Our future is African

On a Nigerian discussion site I just visited, there was a thread lamenting the fact there was no Nigerian firm in the Forbes Top 1000 (biggest) corporations in the world, and only three Nigerian firms (First Bank of Nigeria, United Bank of Africa, and Intercontinental Bank on the Forbes Top 2000 list. The thread author took it to be sign of continuing economic failure.

Add to this the wave of lamentations in editorials, columns, interviews and commentaries over the fact that Nigeria was not invited to the G20 summit in London. This Guardian editorial was something of an emotional lament, driven perhaps by their realization that the wider world thinks of South Africa and not Nigeria as the "deputy-sheriff" of Africa; while I am a long-time government critic, I do not agree with the editorial's characterization of the JTF. More typical are these pieces from Daily Trust), The Punch and Vanguard. Amusingly, a functionary of the Conference of Nigerian Political Parties blamed President Umaru Yar'Adua for our non-invitation, as if two years of UMY are the reason our economy is not one of the 20 largest in the world. Maybe he thinks two years of Atiku, Buhari or Ojukwu, or maybe a tenth year for Obasanjo, would have catapaulted us from where we were in 2007 to G20 status just like that.

It would be great to have 50 firms in the Forbes Top 55, but right now it is more important for us to worry about how integrated (or not integrated) our firms are in West Africa, Central Africa, and Rest of Africa. And while it would be nice to be counted among the 20 largest economies in the world, it is more important that we raise our rank on the list of trading partners for each of Africa's 20 biggest economies; right now China, North America and Western Europe are far more important to our African neighbourhood than we are.

Nigeria's economic security and long-term growth are dependent on economic growth in the continent of Africa. This requires a paradigm shift in how we look at the world and at the direction of our economic growth, and the Forbes 2000 (and other such global surveys and rankings tables) do not say much about whether we are moving in the direction we need to go.

The dominant global economic model of the latter-half of the 20th century basically boiled down to the whole world trying to sell things to North America, Western Europe and Japan. Actually, it was narrower than that; the Western Europeans and Japanese do not consume nearly as much as the Americans, so essentially everyone on Earth (including the Western Europeans, Japanese and Canadians) were trying to sell stuff to the United States of America.

If you permit me a little hyperbole, there are a million reasons why this model simply could not work long-term. It lasted as long as it did because of distortions in global economic system. The deformations produced economic outcomes that did not optimally allocate resources, production or consumption, and did not maximize worldwide welfare in the textbook sense. For all the ideological rhetoric one way or the other, the underlying nature of global trade was not really questioned not even by so-called leftists and "communists"; at a fundamental level, individuals, firms and nations merely sought to maximize their share of the world economy as it existed. And since those regions of the world that benefitted the most from the system were also the regions that dominated most sectors of life on Earth (the global media, academia/research, pop culture, political/military force, multilateral institutions, etc.), there was much talk, but little effective interest in reforming the system.

Even in the best of economic circumstances, with distortions reallocating wealth massively to a small section of the world's population, there are still limits to how much an individual, a firm, a nation or an economy can consume. Disproportionate as their consumption of the world's consumption might be, there is only so much North America, Western Europe and Japan can buy from the rest of the world. The global credit crisis arose in part because of a worldwide refusal to practically acknowledge this fact. Even when the USA economy no longer produced enough wealth to pay for its massive consumption, they insisted "the American consumer" was divinely ordained to hyper-consume else there would be no one to drive global growth. To keep the model going, they invented hollow, illusory devices designed to create the impression of wealth where none existed, so "the American consumer" could keep buying stuff. Until the bubble burst.

For years we Africans have been told that the route to diversifying economic production lay in finding out how to sell new things to North America, Western Europe and Japan. But everyone else is trying to sell those same things to those same markets, and there are only so many cars an American can drive. Competition is stiff, and even long-time exporters like Japan, South Korea and Taiwan are having to adjust to the rising share of US trade taken by China.

To this quantitative ceiling, add a qualitative ceiling. No amount of WTO negotiating will make Norway buy more ogbono or egusi from Nigeria than they do now; they don't buy these cash crops because they don't want them.

Trade is driven by economics, not charity. For all the hype around the USA's AGOA initiative, it is crude oil, a product the USA would buy from Africa with or without AGOA, that accounted for the vast majority of AGOA-eligible US imports from Africa, with Nigeria alone earning more than half of total African AGOA-eligible receipts; CRUDE oil, a raw material with no value added, not REFINED fuel. Spin-doctors have credited AGOA with raising the value of African exports to the USA, but the truth is the China-driven rise in the price of crude between 2001 and 2008 is responsible for the rise in the value of US imports from Africa.

Some say trade initiatives like AGOA and the EU's "Anything but Arms" are not the problem; in their view the problem is African countries lack the capacity to take advantage of the programmes. But that is a redundant statement. If Africa had had the capacity to fully exploit such schemes, Europe and North America would never have proposed them much less enacted them -- and Africa wouldn't have needed the schemes in the first place. Announced with great fanfare, and meant to symbolize the "internatonal community" helping Africa with trade not aid, these initiatives exist only in the context of Africa being unable to utilize them. If we had the capacity, we wouldn't have the deals; they are less a solution to the problem than they are a sign of it.

Africa long since hit a ceiling in terms of what it could export to Western Europe, North America and Japan. The increase in African exports in recent years came from the creation of a brand new market for our goods -- China. For a shining decade, we were able to export to both the old and the new markets, until fundamental truths about the world economy could no longer be papered-over, and commodities prices and demand tumbled back to where it was before.

The "global market" already buys everything it wants from Africa. The "new market" China wanted the same sort of imports (raw material) from Africa, and expected to export higher-value manufactures to us in exchange. If world markets needed anything else from us, billions would have been invested in its production by now. The lack of infrastructure has never stopped foreign firms extracting natural resources; the only infrastructure of note in Chad is the multi-billion dollar infrastructure built to drill and evacuate their crude oil.

Investment is driven by economics, not charity. China, South Asia and South-East Asia dominate textile exports to the USA, in spite of African countries like Uganda and Namibia pouring millions of dollars in scarce public funds to pay for uneconomic inducements to persuade "foreign investors" to to set up textile plants. These AGOA textile firms are struggling to break into the American market even as the African market is flooded by cheap imports from China, and second-hand (used) clothing from Western Europe and North America. The flood of cheap imports severely hurt previously existing (i.e. pre-AGOA) textile industries in countries like Nigeria, Zambia and South Africa.

It is a paradox. I ponder the fact that West African cotton producers bemoan proctectionist policies in the USA and EU, whilst a country that should be their biggest export markets, Nigeria, suffers a collapse of its textile industry due to cheap and second-hand imports from the protected markets of USA, Europe and China. Yet we are told the way forward is to try to export more to these limited markets.

Ultimately, as the 21st Century starts to unfold, the Federal Republic of Nigeria must look to Africa for the markets it needs to power economic growth in the 21st century. The continent's population is 922-million, numerically large, though high levels of poverty and conversely low levels of wealth make it a relatively small "market" economically. Consumption per capita is low, as is investment; we could do with more of both, but we are lucky in that we have the opportunity to tailor Africa's growth to match the realities of the 21st century economy (including climate change) where much of the rest of the world has to scramble to readjust from their dependence on 20th century distortions.

In fact, elevating the African internal economy us crycuak to disentangling some of the distortions the world has had to live with over the last couple of centuries. There is a natural, normalized, undistorted pattern of global production, resource allocation and trade, one that is more stable and sustainable because it is a truer reflection of what an efficient global market should be. I do not pretend to know what it is, but I know that what we have now is not it. The prime strategic economic issue for Nigeria is the search for this normalized economy in Africa, an economy that is integrated both intra-continentally and inter-continentally, an economy that unleashes our latent productive potential, an economy that will provide Nigeria with 922-million-person market.

As such, it is not as important in 2009 for our firms and business to be in the Forbes global 2000 as it is for them to be in the African 2000. We need to be well-placed not just to take advantage of rapid economic growth in the African continent, but to be the spur, the machine, the cornerstone, the creative spark that kick-starts and fuels such growth in the first place.

Corporations from the rest of the world continue to dominate Africa (particularly in mining raw materials). In other ways, the world has been withdrawing from Africa because of the "smallness" of its market, and Nigerian firms (and firms from elsewhere in Africa) have been taking advantage of this. This article in the Francophone African journal Les Afriques from September 2008 discusses Nigerian (and Moroccan) banks that have moved into the banking/finance markets of West African nations, claiming space left by French banks that were withdrawing from markets that are too small in French corporate opinion. And here, the famed Ugandan columnist (for both The Daily Monitor and The East African) Charles Onyango-Obbo discusses Nigerian firms moving into the insurance, banking and entertainment sectors beyond West Africa.

These moves are more important than ranking or not ranking on the Forbes 2000 global list. So much so that I must admit to ambiguous feelings about the biggest of the Nigerian plutocrats.

On the one hand, it is true that rent-seeking, misallocation of public funds, favouritism, conflict-of-interest, misallocation of capital, crass politicking ("Any Government In Power" a.k.a. AGIP), bribery, corruption and so many other forms of immorality have driven the growth of the biggest business concerns in Nigeria. Indeed, the biggest of them all (the multinational oil firms) have for years exploited our institutional weakness to do unethical, immoral and semi-criminal things they would never dream of doing in their own home countries.

The things the plutocrats do to acquire wealth, are things that create unnecessary hardship for everyone else in Nigeria .... and the fact that those citizens with the most ability and resources to fight for change (i.e. the plutocrats) are only interested in milking the system makes change all the more unlikely.

Nevertheless, in a world where other continents are home to mega-multinationals that dominate world trade, I am (unfortunately) resolved to the belief that we cannot throw out the baby with the bath-water. Rather than harm or hurt the business interests of these Nigerian conglomerates and corporate giants, I fear we must instead subject them to the same sort of transformational change the country at large needs .... so they become instruments in driving the creation of a 922-million-strong African market Nigeria so desperately needs, rather than continue being the mosquito-like wealth-sucking machines they are today.

Forget showing off on the world stage and focus on Africa. I do not mean endless invocations of "Pan-Africanism" and postulations about "United States of Africa". Forget the ideology, the rhetoric, and the ludicrous constructs. Focus on the nitty-gritty of growth, trade and development. For example, instead of wasting time on "UN Security Council Reform", the Federal Republic of Nigeria should be pushing strongly for the completion of like the Trans-African Highway system .... particularly the two lines that would connect us to Central Africa and the East African sub-region.

The sort of thinking that prioritizes these trade routes is the sort of thinking that produces governments that pre-emptively move to stop potential conflicts from breaking out, rather than waiting for the world media to start talking about Darfur before belatedly trying to chase a wild horse that has already bolted its pen. Though the proposed routes from Nigeria to East Africa run through war zones, war itself is not the problem; even when the DR-Congo was stable and at peace under Mobutu, there was no transformation in infrastructure. Stability is nice and good, but the stability of poverty and decay is destructive in the long-term. Nigeria's relationship with Congo/Zaire and Chad since independence has shown no signs of understanding our strategic political and economic interests. We just watched, patting ourselves on the back for allegedly being "Giant of Africa" having waged a civil war against ourselves, while our natural markets decayed. In the meantime, we tried to export stuff to Europe and North America.

I really do think we need to refocus our thinking. Okay, we don't rank highly on the Forbes 2000 global list .... but keep your mind on what we are (or are not) doing to expand our markets in Africa.