The Tectonic plates are shifting; where is Nigeria? [I]
By Daniel Elombah
In one of his last meetings before his death, the former Attorney-General
of Nigeria, the late Chief Bola Ige told his followers that the ‘tectonic
plate of Nigeria’s politics was changing’. He informed his high command
that a realignment of the political firmament is taking place that would
fundamentally restructure the face of Nigeria politics, and therefore, it
would be wise for the Yoruba to reposition themselves so as not to be left
out.
In that meeting, he also informed them that the then president, Olusegun
Obasanjo would indeed convene a National Conference and far-reaching
decisions will be reached.
Obviously the late Cicero of Oke had erroneously believed that he was
dealing with gentlemen as was subsequently evident from what happened to
him shortly afterwards.
However, this article is not about the late Bola Ige, though his story,
his politics and the formation of the PDP with Alex Ekwueme and the G34
and what the PDP later became is what came to my mind as I contemplate the
missed opportunities this past decade in Nigeria.
To all discerning observers, the present global economic crisis would not
only mark the end of capitalism as we know it, it would also radically
restructure the locus of world political and economic power; a fundamental
shifting of the tectonic plates of the global economy and the balance of
power. Historians will look back at this period and say this was no
ordinary time but a defining moment: an unprecedented period of global
change, and a time when one chapter of civilisation ended and another
began.
Most countries are already brain-storming and positioning their countries
to remain relevant when the dust of the credit crunch must have cleared.
At the end of the day, only the countries that have acted wisely would
hold the aces. My fears are that once again, Nigeria- nay all Africa would
again remain mere spectators. An embarrassment to the rest of the world.
China has already served notice that they're no longer prepared to finance
the spendthrift ways of the US and UK: they don't want to lend more and
they want to be confident that what they have lent won't disappear in a
puff of bad debts and inflation.
In the United States, President Barack Obama has prepared a budget that
has been described as breathtaking in its scope and ambition. President
Barack Obama's agenda for the economy, health care and energy now goes to
a Congress.
With this budget, President Obama is asking American congressmen to look
beyond the next election and take the long-term steps to ensure America's
future strength and prosperity. It will boldly invest in the three areas
most critical to their economic future: energy, health care, and
education.
Investing in a clean energy future will put America at the forefront of
industry in the 21st Century and create the jobs that will form a new
foundation for the middle class. Confronting the mounting cost of health
care will put America back on a solid foundation so businesses can thrive
and families can prosper. Reforming and strengthening their education
system will ensure American innovation and competitiveness well into the
next century.
While tackling the economic crisis, Obama would seek to enact contentious
measures that that would: cut subsidies for big farms; combat global
warming with a pollution tax on industries; raise taxes on the wealthy;
make big changes to health care.
In the UK - the cunning master, with a near total absence of the real
sector, but a near total dominance of European and Asian financial system
and with strong tentacles in the United States, the focus is on reforming
their Banking system. Their banker’s dodgy lending practices and bonus
culture had brought their national and international financial system to
the brink of collapse.
Gordon Brown has called for the global mandate of international
institutions to be beefed up to deliver growth and jobs; “I want us to do
what was advocated by our country years ago,” Mr Brown said, ”to have
global supervision of what is a shadow global system”.
Gordon Brown’s endeavor to sit down with President Obama this week to
discuss in his own words, “a global new deal, whose impact can stretch
from the villages of Africa to reforming the financial institutions of
London and New York– and giving security to the hard-working families in
every country” should be taken with a pinch of salt.
On April 12, Britain will host a meeting of G20 leaders. Their goal is-
along with their other colleagues internationally, “to have across all
parts of the world supervision, an international shadow banking system,”
This efforts is geared not just towards a “universal action to prevent the
crisis spreading”, but it is also aimed at stimulating “the global economy
and to help reduce the severity and length of the global recession”.
However, the real gist of all of these shifting tectonic plates could be
deducted from Gordon Browns article yesterday, March 1, 2009:“That every country that wishes to participate in the international
financial system agrees common principles for financial regulation,
coordinated internationally, and changes to their own banking system that
will bring us shared prosperity once again; and that, together, we must
agree to reform the mandate and governance of global institutions to
recognize the changing shape of the world economy and the emergence of new
players”.
The next world order is being fashioned. The next financial and economic
structure is being defined. Nigeria, and Africans, should neither hope nor
be lead to believe, that a new world order, an international rule, written
by Europe and America, to fashion a new world order that will guide
international financial Institutions “whose impact can stretch from the
villages of Africa to reforming the financial institutions of London and
New York” would necessarily benefit us in the third world. We have never
really been part of the equation.
As far as we are concerned, the most important issue is; after this“changing shape of the world economy and the emergence of new players” where would Nigeria be?
The trigger of the present crisis was best encapsulated by Robert Peston
in this analysis; The New Capitalism. Devoid of all economic jargon, it is
a succinct narrative, written with great clarity for the uninitiated of
what led us here. I would recommend that article to my readers.
(http://www.thenigerialaw.com/index.php?option=com_content&view=article&id=89:the-new-capitalism&catid=34:economy&Itemid=37)
The disappointment is that, had Nigeria played their cards right, it would
not only be China, giving conditions to the west, despite the small size
of our economy, we would have been up there with them along with India,
Saudi, UAE, Japan and others!
At the beginning of the credit crisis in 2007, the eyes of the investment
community is turning towards Africa. I wrote about this in an article I
submitted to my supervisors late 2007. I mentioned Nigeria, Kenya, and
Rwanda among others as one of the Sub-Saharan Africa Countries supremely
positioned to benefit from the credit crisis.
Referring to a Financial Times report by Matthew Green: Capital Markets:
Betting bus-loads of cash, July 12 2007, I gleefully pointed out a
catch-phrase, coined by the promoters of the Lagos stock exchange to lure
investors – “the highest returns in the world”. The country’s status was
shifting from marginal emerging market play to star performer.
Driven by a combination of government reforms, debt relief and high oil
prices at a time of heightened appetite for new types of risk, the gains
of the Nigeria Stock market have revealed a glimpse of untapped potential
but looming hazards in equal measure.
There were a massive number of Nigerian investors who are investing their
capital back home attracting a lot more of the international money.
Nigeria’s external debt was slashed from $36bn in 2004 to $3.5bn. There
was improved monetary stability through reforms backed by the
International Monetary Fund and accumulated robust foreign exchange
reserves.
According to the Financial Times, A tougher line on money laundering and a
newly-awarded BB- sovereign debt rating added to the allure at a time when
global funds were turning to Africa as an antidote to dwindling returns in
established pastures. The sheer size of the country’s debt and equity
markets has enticed hedge funds that worry about liquidity in smaller
sub-Saharan countries, while strong domestic buying insulated Nigeria from
a global sell-off in March.
Some Banks shares like the Fidelity Bank and First City Monument Bank
jumped by more than 300 per cent, while stocks such as Zenith Bank,
Oceanic Bank International, Diamond Bank, and Access Bank all rose to more
than 100 per cent. Other sectors recorded more modest gains, apart from
Dangote Sugar and UTC in the food and beverages sector, which more than
doubled in value.
Standard & Poor’s launched three new indices in Africa in response to this
investor demand. The indices aim to capture about 80 per cent of the
continent’s total market capitalization. Africa was viewed as somehow
immune from the credit contagion, yields an exceptionally high return on
investment, and is one of the fastest growing
investment communities.
In fact as, as late as February 2008, A World Bank Report opined that
Nigeria would witness an appreciable economic growth. ‘Nigeria economic
prospects strong’, broadcasted the IMF on Feb 15, 2008. The fund forecast
that Nigeria's economy would expand by 9 percent in 2008, slowing to 8.3
percent in 2009 and 7 percent after that through 2011.
Today, it is sad that all those hope was lost. the real market value of
the Naira has declined, there is a crisis of confidence in the Nigerian
banking system, Inflation is now in the low double digits, the local stock
market is one of the worse performing in the world in US dollar terms, and
the crude oil benchmark for the budget at $45/ barrel looks increasingly
like an over-optimistic price target.
The Naira has been devalued; the market capitalisation of the NSE had
plunged perilously. The NSE has lost well over N7 trillion in the last 10
months; President Yar ‘Adua has requested and the Senate has approved the
request for $500m naira denominated bond from the international capital
market; Seeking to get into another round of loan and increasing the
national debt.
What went wrong? What measures is the, President Umaru Yar’ Adua and his
cabinet taking to reposition the economy? What could be wrong with those
measures and what should we rather be doing at the moment?
To be continued
Daniel Elombah is the publisher www.elombah.com
