Africas Economic Moment: Why This Time Is Different

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The narrative of a booming African continent — first popularised by the Economist, which featured the headline Africa Rising on its cover in late — is a great example. In the years since, the narrative has gained wide support. But a closer look at indicators for measuring development finds that most countries in Africa are actually falling behind the rest of the developing world.

Africa's economic development

However, GDP growth per person is more suitable to measure the rate of economic development. High birthrates in parts of Africa mean the difference between these two growth rates is striking. High birthrates also mean that the share of the population eligible for work those between 15 and 64 is expected to increase. Consequently, some economists are forecasting a demographic dividend. This is by far the highest vulnerable employment rate of all developing regions.

Poverty rates remain dismal. In the same time span, developing countries in east Asia and the Pacific slashed this rate by more than two-thirds, from In light of the poor performance of Africa in the s and early s, people have seemingly felt that a mention of the good things happening is overdue.

And some things have definitely changed for the better: As such, it would be best to engage portfolio and diaspora investors once FDI inflows are underway to stabilise the foreign exchange situation. Successive Nigerian governments have acted as though they were oblivious of the opportunities on the capital account.

There is a large pool of money on the global scene that Nigeria can attract into its large network infrastructure sectors that include nationwide rail transport network, gas pipelines, and electricity transmission.

The current global liquidity climate will deliver every cent of that sum if the new government can immediately break government monopoly in the sectors and engage the world to come and invest in these sectors. Had Nigeria done this when it opened up the GSM space in telecoms in , much of those infrastructure gaps would have been filled by now, and external reserves would have been buoyed by massive FDI inflows, and perhaps diversified export base that adequate infrastructure would sustain, but missed the opportunity.

She also could have done it in the wake of the oil price collapse two years ago to avoid some of the more painful consequences for real GDP growth, external reserves and exchange rate, but had delayed until now. The time to act is now. Nigeria cannot borrow her way out of the current crisis, as the projected debt service of N1. The reality is that revenue inflows in the first half of were considerably less than the budget projected, implying that borrowing and associated debt service may be higher than projected.

Nigeria should pursue the more sustainable strategy of attracting foreign investment into infrastructure. India illustrates the success and sustainability of this approach. Nigeria should rely on foreign investment to fix infrastructure, and also provide the foreign exchange required to stabilize external reserves and the exchange rate, by creating capital account buffers. Unless infrastructure gaps are filled, the much talked about diversification of the Nigerian economy away from oil, towards manufacturing, agriculture and solid minerals, will not happen because it is the high costs of key infrastructure, particularly the prohibitively high road haulage costs in the absence of rail transport and high costs of fuel electricity, gas, or petrol because of inadequate supply, that has killed these sectors that once thrived in Nigeria.

Talks about diversification when these vital infrastructures have not been fixed amount to wishful thinking. Similarly, the rhetoric about Buy Nigeria sidesteps the fact that we need to Fix Nigeria before Nigeria can produce the things we need to buy. Once other key infrastructures are fixed, the way telephone lines in Nigeria jumped from only , in to million in , system-wide transaction costs will become much lower, making all sectors more competitive.

Only then will slogans like diversification and Buy Nigeria will become realistic.

At the moment, the new government may want to consider Invest in Nigeria or Rebuild Nigeria or Fix Nigeria as much more realistic slogans, given the circumstances that the previous regimes had left the economy. Nigeria needs to take immediate steps to open up to foreign investment.

The first and perhaps the most important step is to ensure the ease of entry of potential investors into infrastructure sectors that are currently under government monopoly. The second step is that Nigeria must engage the world about the future of her economy, like India and Saudi Arabia are currently doing.

Why This Time Is Different

This is the result of a determined investment-friendly strategy that shows that countries that court investors in the face of the current easy global liquidity conditions will receive investment. India has learnt how to get the message across to both non-resident Indians NRIs and foreigners, and both groups respond very resoundingly! Saudi Arabia is also currently trying to attract foreign investment to make up for export income lost to oil price fall. Saudi Arabia is speaking loudly and clearly to the world about her non-oil investment prospects.

Nigeria has much bigger non-oil investment prospects than Saudi Arabia, but is quiet. Nigeria now has to put a sellable story together on the economy, and engage the world. In his first year in office, President Muhammadu Buhari openly engaged the world in his fight against corruption and insecurity in Nigeria, as these two have been the theme of the discussions with both foreigners and Nigerians in diaspora during his trips around the world. He has been extremely well received.

He now needs to engage the world about the economy as well, about the huge opportunities for profitable investment in Nigeria. Especially now that his regime is well known to have taken giant strides in making the country much more secure and much less corrupt. Nigerians in diaspora and foreigners alike are waiting to buy-in. Nigeria needs to mobilize all the foreign direct investment, foreign portfolio investment and diaspora investment that it can, but needs to learn how to engage investors and gain their confidence as a country with clear enough vision and strong enough sense of purpose that others can make large-scale investment commitments in.

Africa's Economic Moment

Break the government monopoly that shuts investment out of network infrastructure sectors; ii. Attract foreign direct investment, through immediate IPOs on existing state-owned enterprises, and new licences for greenfield projects nationwide; and, iii. Needless to say, I take sole responsibility for any remaining errors in the paper. Global liquidity conditions have continued to ease in response to quantitative easing QE policies of major central banks, ensuring steady growth in global foreign direct investment stocks Chart Signs of any liquidity weakness are likely to lead to more easing.

The outlook of global liquidity and investment flows thus remain bright for countries that could attract them. This contrasts with the tight global financial conditions of the eighties and nineties, in which external debt repayment talks with Paris Club and London Club of creditors on the one hand, and policy conditionality discussions with IMF and the World Bank on the other, shaped the realities for most developing countries. Remittances data is from the World Bank.

Some of these are available at http: Conversations at the EA conferences revolve around: The twin-gluts on the global scene: Global commodity glut has replaced the old regime of revenue and foreign exchange windfalls with a new regime of shortfalls; just as Global liquidity glut resulting from cash injections by leading central banks creates opportunities to unlock the liquidity required to mitigate the shortfalls.

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Liquidity- money, bonds, equity, foreign reserves; Growth-GDP growth, sectoral growth; and, Stability- inflation, interest rate, and exchange rates. Structural Shifts in production and spending, government revenue and expenditures, and activities across the states. Hurdles limiting the deployment of fiscal, monetary, and investment policies. Contemplating actions needed to seize opportunities at Federal, State and Corporate levels.

UK, Germany and China. Central Bank makes a U-turn, raises rate to System Liquidity support bullish interests in the Fixed Income Markets. Inflation Rate to Remain Unchanged at Merchandise Trade Declines in Q2 Nigeria, China hold Bi-Lateral Meeting.

This Time Is Different: There Is A Clear Way Forward For The Nigerian Economy

Manufacturing PMI Stands at This Time Is Different: Crisis of The Early Eighties 3. The Current Crisis 4. Why This Time Is Different 5. The Way Forward i. Engage the World about the Future of the Nigerian Economy 6. Break Government Monopoly that Shuts Foreign Investment out Nigeria has the potential to attract and retain significant inflows of foreign direct investment into its large network infrastructure sectors , including rail transportation, gas pipelines, and electricity transmission, as it has successfully done in telecommunications, but failure to abolish government monopoly in these sectors keeps shutting the investment out.

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Nigeria Must Overcome Reluctance to Abolish Government Monopoly Nigeria has a very poor record of success in privatizing state-owned enterprises in its infrastructure sectors including telecoms and electricity, having more record of success in liberalizing the entrance of greenfield foreign direct investment than in privatizing brownfield projects.

Attract Foreign Investment to Fix Foreign Exchange Scarcity and Infrastructure Decay Nigeria should attract foreign investment inflows to solve the two main problems that have inflicted recession on the Nigerian economy: FDI, FPI, and Remittances While it is appropriate to highlight investment opportunities in infrastructure as obvious potential destinations for large-scale FDI inflows, Nigeria needs to boost all types of investment inflows into all areas of the economy, although it is a fact that functioning infrastructure would also boost investment inflows to all other sectors.

Why Borrowing Is Not a Sustainable Option Nigeria cannot borrow her way out of the current crisis, as the projected debt service of N1. Engage the World about the Future of the Nigerian Economy Nigeria needs to take immediate steps to open up to foreign investment. UK, Germany and China 3. System Liquidity support bullish interests in the Fixed Income Markets UK, Germany and China Nigeria, China hold Bi-Lateral Meeting You would be the first to know the latest happenings around the Financial Market on Economy. All One Min News. Doing Business in Nigeria. Mobile Money and Telcos.

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