The Naira Republic

By Leonard Lawal in Lagos and ?Oladipo Salimonu & Patrick Smith
Posted on Monday, 21 September 2009 09:46

Nigeria is entering its 50th year of

independence to the accompaniment of bullish forecasts by international

banks which drown out predictions of an imminent apocalypse in Africa’s

most populous country.

The paths predicted for Nigeria are growing ever more divergent: a high road of local companies using the country’s world class oil and gas resources, and mass access to information technology to effect a China-style transformation of the economy and living standards; or a low road of the centre failing to hold, with things falling apart as militants in the Niger Delta and the Muslim north, drawing on huge social discontent, overwhelm the state.

This polarisation of prospects partly reflects the social gulf between the financial oligarchs and the toiling multitudes – as wide as any in states such as Brazil, India or South Africa. But it also reflects a sense that the option of Nigeria somehow muddling through, staggering from bust to boom and back, no longer looks viable.

Coming to power on the back of a fiercely disputed election in 2007, President Umaru Musa Yar’Adua promised there would be no muddling through but a clear programme of political and institutional reform to establish a truly independent electoral commission, a radical restructuring of the country’s oil and gas business and a reliable electric power network. And there was also to be a concerted effort to tackle the despoliation and unemployment that had become rife in the Niger Delta.

Reality has turned out differently. The barons of the ruling People’s Democratic Party (PDP) opposed electoral reform, even if some admirably independent judges overturned the most improbable results in governorship elections. Electric power supply has worsened, and the National Assembly is gearing up to filibuster the oil sector reform bill into submission.

For those who saw the quiet and modest Yar’Adua as a welcome change from his ebullient predecessor, President Olusegun Obasanjo, the record to date has been disappointing. High hopes are still invested in the reforming new governor of the Central Bank of Nigeria (CBN), Lamido Sanusi, as much as in his colleagues, finance minister Mansur Mukhtar and oil minister Rilwanu Lukman.?Time is running out for major change before the next national and state elections due in mid-2011, even if Sanusi’s recent purge of Nigeria’s banks has shown what can be done quickly with political will (see page 89).

Apocalypse, no thanks?

The opposition remains sceptical and defiant: they are convinced they will triumph in free elections, with one leader, Muhammadu Buhari, accusing the government of presiding over “the erosion of its institutions”.

Unforgiving as they are towards their political leaders, few Nigerians subscribe to apocalypse notions. Even seasoned civic activists in the conflict-wracked Niger Delta bristle when they hear foreign analysts talk about their country as a failed state heading Somalia-wards. As they survey their inheritance of natural resources and entrepreneurial people, many Nigerians prefer to castigate the incumbent regime and maintain a resolute optimism about the future.

Buying into the optimism is US investment bank Goldman Sachs, which is sticking by its assessment that Nigeria will be one of the world’s 20 biggest economies by 2020. Equally hopeful is its 2050 forecast that Nigeria will be the 11th biggest economy in the world with a GDP of around $5trn, a couple of rungs below Britain and just ahead of France. Nigeria’s economy would then be less than a tenth the size of world leader China, which by 2050 will have a GDP of just over $70trn.

Nigerian pipe-dreams?

Yet more gung-ho is Cyprus-registered Renaissance Capital, which has invested more than $500m in Nigeria and organised an investment conference in Lagos in early September, as Nigeria’s economy emerged from its worst year for over a decade. Yes, say Renaissance chief executive Steven Jennings and his executives, Nigeria’s GDP this year will fall back to $197bn, but then it will bounce back to $245bn next year and $308bn by 2011 to overtake South Africa as the continent’s biggest economy.

There was a sharp intake of breath from the assembled commercial bankers, asset managers, officials from the World Bank and civil servants as the Renaissance analysts reeled off their upbeat data, culminating in a projection that Nigeria’s GDP would top $500bn by 2014. Not quite so sur­realistic, say the econometricians, who suggest a very rapid expansion over the next decade with the continuation of Nigeria’s growth path of 7% a year since 2003. Their calculations are premised on straight-line projections, and a questionable optimism about the political future and exponential population growth – the latter partly borne out by the UN Population Reference Bureau, which reckons that Nigeria will widen its demographic lead over other African countries.

The UN forecasts that Nigeria’s population will be 282m by 2050, compared with a projected 118m in Egypt and just 55m in South Africa, even allowing for the likely substantial reductions in the current fertility rate in all these countries. Indeed, if Nigeria’s fertility rates stay at current levels, it would have a population of well over 400m by 2050, says the UN.

Population booms can cut both ways. In Nigeria, if such a growing population has access to electric power, information technology and decent standards of education and health, then the bankers’ growth forecasts look less like wishful thinking. That would be a demographic dividend of the type that propelled China’s great leap forward over the past two decades and is now pushing India in the same direction.

But that dividend would require sweeping political change to overcome the local and foreign vested interests and to restructure Nigeria’s economy. Without that, a fast growing population will simply provide more recruits for the squadrons of dispossessed in the Niger Delta and the economically marginalised north, and more challenges to a state already failing dramatically to keep pace with the threefold increase in the number of Nigerians since independence.

The policy changes required are clear both to President Yar’Adua’s government, and its opponents. Battle is now being joined over some of the most important reforms in the Petroleum Industry Bill, which the government is trying to push through the National Assembly in the coming months. It will be an onerous passage, even if some of the provisions are finally approved into law.

?Records worth holding?

In its opulent surroundings in Abuja, Nigeria’s National Assembly holds international records for the volume of legislation it blocks or delays. Assembly members are unimpressed by Rilwanu Lukman’s contention that, with the bill: “Nigeria will move in one step from one of the most opaque petroleum nations in Africa to one of the most open and transparent in the world.” Lukman’s aim is to transform the state-owned Nigerian National Petroleum Corporation (NNPC) into a formidable national oil company with the muscle of Brazil’s Petrobras or Indonesia’s Pertamina. Those opposed are a formidable array, including the foreign oil companies as much as the Niger Delta politicians.

Oil companies are doubtful about Lukman’s ‘increased accountability’ argument and say they will still be asked to pay commissions and backhanders to the political jobbers that surround the oil business. But with Halliburton, Shell and Willbros all embroiled in multi-billion dollar corruption cases in Nigeria, the foreign companies’ own record on accountability looks poor.

Lukman and Yar’Adua insist that stasis is not an option. After oil production plummeted to a reported 1.2m barrels a day in July, as a result of militants’ attacks and mismanagement, the country’s economic engine came close to seizure. Even the most self-seeking politicians realise their prospects for election campaign finance and perhaps of elections at all are under threat if the looming oil crisis is not tackled.

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