Edging Towards a Robust Nigeria Economy vis-a-vis Import Substitution Strategy

No Man is an Island:

To my mind, The saying,’ No Man is an Island’ resonates why foreign relationship and interaction among countries of the world, especially in the economic realm, takes place as all nations are uniquely and differently blessed with resources, especially material and natural resources.

Whilst human resources are easily sourced e.g. through the academic exposure of nationals to the right environment abroad, thereby being equipped with the right skillset to significantly contribute to the home economy, resources aren’t met with ease when not available in the home country.

To ensure the available of resources not locally sourced, international economic relationship, through foreign trade comes into play.

The importation of goods and services is an important tool in international trade, with the exporting country (seller) the more productive country, whilst the importing (buyer) is most times considered productive when the goods imported are primary products or input necessary in furthering production.

The Balance of trade for example is a very crucial tool to monitor the capabilities of a country’s international trade as it is the difference between her export and import.

Bringing these home, with the challenges experienced in Nigeria, the sharp decline in the purchasing power of her currency -  the Naira – as well as the growing poverty levels and sufferings of Nigerians negates the era of Change majority of the populace had longed for and voted with so much enthusiasm. As at 2014, the exchange rate of Naira to USD was N180, two years down the line, it is N490.

Citeris Paribus:

Citeris paribus, with a Nation’s annual Gross Domestic Product (GDP) being the sum total of C + I + G + (X – M), where C represents consumer spending; I, capital investment and G, government spending, as well as X being export and M, Import the summation of these puts the icing on the cake on why the Nigerian economy is at this time very bleak.

From these 5 indices, Government spending has dwindled overtime as evident in the inability of over 15 states to pay the salaries of their workers, as well as the declined Capital Investment and trade deficits experienced over the years, as evident in a host of firms leaving the shores of Nigeria to Ghana since 2009.

Regardless of these, my thought on the improvement of the Nigerian economy is hinged on her having an export driven economy where common needs like toothpick, food supplies, especially  Rice, vehicle tyres, sleepers and electronics etc. are locally produced at home through the encouragement of Foreign Investment into the country.

According to tradingeconomics.com, “Imports to Nigeria increased 60.4 percent year-on-year to NGN 774998 million in September of 2016, the biggest rise since July of 2013 as a weaker currency lifted import prices”.

More so, popular newspaper, guardian stated that Nigeria has lost its status as the aviation hub in West Africa to Ghana primarily due to the 100% increase in the cost of Aviation fuel – Jet A1 – in Nigeria. Other reasons by venturesafrica include, scarcity of Aviation fuel, devaluation of the Naira and unfriendly government policies. The case of unfriendly government policies is not a surprise, as Nigeria is presently placed 169 out of a possible 190 countries in the Ease of Doing Business Economic Ranking by The World Bank.

According to the World Bank, “a high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm”

 Import Substitution Industrialization:

Pondering through the way forward for Nigeria and her economy is a hurricane task, as driving in the right investors in the right numbers with the right capital is highly dependent on her treating the headaches encountered in the investment climate.

According to the vanguard, “statistics obtained from the 2010 annual report by Central Bank of Nigeria (CBN) shows that the total foreign capital inflow into the Nigerian economy in 2010 was $5.99 billion. The record shows that that FDI represents, 78.1 percent drop from $3.31 billion in 2009. Analysts attributed the decline in FDI to the increasing rate of insecurity in the country as well as infrastructural decay”.

No Foreign Investor puts in Capital into an economy without reaping in good time. As an investor into Nigeria, cost of goods and services are usually on the high side due to what I call ‘Price Surge Determinants (PSDs)”.

Encouraging the right investors into the country increases exports and significantly reduces imports, thereby achieving a favourable blance of trade (Trade Surplus), thereby strengthening the Naira against the dollar and other currencies, especially those of Nigeria’s trade partners.

The PSDs include high cost of vehicle maintenance and transportation of goods due to bad road network, unfavourable tax system, poor security, poor infrastructure and social amenities, high cost of rents and little or no incentives by the Government to lure investors into the country.

To counter these PSDs which usually make the prices of goods and services very expensive to the common man, the government must provide the following:

·         Significant improvement in the power sector;

·         Easing and reducing the processes involved in documentation

·         The availability of motorable roads, especially in the rural areas – thereby easing the movement of raw materials from sourced locations to the concerned firms/production location;

·         Strengthened local banking system with favourable interest rates to encourage borrowing from Local Banks;

·         Acceleration of residency permits by foreign employees of the foreign investing company,

·         Provision of a minimum of 3 years tax holidays, as well as an efficient and realistic tax system;

·         Availability of social amenities like good and affordable hospitals/schools with the best facilities thereby discouraging hospital tourism abroad

·         Efficient security system, low crime rate

In conclusion, the raw material availability and human resource potentials among Nigerians, as well as her huge population among other factors is a propelling force to the Nigerian Government leaving no stones unturned at ensuring the economy of Nigeria is made competitively viable in the global economy.

It is high-time, impossibility became a banned word in all facets of government activities, as making the impossible possible got Qatar, Abu-Dhabi amongst other great nations where they are.

Think Investment, Activate in Nigeria should be the drive to encouraging Foreign Direct Investment vis-à-vis Import Substitution approach.