and his economic theories, proceeded to champion infant industry industrialization, which simply blocked imports and promoted and protected America’s emergent industries from their foreign “adult” counterparts. And, as a result, within a few decades, American manufactured goods began to compete with British ones.

In 1841, today’s Germany, taking the same simple industrialization step of blocking imports and promoting local production of the same imported goods, became a major industrial economy; and before the end of the same century it became Europe’s largest industrial economy. Insisting in 1868 that his rustic too should take the same industrialization footsteps of Europe by copying them, Emperor Meiji suddenly turned his poor Japan into a leading industrial economy in the world, to the extent of defeating mighty Russia in the Russo-Japanese War (1904–1905) fought over imperial rivalry in Manchuria and Korea.

By 1961, after the devastating civil war, South Korea led by General Park decided to become an industrial economy by following in Japan’s footsteps. Led by Deng Xiaoping in 1978, the economically provincial China, in less than four decades, became not just an industrial economy but the world’s second-largest economy. After its own many years of experimentation, India too is today one of the world’s fastest-growing high-tech and service economies.

But Nigeria, the supposed giant of Africa, seems to remain stuck in its rural economy. This is the consequence of a country that pretends to be too poor for its leaders to be living such ultra-expensive lifestyle and too rich for it to be the world’s poverty capital. That is why Nigeria’s case is that of the blind marching on gold but fighting over a piece of iron. It can be likened to the bizarre case of a group of hunters carrying an elephant but still fighting over a rabbit. There is this dangerous mentality of “we are not capable until some far more ignorant whites show us the way”.

Not being idiotic like us, they have made sure that they never help us out. Shouldn’t showing us the so-called way mean shooting themselves in the foot? What is the rationality for someone benefiting from your ignorance teaching how to catch up and become a potential competitor? If other countries that joined those already there cleverly climbed the ladder being shifted by those up there, why can’t we too be pragmatic enough to avoid their neoliberal economic trap carefully constructed to undermine our industrialization?

If the first secret of rapid industrialization is to build critical industrial infrastructure, stimulate small industries to compete and take advantage of domestic consumer market, why are we pretending that our industrialization will take place without massive investment in such important infrastructure development like power, road, rail, and ports? Above all, why pretending that it can be private-sector led when it is obvious that given the rate we are going it will take over two centuries of federal efforts? Honestly speaking, from where will the federal government find such a whopping $300 billion to fill the huge infrastructure gap? Is this not the government that is increasingly finding it difficult to pay salaries? Even in countries as rich as the U.S. and China, infrastructure is built by private-sector firms.   

The only reason Buhari continues to give preference to government-driven infrastructure development is that it is the only way government can use the oil money to invest in areas of the country that have the lowest return on investment, while ignoring to invest in those parts of the country where return could be high. In other words, Buhari’s thinking is that allowing private investors to drive infrastructure investment would amount to investing in those parts of the country where their returns are expected to be high.

An excellent example of the federal government’s infrastructure investment with no direct impact on industrialization is the billions of dollars borrowed from China’s EXIM Bank to construct railroads between Abuja and Kaduna and Lagos and Ibadan. China gives loans for white elephants like these. China will never grant loans for industrialization-triggering infrastructure investment, or else billions of exports to Nigeria and millions of manufacturing jobs would be lost in China.

In the meantime Chinese, Indian and South African companies in particular have invaded our consumer economy and turned Nigeria into a dumping ground for cheap and substandard goods from their factories. While China dumps substandard electrical and electronics consumer goods evacuated from their factories, India is dumping substandard pharmaceuticals and drugs, and South Africa’s Shoprite has literally destroyed our food market, where all adulterated farm products from South Africa find their way to the Shoprite malls scattered across the country, displacing our local fast-food businesses and thousands of workers losing their jobs.

They wouldn’t have captured our retail market if not that we operate a zero tariff open import-dependent economy, where dumping of foreign-made goods has become the order of the day. All they need to do is find a powerful politician or top technocrat in the presidency to bribe as an indirect shareholder and they are in business. Even our central and commercial bankers give them preference by making forex readily available to them and lending to these finished goods importers at the expense of local manufacturers.

We have a central bank that formulates an anti-investment, anti-growth and anti-jobs monetary policy, which has to constantly intervene in the forex market to artificially keep the naira strong. In most cases, liquidity tightening is designed to synthetically subsidize the dollar and imports. But we all know that no nation that allows its commercial banks to continuously finance consumer goods imports should expect industrialization.

Understandably, Nigeria today faces a looming bankruptcy. If we continue this way, latest by late 2020, besides our revenue we would have to still borrow in order to be able to service our debt. When this happens the country becomes bankrupt because our revenues are not even enough to meet our debt service obligations. Since at this point government has to borrow to add to its whole revenue, salaries can no longer be paid let alone investing in infrastructure. At this point not only will no creditor lend to us, creditors will demand upfront handing over of the country’s strategic assets, including our oil strategic reserves. In the meantime the naira will collapse to the point of thousands of naira equal to a dollar.      

Averting this inevitability will require a president that understands how to fix the economy. Unfortunately this government lacks what it takes to fix what it has caused during the past four years. That is why the holders of the key to avert this looming bankruptcy are the presidential tribunals that are now hearing the post-presidential election case. Besides, this is an opportunity for the country’s judiciary to redeem itself and reclaim its independence.

If the leadership of the judiciary allows the recent assault on it by Buhari to go unpunished, in no distant time we could wake up to hear that the EFCC has rounded up the country’s Supreme Court, Appeal Court and High Court justices, and in their place lower court judges and even some friendly lawyers could be named justices. But that’s all. With a government that is unpredictable and allergic to the constitution, would we be surprised waking up one day to hear that all the members of the Nigerian Judicial Council have been sacked and replaced with some apologist young lawyers?  

Enwegbara, a development economist, can be reached at 07038501486 or [email protected]

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