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Nigeria: The World’s Next Economic Giant

Nigeria’s economy has been growing substantially 

Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes. Peter Drucker

Peter Drucker the management expert in his book the practice of management wrote that “Innovation is the specific instrument of entrepreneurship, the act that endows resources with a new capacity to create wealth.

Management must always, in every decision and action, put economic performance first. It can only justify its existence and its authority by the economic results it produces. There may be great non-economic results: the happiness of the members of the enterprise, the contribution to the welfare or culture of the community, etc.

Yet management has failed if it fails to produce economic results. It has failed if it does not supply goods and services desired by the consumer at a price the consumer is willing to pay.

It has failed if it does not improve or at least maintain the wealth-producing capacity of the economic resources entrusted to it. Apply this principle to the Nigeria nation; many have asserted that Nigeria is a failed state.

This is far from the truth. Nigeria is a land of ample opportunity and immense possibility. In a fast changing and evolving world, where weaklings of yester years have become economic giant and the strong of yesterday are fading in economic glory and becoming weaklings Nigeria has a chance to make a difference.

That the United States is the leader today, economically and socially, does not mean it will remain so for ever. Twenty years ago no economist would have accepted any theory that postulates the emergence of China India and Brazil as economic power houses.

Today China is the second largest economy in the world beating United Kingdom, Japan, France, Germany and Italy. According to the United Nations economic data the global economy Gross Domestic Product as at 2010 was $62.6 trillion. Of this the United States of America account for $14.447 trillion as the largest economy in the world. It is followed by China with a GDP of $5.739 trillion making it the second largest economy.

Japan the third largest has $5.458 trillion GDP. Germany which is fourth has a GDP of $3.280 trillion while France the fifth has $2.559 trillion GDP. Britain which dominated the world for decade as the economy to beat is now a distant 6th economy in the committee of nations. Nigeria is occupying 47th position with a GDP of $238.920 billion.

This shows that from the peak there is only one easy way to go: downwards. It always requires twice as much effort and skill to stay up as it did to climb up.

In other words, there is real danger today that in retrospect the United States of 1950 may come to look like the Great Britain of 1880–doomed to decline for lack of vision and lack of effort.

Going by the current trend and projection by 2020 there will be a major shift in the global balance of economic power compared to 2010. Emerging economies will rise in importance and China would have overtaken the USA to lead the list of the world’s top 10 largest economies by GDP measured in PPP terms.

Consumer markets

Consumer markets in emerging economies will present enormous opportunities but their rapid growth poses a challenge to the global environment.

Early this year Japan confirmed that China’s economy surpassed its own as the world’s second largest in 2010.

In the nominal GDP method, it can seen that the developed world leads the pack, but that China has already broken into this exclusive club, and is now the second largest economy in the world by both measures.

Come 2014, the geographical expression called Nigeria will be 100 years old. The Northern and Southern protectorates were amalgamated by Lord Lugard in 1914. In 2014 Nigeria will be celebrating 100 years of her existence.

The land mass in which Nigeria is located is a land flowing with milk and honey. Many have looked at the progress made in desperation and have written off the country.

But many out there are seeing the Nigeria experiment as a land of great opportunity. The United States of America recently described Nigeria as the next economic success story.

Apart from its natural resources, Nigeria has a young and dynamic population made up of upwardly mobile middle class. It is this middle class that current serve as attraction to the international business community as attraction because of the huge market it represents.

Telecom operators

The experience of the telecom operators in Nigeria bears this out clearly. It is for Nigeria to put its act together and get it right. Nigeria’s economy has been growing at 6-7 per cent in the last few years without regular supply of power, when eventually the country gets the power equation right, the economy will leap-frog.

President Barack Obama himself declared Nigeria as the world’s next economic success story, stressing that this was one of the major reason his government was committed to helping the country build strong democratic institutions and remove constraints to trade and investment through the African Growth and Opportunity Act.

Making this declaration at the US-Nigeria Trade and Investment Forum, an event organised by the Nigerians in Diaspora Organisation (NIDOA) in Washington DC, Obama who was represented by Ambassador Eunice Reddick, said that his country expanded opportunities for Nigeria to effectively access markets and diversify its economy beyond a narrow reliance on natural resources. “As we support these efforts, the Diaspora can play an important role in contributing to a strong, vibrant and economically prosperous Nigeria” he noted.

In his own view US Department of State Director of West African Affairs, Ambassador Eunice Reddick, in a keynote address to Nigerians in Diaspora Organisation of the America conference revealed that Nigeria’s bilateral trade with the U S in 2011 stood at $38.5 billion up by nearly 12 per cent from 2010.US exports to Nigeria, primarily wheat, vehicles and refined petroleum products valued at 4.8 billion dollars in 2011, an 18 per cent increase from 2010 figure.

She declared that America believes that Nigeria could be the world’s next major economic success story, “that is why according to her, the United States is committed to helping Nigeria build institutions, remove constraints to trade and investment through the African Growth and Opportunity Act, expand opportunities for Nigeria to effectively access its neighbour’s markets and diversify its economy beyond a narrow reliance on natural resources.”

We are also working to strengthen Nigeria’s agricultural sector, which employs nearly 70per cent of the country’s population by encouraging improvements to infrastructure that would facilitate agricultural growth, liberalising trade policies to foster regional trade reforming the customs system to bring it in line with global best practices and encouraging policy reforms to enable private investment in agriculture.”

Largest economies

It is not only the US government that is seeing the great possibilities in Nigeria. In 2004, Goldman Sach said that Nigeria will emerge one of the 20 largest economies of the world in 2025. This was the basis of Nigeria’s vision 20-2020 by the then President Olusegun Obasanjo, He said 2025 was too far and could be fast tracked to 20:2020.

In a recent presentation on Nigeria’s Debt Capital Markets, Richard Fox, Fitch Rating’s Head of Africa/Middle East sovereigns, had compared Nigeria’s current sovereign debt metrics to those of Emerging Markets (EMs) that have recently made the transition to investment grade (IG) and came to the conclusion that Nigeria is on the path of success. Are you taken aback? Just wait and hear him.

He said: “Since 2004, seven EMs have moved up the rating scale from Nigeria’s current ‘BB-‘ level to the lowest investment grade ‘BBB-‘ rating. The most recent was Indonesia in 2011; the others are Azerbaijan (2010), Brazil (2008) and Bulgaria, Kazakhstan, Romania and Russia (2004).

Of the seven, four are oil producers to varying degrees. The three notch upward movement has typically taken between six and eight years, which makes it a plausible ambition for Nigeria in the context of its Vision 2020.

“Among the key indicators that Fitch uses to assess sovereign creditworthiness, three stand out as being well outside the range of experience of recent newly IG EMs: per capita GDP, reserve cover and governance (the latter measured by the World Bank’s governance indicators).

These areas represent Nigeria’s biggest challenge to improving its “Nigeria’s stable and robust GDP growth of more than 7 per cent since 2009 compares well with the record of newly IG sovereigns and is even more creditable given its reliance on the non-oil sector.

However, structural reforms planned in the electricity, oil and agriculture sectors, will be crucial if growth is to be diversified and sustained closer to double digits, in order to close the large gap in per capita income.

Even with a likely substantial increase in nominal GDP this year due to the rebasing of the national accounts, Nigeria’s per capita GDP will still be outside the range enjoyed by the newly IG countries when they became IG.

“Nigeria’s inflation rate is also still on the high side – in low double digits- compared to an average of 7.5 per cent for newly IG sovereigns and a range of five per cent to 12 per cent.

By contrast, Nigeria scores much better on the government debt ratio which, despite creeping up, at a little under 20 per cent of GDP, is lower than the 26 per cent average for newly IG sovereigns. Nigeria’s ability to finance itself domestically, in its relatively well developed domestic capital market, is also a major strength compared to many newly IG sovereigns.”

This is a prompting to the international community to look beyond what is happening now in Nigeria to massively invest in the opportunities available in the country. Already China accused of only interested in Africa’s natural resources is taking the lead.

It is investing in Nigeria. But beyond the construction and buying of crude Nigeria should engage China to invest in manufacturing here just as many companies in Europe, Asia and America cited their plants in China and today China is an economic success story.

If the goals of this administration’s transformation agenda are to have strong, inclusive non-inflationary growth, to generate employment and alleviate poverty and to achieve value reorientation Nigeria must begin to take advantage of this positive disposition. Nigeria must look beyond contract of road construction and encourage partnership with China to develop agriculture away from the traditional model.

Today the global climate change is having adverse effect on the economy. The north which was regarded as arid zone has experienced heavy down pour this year while area like Lagos have seen scanty rainfall. Climate change will need to be handled with new methods and differently.

The focus areas are on good governance, infrastructure and human capital development with the expected outcome of the jobs creation, better resource management, elimination of corruption and sustained economic development.

The World Bank’s Doing Business Index of 2012 ranked Nigeria as 133rd out of 183 countries on the basis of the constraints encountered in starting a business, dealing with construction permits and registration of property and enforcement of contracts. It also identified differences in state regulations and in the enforcement of national regulations that can enhance or constrain local business activity.

Nigeria was on the path of greatness at independence. It evolved development plan which saw major development in the country at the early stages of the nation’s development.

The first, second and third plans were executed but the fourth was abandoned and since then Nigeria has had no development plan or short term development strategy. The fourth Nigeria needs to return very quickly to development planning if it is to tap into the vision many are seeing for it.

If the fourth development plan that was jettisoned was religiously implemented, Nigeria would be singing songs of freedom today. In that plan, the framers said “Since the fourth national development plan is only one in the series of medium term plans intended to transform the Nigeria economy and society over time, its basic objectives are naturally broadly similar to those of its immediate predecessors. What ever changes there are would be no more than a reflection of the lessons of experience derived in the implementation of the preceding plans”.

Specific objectives

The over riding aim of any development is an improvement in the living conditions of the people using the resources, human and material, with which the country is endowed. It is around this principal goal that the specific objectives of Nigeria’s development efforts were woven.

The nations set objectives in the 3rd National development were what the country is clamouring for today.

It envisaged increase in real income of the average Nigerian; more even distribution of income among individuals and social economic groups in the country; reduction in the level of unemployment; increase in the supply of high level man power; reduction of the dependence of the economy on a narrow range of activities; balanced development – the achievement of better balance in the development of the different sectors of the economy and various geographical areas of the country; increased participation by Nigerians in the ownership and management of the productive enterprises; greater self reliance that is increased dependence on internal resources in seeking to achieve the various objective of society.

This implies increased efforts to achieve optimum utilization of Nigeria’s human and material resources; development of technology; reduction in rural urban migration; the promotion of a new national orientation conducive to greater discipline, better attitude to work and cleaner environment.

The main trust of Nigeria’s strategy during this period was in the direction of increased self reliance and considerable reduction of its dependence on the external sector in general and the petroleum sector in particular. If these objectives were rigorously pursued Nigeria would not be playing a catch up game in the global economy. Nigeria needs to return to its roots, plan, strategise and push to become relevant in the eyes of other nations.

This will require greater sacrifices especially in terms of established consumptions habits if resources are to be freed for pressing development needs. There will be no room for subsidy. It must free resources for development. This strategy will demand a greater spirit of innovations, hard work, and greater utilization of domestic resources and in particular, the involvement of the masses especially at the local level in the development process. A conscious effort must be made to mobilize the Nigeria masses–the entire Nigeria population for the implementation of the new Nigeria vision. If China could successfully mobilise its populace to achieve the second largest economy position out of obscurity, yes Nigeria can. Nigeria and China has certain things in common, a growing population, an emerging middle class that constitute a huge market for industrial products, a huge land mass. Yes, Nigeria can move into the league of top economies of the world. All that Nigeria needs is an effective leadership.

Like Peter Drucker said “Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes. Will President Goodluck Jonathan take Nigeria there?

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