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Party politics aside, Nigeria must industrialize Now

By Ugo Nwagwu

The best time for Nigeria to industrialize was 35 years ago. The second best time; NOW!

Pre Independence Malaysia was rich in natural resources such as porcelain, spices (which were then traded as currency) and large deposits of Tin. As part of the British Empire, the British took over administration of the economy and also introduced Rubber and Palm Oil trees for commercial purposes and then brought in Chinese and Indian expats to work the fields and mines instead of locals. Pre 1970s Malaysia had an economy completely dependent on natural resources exported while basically everything it consumed was imported. Sound familiar?

Today, Malaysia though still state oriented, has a newly and open industrialized market economy. This is because in the 60s and 70s, the Malaysian government took painful and costly steps to industrialize their economy. The Malaysian government committed itself to a transition from being solely reliant on mining and agriculture as an economy to a multi-sector economy. Mining and agriculture dominated the economy up until the 80s and since then, it’s been the industrial sector driving growth. It took 25 years for the turn around.

If you read the papers and follow the news concerning all things about Nigeria’s economy, three things continue to drive the headlines: Oil prices, Nigeria’s insatiable appetite for FOREX (Dollar, Pounds, Euros and now potentially, Yuan) & diversifying to Agriculture.

One thing we still aren’t talking about is how to push past the politics of now, and blame shifting to chasing after real solutions that will benefit our children and their children. We are a nation of traders. We have always been a nation of traders and even if we exploit more of the agricultural sector, chances are that we will take the traders approach.

As we diversify into agriculture, the tendency will be to treat its produce as we’ve done with oil. Right now, Nigeria remains one of the largest crude production and exporting country but what plagues the average Nigeria today is the availability of refined crude. We continue to import refined crude at an amazing rate negating whatever balance of trade that could have been helped by crude export. Even if the state’s 3 refineries were working to capacity, it won’t produce enough to support a population of 180 million and growing.

Now we want to take the same mentality into agriculture by “mining” produce and then exporting the raw produce without any thought to a “National Vertical Integration” whereby we keep all our “raw produce” and process them here to first serve the immediate need of the population (limiting imports of those processed goods) and then exporting them. Simply put, if we grow tomatoes, we should be able to process every part of the tomato into everything Nigerians need from a tomato i.e. canned tomatoes, ketchup, tomato sauce, tomato paste, tomato puree all in Nigeria. This goes for every single agricultural produce we grow or plan to grow.

That’s one example but it can be applied to every sector in which raw materials are found. Palm oil is used in over 50% of everything found in a supermarket and you know which country has one of the world’s largest palm oil production potential? Nigeria! As a nation we need to invest not just in mining gold, lead, zinc or whatever metals are beneath the soil to smelting them and turning them into actual products that we can then export to other parts of Africa and the world thereby controlling all parts of its margins.

This level of industrialization would pump millions of jobs into the economy and lead to economic growth unrivaled in any part of Africa in its history.

How do we start? First we must resist the urge to turn the Naira-Yuan swap into another level of shopping binge for cheap Chinese goods but instead import heavy machines and power plants to build factories and manufacturing plants. We must continue to attract foreign investments that solely act to serve Nigeria in an industrialization master plan.

The Federal Government can pursue public private partnerships with matching investments and use the capital markets as part of their exit strategy thereby also providing a return of investments to shareholders. This is certainly more productive than subsidizing fuel consumption.

We don’t need more retail outlets and companies selling us high priced alcoholic beverages. We have enough cheap clothing and shoes coming in droves from all parts of the world.

If we do this and leave the politics and tribalism that only serves to separate us and shift our attention from the selfish ambition of today’s politician from the Local Government level to the Federal Government and all ministerial staff, then maybe in 25 years, we too would serve as an example for other countries to follow. If we get this done and done right, no one would be as concerned about the price of $1.

To borrow a phrase from one of Nigeria’s senators from Bayelsa, Senator Ben Muray Bruce, my name is Ugo Nwagwu and I just want to make common sense.

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Oil prices plunge 5% in wake of failed Doha deal – MarketWatch

Crude-oil prices pared some losses in mid-Asia trade Monday after tumbling more than 6% in the opening hour following a failure of the key producers to agree on a production cap that could have tightened up the supply market.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at $38.28 a barrel, down $2.08, or 5.2% in the Globex electronic session. June Brent   crude on London’s ICE Futures exchange fell $2.20, or 5.1%, to $40.92 a barrel.

The sharp decline in oil spilled over to regional stocks. Energy stocks in Hong Kong and Australia were all off about 2.8%, while the broader Hang Seng Index  and S&P/ASX 200 benchmarks  fell 1.2% and 0.3%, respectively.

Japan’s Nikkei Stock Average  was off 3%, as the Japanese yen  came close to reaching a fresh 18-month high. Elsewhere, the Shanghai Composite Index   slipped 1.5%,

Over the weekend, Russia and heavyweight producers inside the Organization of the Petroleum Exporting Countries walked away from a much-anticipated meeting empty handed. The group had gathered to discuss a production cap to limit output to January’s levels as a way ease the global oversupply.

The key driver behind the breakdown was Saudi Arabia’s refusal to participate in the deal without its geopolitical rival Iran pledging to do the same. Since economic sanctions against Iran were lifted in January, the country has vowed to keep ramping up production until output is back up to at least 4 million barrels a day.

Continue to MarketWatch for More

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IMF Seeks an End to Nigeria Budget Impasse, presses on Currency Devalution

April 15, 2016
– By NairaFX
IMF Managing Director, Christine Lagarde, who speaking at the opening press briefing of the fund at the 2016 Spring Meetings of the IMF-World Bank in Washington D.C., has asked that the Nigerian Federal Government look for assistance from international institutions that have the capacity to aid the Nigerian economy overcome its challenges.

“Our recommendation is that, first, Nigeria seek help from the international institutions that can best help. Second is that Nigeria is open-minded about using flexibility of the exchange rate in order to absorb some of the shocks; we believe that it’s more efficient than using a list of forex items that are barred from being imported into the country.
“And third, we believe that it’s really important that budget be completely decided and approved,” Lagarde said.
The IMF as well as many other global economist have warned that the currency policy of the current administration is unsustainable. Some have also recommended a two tier Forex market system although critics of that decry the opportunities for corruption to rise as a result of said two tier system.
Lagarde continued to encourage Nigeria and Nigerians to seek economic diversification in the long run as near total dependence on oil revenue is dangerous for economy.
Lagarde said, “The low price of oil is general but low price of oil as far as Nigeria is concerned is a critical issue. Sixty per cent of your exports and 80 per cent of your revenue or the other way round is actually oil dependent.
“So when there is a massive decline in the price of oil, those two also take a similar beating; it has a major impact on the country.”
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Commodity slump pushes Africa back into IMF’s embrace – Reuters

JOHANNESBURG, April 15 (Reuters) – Falling commodity prices have pushed several African countries back into the embrace of the International Monetary Fund, which has an opportunity to push for reforms and inject transparency into opaque economies.

 Top of the list is Angola, Africa’s second biggest crude producer and third largest economy, which has not borrowed from the IMF since 2009 and just a few years ago had the Fund all but turning a blind eye to missing billions.

It is hardly alone, with depressed prices for commodities ranging from oil to copper sapping the budgets of African governments and sending them to the IMF, the “lender of last resort” which typically imposes tough conditions for assistance.

Gas-rich Mozambique and gold and oil producer Ghana, hard hit by the sour commodity cycle, both inked financial arrangements with the IMF in 2015, their first in six years, according to the Fund’s website.

Ghana’s was a three-year, $918 million assistance deal signed as its fiscal and current account deficits ballooned.

Africa’s second-largest copper producer, Zambia, started talks in March on an aid programme. Lusaka last signed a financial arrangement with the IMF in 2008.

And the region’s most industrialised economy, South Africa, which is also a major producer of platinum, gold and coal, may be forced to turn to the IMF if its credit rating gets downgraded to junk.

China this week offered Nigeria a loan of $6 billion to fund infrastructure projects but Africa’s top oil producer is still expected to also seek assistance from the IMF for the first time in almost two decades.

Continue to Reuters