It is the Economy, Stupid!

To read the Nigerian press you would think that if we caught all the people that stole money and cleared the Senate of so called 419 lawmakers we would be in paradise and all problems resolved. Across the continent of Africa we have spent the greater part of the last century on battles around governance, accountability and political credibility. Try as we might as Kenya shows along with Zimbabwe, Nigeria even South Africa our politics is driven by the desire to consume and the addiction to control. We have largely assumed that if we get the politics and governance right the economics will follow this is in spite of the example of the Chinese.

We are now watching the so called credit crunch play out in the West with little or no analysis of its consequence for Africa. This is the same continent where intra- Africa trade still constitutes less that 10% of all trade. It is the same continent where capital flight i.e. money leaving the continent is far more significant than those that is coming back. The millions spent on sending people to study in UK and the US, the never ending holiday shopping sprees to London, Dubai and New York, the salting away of millions into foreign accounts. The Nigerian banks have now joined in this foolish pursuits by advertising perpetually on CNN for millions of dollars to what avail? Who are they really directing this adverts too? what is their return on such adverts when they are supposed to be investing in their economy especially SMEs in Nigeria. As this credit crunch takes hold think about its effects a little.

The sup-prime mortgage debacle will affect Nigerians abroad than most groups because they went into the buy to let property market far more that most nationalities. In the UK the middle class Nigerians who tried to spread their wealth creation through property investment are now scrambling to sell and pay mortgages as the value of houses start to drop. It also affects others not in the sub prime but maxed out on credit cards and other financial facilities. All these will have profound dampening effect on Remittances which have been quite a supplement to Foreign Direct Investment in the past five years.

It is also the case that many people are migrating back to Nigeria as a result of the dynamism that the policies of the last government started to create. It is the irony that the same policies are now being reversed every day destroying business assumption and generating economic uncertainties. For example a friend of mine who invested his life savings in Cassava Flour processing because of the Government directive on incorporating a percentage of cassava flour in bread is now facing ruin because of a recent reverse by the new government. As this people return they also face a labour market that is not meritocratic nor is it transparent enough with credible system of redress. In all the economy has not even opened up enough to accommodate the returnees.

The Nigerian stock market which registered the fourth largest growth in the world last year is also not organised to capitalise on the problems in the west since it takes forever to administer transactions. It is known you can wait over a year for your certificate reducing the possibility of transacting shares quickly and consistently.

Finally there are governments all over the continent who do not grasp the interdependent nature of the economies in this epoch. It is with concern one views the Nigerian government bogged down to inane dialogue about rule of law when the economic strategy is neither apparent nor is it consistent. It is time for a more considered dialogue about our economies and more importantly how we will make sure that we turn this commodities boom into a sustainable catalyst for growth before the `recession in the West destroys key elements that are making it happen. Wake UP!


Ire O