Nigeria: Africa's Biggest Economy?

Published on 8th April 2014

Word is going round that Nigeria is poised to become Africa's biggest economy. Nigeria does not have economic development; but mainly a transaction economy that is fueled by consumption of imported goods and reliance on foreign goodwill to achieve its basic needs. If more than 75% of what Nigeria needs to survive as a nation are imported, can such a country be considered as growing and developing?

When there is hardly any city or state that can supply ‘24-/7’ water to its citizens, and public servants are owed outstanding wages, and pensioners have seen the real value of their pension gone, Nigeria is on a make-believe trajectory. My in-laws live in Ibadan and they have said that the entire city goes without power for days. Just imagine that, and Ibadan, Oyo State, is a major population center. 

No Nigerian bank stock is worth an equivalent of $2/share. The total mortgage notes in Nigeria; a country of 160m people is 20,000. There is outstanding housing need of 16 million, and no developer in Nigeria builds 1000 housing units a year. Do the maths. Housing, as a significant component of any economy because of its socio-economic benefits, is annoyingly lacking given that since 1914, no government in Nigeria in collaboration with the private sector has built 100,000 housing units annually. Why so?

The government is playing with numbers and banking hope on mineral resources/reserves which are unearned income. Since the US importation of Nigeria’s oil has dropped from about 22% to its current import of 16%, Nigeria has had to scramble to find buyers. Spain is now the leading importer of Nigeria’s oil. Spain, a country that is struggling, is the importer of Nigeria’s main commodity that affords the government 85% of its overall expending. Do you understand the implication of such a relationship? Spain is hardly a member of G-8. She is neither a developed nation nor a third world country – a floater. Since oil transaction is often carried out on IOU basis, what does Spain have to offer Nigeria? Longer payment terms and seeking support from EU to help facilitate balance of payment arrangements.

As a country with weak finances, Nigeria’s strength to borrow/trade [current account] is based on its foreign reserve. The Naira has been having problem sustaining its value. If Nigeria is that buoyant, how come 85% of its refined oil need is imported? Its currency, the Naira, since 1999, has lost about 210% value. Since Finance Minister Okonjo-Iweala’s debut, the Naira has lost almost 40%, and Nigeria’s bank debts are not easily tradable assets as majority of the debts are not well collateralized or secured by verifiable assets. 

Hinging growth on rate of change of GDP as a volume, while the fundamentals are missing is voo-doo economics and that has been prevalent since 1999, as the leaderships tries harder to convince Nigerians they are up to the task of delivering the most populous black nation in the world. Is the economy stupid? One may say YES in the case of Nigeria. But do not take my word for it. Go to the street and look at the people and see the agony and suffering. Many college graduates in Nigeria, after more than a decade are not able to afford a 2-3 bedroom home, car and job that matches their education. Mark you, many Nigerians just so they have a job, are well underpaid such that any number of those employed, a good half are sweating it trying to make ends meet.

Here are three basic aspects of economic development: job creation, stabilized interest rate and stable currency. A major fluctuation in any of the three factors makes an economy stand on a faulty foundation – quicksand. That is why Nigeria’s Naira is weak currency - it has lost tremendous value and Nigeria’s banks cannot afford to make loans on amortizing schedule. Instead, they do so on interest-only, with hefty up-front charges and payments. And the desire of Nigeria businesses to source credit facilities off-shore placed additional pressure on the foreign reserve such that Nigeria is not able to meet its 90-day current account requirement. The resultant effect, the Naira is on a wide and wild swing.

How can one sing about a growing economy with an interest rate that runs in doubt digits, such that it is hard to get a loan that goes beyond a few years? The absorption rate of capable employable Nigerians is less than 3% of jobs produced as a result of the growing economy. And given that many Nigerians are in default professions – jobs different from what they went to school for, means that many Nigerians are just getting by and causing employers more money on training because they are not squarely placed in their field of study. One can understand the frictional unemployment rate that exists in every economy. But when more than 80% of a nation’s labor resources are ‘floaters’ - underemployed or marginally employed, labor as a critical factor for productive existence is seen as not throwing off benefits for sustainability. 

Until Nigeria admits its shortcomings in getting the fundamentals of the economy right, the fuzzy math, fluff in the projections, forecasts and predictions, will continue to undermine actual gains. The gains are imagined than actually measured. It is like what my mom taught me – ‘one who lies about catching fish pretending to throw fish into a bucket, will go home empty handed.’ While Nigeria’s leadership is pretending on how well it is doing, Nigerians are having a difficult time reconciling what gets said and what they see and feel. In a country where TRUST is in short supply, no one believes what comes out of Nigeria, even the leadership. As they huddle in their federal cabinet weekly meetings, it is more ‘beer parlor’ chant as Finance Minister Madam Okonjo-Iweala, the coordinating minister for economic development, dazzles them with voo-doo stats as no one in the cabinet questions the authenticity of the numbers. It is a case of a barely one eyed expert leading a pack of totally blind cabinet who dare not question her.

What/where does that leave one – get back to the basics and free Nigeria from central command and control economy such that the mood of the president and his loose set of mechanics and experts dictates what happens. Since Madam Okonjo-Iweala’s debut, the Naira has lost value and she was recommended for HIRE as a World Bank expert. Well, we know the World Bank is not a bank for developed nations but for less fortunate nations that are seen as not worthy of access to global capital markets, such that they must live dealing with shylock lenders – vultures that descend on them. Under her Finance Ministry, Nigeria has seen more damages to her economy. It is amazing.

By Ejike Okpa II
Dallas, Texas

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