President Mohammadu Buhari appears to be determined to build as many bilateral economic alliances as possible within a short time. This has resulted in his frequent foreign trips, adding to the criticism of the regime. Perhaps the end will justify the means but for now, let us look at some issues around this search for economic alliances, and what we ought to do to maximally profit from the president’s business promotion efforts.
The recent visit to China is in this mould. The president was said to have gone to shop for Chinese input to his development projects, especially in the areas of infrastructure, power and agriculture. Rail transportation seems to have been top on the agenda, culminating in a pledge of considerable financial resources by the Chinese government. While the president should be commended for closing such major deals on his short trip to China, we should now be interested in the relevant details in the small prints of the deal. The devil, they say, dwells in the details.
The conversation on the diversification of the Nigerian economy has, once again, come to the front burner. Although it has been doing so since the 1980s, it appears we may be more serious this time and for obvious reasons. There is hardly any discourse now that does not have economic diversification as a core element. Like in the past, economic diversification has always been a policy of governments in Nigeria, government has actually pursued it diligently. Without doubt, to diversify an economy from a mainstay that has held sway for decades should be challenging, especially in a corrupt environment ruled by deeply rooted personal interests.
Recent revelations have shown that the dealings in the Nigerian oil industry are so opaque that billions of dollars could be missing from the national treasury unnoticed. That kind of environment does not encourage adventure into other sectors of the economy, nor research and invention; hence diversification remained a hollow mantra. There is concern therefore that the current song on diversification may remain what it is, a song, to be passed on from one administration to the other without anything concrete done in that regard.
To really diversify the economy, we should look for diversification opportunity in everything we do, including major development projects. That brings to focus the railway deal with the Chinese. The good gesture of China to support Nigeria should be put in proper perspective. First, the Chinese have built a very successful domestic economy and now seek opportunities to expand abroad. Second, China has a subsisting agenda to upstage America as the largest economy in the world. Third, China’s aggressive global expansion programme is also fired by the need to find employment for the huge capital it accumulated over many years of outstanding trade and economic performance. Fourth, global growth is slowing and recent downward review of growth figures for both China and America calls for more aggressive investment programmes for those that have capacity.
Furthermore, the Chinese are not new to the Nigerian economy. They have been involved at every level of it. The Chinese have been involved in retail trade in Nigeria more than any other country. It has been said that for every container shipped to Nigerian importers by a Chinese exporter, another is shipped immediately by the Chinese on his own account. That way, he undercuts the Nigerian importer as they both battle for retail customers. Such a strategy has implications for the participation of the local industry in major transactions with the Chinese. It suggests that we could be holding the short end of the stick, even in a major contract like the railway if we do not connect the dots and be sure our national, not personal interests, are the underlying priority.
Nigeria should build on established wisdom and learn from experience; not necessarily hers. This has not been the case and may be responsible for many of the negative experiences we have in dealing with foreign partners. Our inability to tie in all relevant variables while making deals with other countries seems to promote the idea that the national interest is often deliberately downgraded for personal gains.
We should not make any deal without considering the nature of our economy, and for the avoidance of doubt, ours is an informal economy of SMEs. This is a basic fact that must drive all our dealings with outsiders. Every bilateral relationship that would promote the Nigerian economy must factor in the role of SMEs. Nigeria cannot participate maximally in any deal that does not properly situate the role of the core drivers of this economy – SMEs.
So how does the deal with the Chinese to revive the Nigerian railway system impact the SMEs? In other words, is there a role for small industries – fabricators, suppliers and other economic agents to participate in the transaction? In the past, we gave major contracts to foreigners without considering economic linkages. No such mistakes should be made in this day and age. We must ensure that derivative activities are hived off to domestic agents to make diversification happen.
Every country must focus on what is important to it. Nigeria is a developing economy. It is in addition, an SME-driven economy. There is no need here to reel out the statistics that prove that this economy survives squarely on the efforts of small companies and enterprises rather than those of large corporations. If we make deals that have no strong SME component, we open ourselves up for exploitation. At the end of the day, we may have a railway that works only when the Chinese are around to maintain, repair and replace even minute parts. That will be a disastrous gift to our children.
There is no need to repeat what I have said elsewhere; that while the substructure of our economy remains highly informal, the superstructure is formal. We have a formal economic system that is squarely in control of everything – our banks, industries and schools are formal institutions. Even our government thinks and acts formal and so we are unable to properly account for the well-being of the larger informal part of our economy. Our automobile industry failed because while the South- South was filled with rubber trees, our car manufacturers imported all the tyres they needed from outside. There was no provision to link the auto industry with local suppliers so when foreign currency dried up we were forced to sell the plants. No deal should be made without a clear understanding of its economic linkages to local industry. We not only have to deal with the incongruence of a formal economic superstructure superimposed on a substructure of informality, we also need to worry about interdependence of economic agents.
The present regime should avoid the mistakes of the past whereby we entered into major infrastructure projects without measures to protect or promote local industry. Whenever we plan a major project we simply invite others and hand them blank cheques. Our steel industry died a natural death because we allowed the Russians to give us a “dead-on-arrival” steel plant. We should now be sure we tie projects to the well-being of our country with projects that depend substantially on local derivative industry. As these friendly countries find outlets for their technology and industrial giants, we must also find avenues for our small industries to grow. That way we can be sure of continuous learning and development of local expertise. That will promote economic diversification.
Emeka Osuji
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