I have argued that Nigeria needs to address certain foundational questions if its transformation agenda is to become properly aligned. These foundational questions include whether the country’s political structure, a federation that is nevertheless perceived as having an excessive concentration of power at the centre, needs to be re-engineered in order to truly release the West African nation’s economic potential, or whether the problem is in fact not with the structure but with the people who run it. There is no automatic answer to this conundrum, but the country must confront the strategic choices available to it and make a decision.
The second foundational question is the right balance between the political legitimacy of economic decision-making in a democracy and the need to give technocrats a free hand to reform the economy and avoid the politicisation of rational economic choices. Again, this is not an easy conundrum. And the third foundational question is the tension between the instincts to save and spend in Nigeria’s political economy.
Three paradigm shifts are necessary for Nigeria: it must break the “resource curse” and move away from a mono-product economy to economic diversification, from an economic mentality of comparative advantage to one of economic complexity in which manufacturing is not based on natural factor endowments but on productive and competitive advantage; the buy-in of the Nigerian citizens to the Nigerian federal government’s Transformation Agenda is an essential paradigm shift, and must be secured through the “manufacturing of consent” through positive and evidence-based propaganda; and Nigeria must build its institutions if the country is to achieve economic transformation. Political will, leadership and effective public policy are important conditions if that transformation journey is to make measurable progress.
Finance is an essential ingredient of economic growth and transformation, but in a world in which excessive financialisation led to a destructive global financial crisis that wiped out over 12 trillion dollars of value from economy, how should Nigeria and other African countries utilise finance for economic transformation? The key is to focus on utilising finance as a tool for capital formation for economic development, which includes human development, not just achieving growth statistics. This requires an emphasis on development finance through the work of development banks (China and Brazil provide excellent examples), a focus on increasing financial access for the poor, and on issues such as the effectiveness of microfinance and the very urgent priority of establishing a large presence of venture capital firms to finance small and medium enterprises.
This article is an extract from Kingsley Moghalu’s book, Emerging Africa: How the Global Economy’s ‘Last Frontier’ Can Prosper and Matter (published by Bookcraft, June 2013). It is also available on Konga.com and will soon be available on Amazon.
Kingsley Chiedu Moghalu is deputy governor of the Central Bank of Nigeria. Before then he was founder and CEO of Sogato Strategies S.A. – a global strategy and risk management firm in Geneva, Switzerland. He spent seventeen years working for the United Nations, at duty stations in New York, Cambodia, Croatia, Tanzania and Switzerland.