There has been an unprecedented level of confusion and uncertainty asto whether Nigeria’s ailing economy has really defied all economic logic.The truth of the matter is pure and simple: our economy cannot defy alleconomic solutions, but policymakers tend to put round pegs in squareholes.
The major problem confronting Nigerians today is economic. Other problemsare implicitly solved when the per capita income is tripled. Nevertheless,how the tripling of per capita income is going to be realised is yetto be seen. At the dawn of the 21st Century, trade volume among countriesis increasing. Regional economic groupings are also increasingly witnessedin every part of the globe.
With the end of Cold War, nations have seenthe need to co-operate economically and create a platform on which asound economic footing can be built. In pursuance of this laudable move,most countries have liberalised their economy and trade regime. Thusit has been recognised that free trade, a core component of globalisation,increases economic opportunities, raises standards of living and it isan important element for growth.
A strong commitment to free trade transcends any country’s form of government.Countries that promote economic freedom create their own economic dynamismand accelerate a well-spring of prosperity that benefits every citizen.
But Nigeria, despite her population and abundant natural endowments,has not really rolled out plans how she intends to be a major playerin the global economy.
Quite recently, there have been calls in certain quarters to re-introducethe outdated period of watertight trade restrictions to deter the influxof imported items and manufactured goods. Also going by a recent newspaperadvertorial, plans are in the pipeline to review Nigeria’s stand withrespect to the World Trade Organisation Agreement of which Nigeria isa signatory. These pernicious policies were once pursued and the consequenceis the present economic quagmire we find ourselves now.
I think we should honestly resist the urge and temptation to revert to those inward-looking options which had failed woefully in the past. The cost of stringenttrade restrictions is better imagined than felt.
First, it favours high prices and lower standards for consumers, secondly, there is the tendencyfor producers interests to be favoured and thirdly, it will have a dampeningeffect on entrepreneurship, innovation and technological and managerialdevelopment. In actual fact the policy will fail to take into accountthe future development in technology.
Trade restrictions are nothing buta crude way of holding back real and genuine economic progress.With the introduction of programmes like the Poverty Alleviation Programmes(PAP), Youth Empowerment Scheme (YES), etc. to tackle poverty, it isevident that government is quite aware of and ready to confront the monstercalled poverty that is now prevalent.
But whatever programmes introducedby the government and the amount of money injected into them just tocombat poverty will cut no ice. Such programmes can only attain its goalsif the economy is privately driven. The advantage of free trade is thatthe payoff is more immediate in private sectors: foreign investmentsdevelop and provide better employment opportunities. Impoverished peoplehave better opportunity to earn better wages, acquire more goods andraise their standards of living, more than what the so-called foreignaids and government directed programmes, both of which are subject towaste and fraud, failed to achieve over the years.
Free trade fosters competition, spurring companies to innovate and developbetter products and bring more of their goods and services to the market,keeping prices low and quality high in order to retain or increase theirmarket share. Policies that restrict competition exact a heavy toll onconsumers, fake and adulterated goods and services flourish. When tradebarriers are removed, per capital consumption will increase, health serviceswill improve and other social benefits follow economic gains. So removingcounter productive barriers to competition is both good economic policyand good public policy.
We have to contend with free trade. For Nigeria to be able to competein the global economy, we must evolve strategies that will enable usto benefit from advantages it offers while at the same time face up tochallenges it poses.
To be an active player, we must, as a matter ofurgency, address the poor state of physical infrastructure, address fragilebase manufactures, develop an export culture and inappropriate macroeconomicpolicies. Over 80 per cent of world’s exports are manufacture-dependent.
In view of this, we must vigorously pursue the following: the emergenceof a virile, viable and dynamic manufacturing sector, fiscal discipline,robust macroeconomic policy framework and an array of policies that willpromote the international competitiveness of our non-oil export. Aboveall, private property rights must be protected and there must be an efficientcourt system that enforces contract. The latter are important. Whereprivate property rights is at low ebb and contracts are not enforced,business relationship fail, investors flee, and capital flies. Both aredownward spiral movement that obstruct economic development.
At this stage of economic development we must not glossover the potentialof foreign trade and investment. If Nigeria is to kick-start her ailingeconomy and participate in the fast globalising world, then the callsfor the review of WTO Agreement will be totally out of place and uncalledfor. Past ugly experience should dictate caution. Returning to the regimeof stringent controls and prohibitions will be retrogressive.
Free trade will at the end be seen for what it is: a policy that givescountries that embrace it a great economic advantage. More than whatanyone can imagine, free trade also brings about more than physical goodsor services to the people. It transmits values and ideas. There is tremendousinflow of goods and normal business practices in a country where theculture of economic freedom blossom. That culture of economic freedomis both the cornerstone and capstone of economic prosperity.
Printed in The Comet , Lagos, Nigeria
4 September 2001
Thompson Ayodele is of the Institute of Public Policy Analysis in Lagos.