The drop in capital inflows into Nigeria which was highlighted recently by the National Bureau of Statistics should engage the minds of our policy makers. Both outgoing President Goodluck Jonathan and President-elect, Muhammadu Buhari, need to work out effective strategies to restructure the economy and position it to attract massive foreign investment.

In a report last month, the NBS found that capital imports into Nigeria in 2014 fell by $576.61 million, or 2.66 per cent, to $20.75 billion, down from $21.31 billion in the 2013 fiscal year. In the fourth quarter of 2014, the NBS said capital worth $4.49 billion was imported into the country, a sharp decline of $2.04 billion or 31.22 per cent from the $6.54 billion imported in the preceding quarter. In October 2014, foreign investors pulled N101.2 billion from quoted equities on the Nigerian Stock Exchange, dropping shares to flee an economy facing sharply declining crude oil prices and anticipated depreciation of the naira against major world currencies. As the foreign portfolio investors account for 80 per cent of investment in the bourse, market capitalisation lost N1.47 trillion in October, closing the month at N12.43 trillion compared to an opening value of N13.6 trillion.

With capital in short supply, Nigeria therefore needs a fundamental restructuring of its economy. We need to organise our 170 million people and abundant natural and human resources for production as successful nations of the world have done. The incoming government should realise that relying on crude oil for national economic survival is no longer sustainable. Leading members of the Organisation of Petroleum Exporting Countries, Saudi Arabia and Kuwait, have once more asked members to brace for possible sub-$30 per barrel oil price. When it is remembered that financial analysts estimate that Nigeria requires an oil price of $107pb to fund its budget, then the desperate need for FDI can be understood.

The International Monetary Fund says that FDI is crucial for an emerging economy to build up capital, infrastructure and diversify its public revenues from commodity sales to taxes. Apart from propelling development, according to the United Nations Conference on Trade and Development, capital inflows lead to the creation of jobs, increased productivity, availability of advanced technology and access to research and development resources. It was a fundamental restructuring of its command, centrally-planned economy that facilitated the emergence of China in a space of three decades to become the world’s second largest economy on the back of massive foreign investment. In the first six months of 2012, it received $59.1 billion in FDI, the global leader, beating the United States which had $57.4 billion within the same period. FDI inflows into China rose to $64.1 billion in 2013, representing 34.7 per cent of total FDI inflows into the Asia Pacific region, according to the IMF.

To build a sustainable and diversified economy, the World Bank recommends the adoption of “development friendliness” or policies of liberalisation that will lure in foreign investors. With Nigeria on track to become one of the world’s top 20 economies by 2020, projected growth of 5 per cent for 2015 despite falling revenues and a likely successful change of government by May 29, the IMF said Nigeria would continue to be Africa’s third highest recipient of FDI this year.

The problem is that most of the investment, over 70 per cent of what came in 2013, according to the NBS, is portfolio investment, which is short term, while the crude oil and gas sector takes another large chunk. But it is in the productive, job-creating and infrastructure sectors that FDI is most needed for long-term growth and export diversification.

We should tap into the transformative power of foreign investment. Going forward, Nigeria must resolve the problems of the power sector, where previously state-owned generating and distribution companies have been handed to incompetent adventurers with no expertise in power through a rigged auction. Start-ups and small and medium enterprises that are critical for industrial take-off and job creation, cannot survive without access to cheap power. Citing 40 per cent additional energy costs that rendered their products uncompetitive, many multinational producers such as Dunlop and Michelin have packed up and left. Coca-Cola International, despite the dominance of its brands in the local market, fled, relying now on a local franchise to bottle its brands in the country while it ships in imports. Our FDI drives should target multinational corporations that could create largest number of jobs, import new technologies, train Nigerians in advanced skills and produce for export.

To leverage our assets, the government should immediately commit to opening up the railways and steel sectors to private capital. Only perfidy can explain why the government and the National Assembly have refused since 1999 to repeal the Railways Act of 1955 that gives the central government a monopoly over railways, preferring instead to pour money into an obsolete track system that was first laid at the turn of the 20th century. The same perfidy has seen the Petroleum Industry Bill stalled at the parliament for six years, thereby depriving the economy of new, long-term investment in the oil and gas sector.

India, on its part, introduced policies from 1991 onwards to open its economy and become the second most important FDI destination by 2012, with inflows into services, telecommunications, computer and engineering. Similar initiatives, said UNCTAD, have facilitated capital infusion into Russia prior to recent Western sanctions; Malaysia, and Singapore, whose leadership combined land reform, education and liberal fiscal policies to transform the Asian city state from a backwater into a highly developed market economy and international entrepot with the world’s third highest per capita income at $78,762 per head at purchasing power parity.

Nigeria cannot afford to delay further as the rest of the world is moving on and must reform or remain a poor but resource-rich country.

IMF and Nigeria’s infrastructure prioritization – Daily Independent

The recent recommendation by the International Monetary Fund (IMF) in its just released 2014 Article IV Consultation-Staff Report that the Federal Government of Nigeria should slow down on its infrastructural projects so as not to further squeeze the economy is, not only preposterous, but laughable, considering the fact that infrastructural development is globally known as a panacea for economic development.

Coming at a time when some other developing economies are busy aggressively developing their capital infrastructural base to woo both local and Foreign Direct investment (FDI), it will be counterproductive, if Nigeria should adhere to the IMF’s directive. In fact, we find the directive as lackluster and anti-development to say the least.

This is even contrary to the clamour from most economic quarters that the best way to ensure economic growth is to create a balance between capital and recurrent aspects of our budgets to make it conducive for job creation imperatives. As it is today, about 80 per cent of our budgetary allocations go to recurrent expenditure, which does not bode well for economic growth. This is why we are taken aback at the IMF’s advice.

Instructively, IMF was originally formed to promote steady and full employment by offering unconditional loans to economies in crises and establishing mechanisms to stabilize exchange rates and facilitate currency exchange. It is common knowledge that much of these visions have not been realized especially in third world countries. What we have seen is an IMF that is offering loans based on strict conditions. As a matter of fact, IMF’s policies have, undoubtedly, reduced the level of social safety and worsened labour and environmental standards in developing countries of which Nigeria is one. What is more, IMF is apparently an imperialist tool. Therefore, it is time Nigeria, and indeed, other African countries stopped being subservient to the imperialist world.

There is no gainsaying that some of the policies, programmes and directives of IMF, over the years, most times end up promoting poverty rather than reducing it. It is in the light of this that this Newspaper finds the current IMF directive to Nigeria unacceptable and must be ignored. It is evident that IMF and even other world donors such as World Bank; do not have the country’s interest at heart.

Moreover, coming almost immediately after the 2015 Presidential and the National Assembly elections, it seems that by given such directive, IMF is positioning itself as an economic adviser organization to the incoming new government. To this end, it is imperative, therefore, for the incoming federal government and our economic managers to be wary and jettison destructive economic advice of the IMF.