By 1978, the GDP of China was $147b; Today China is a $4,900b economy, that is a 3,233% GDP growth in 31years. Can Nigeria grow her GDP by 178% in 9 years?
The Vision 202020 is a plan to make Nigeria one of the 20 biggest economies by 2020, i.e. in 9 years Nigeria will overtake Belgium (the 20th largest economy) which has a GDP $470b. Nigeria has a current GDP of $173b. For Nigeria to overtake Belgium by 2020, we would have to grow our economy by 178% or 19% in 9 years. Please note that Belgium has to "stand still" for 9 years, Possible?
Currently in Nigeria, there is corruption, no power, no roads, no security, no credit, yet the economy has grown on average 7% a year. Therefore, a lay argument will be to say if we simply double our power generation, it will bump our GDP to 14% a year.
GDP means how much productive active happens in a country, it is the addition of
To get a good GDP score, it means you have to spend money in your country on stuff and export stuff. Note that investment in shares does not qualify as investments under calculation of GDP, and all imports are deducted.
Therefore, it is clear that Nigeria GDP is low because we export oil and bring in billions of $, then we import everything, and the bulk of the population has low spending power.
So to grow by 19% a year Nigeria needs to develop the infrastructure that will make us export, and grow the spending powers of Nigerians by creating a middle class. Primarily we need to build up our infrastructure.
So the first question is how do we develop the infrastructure of Nigeria?
The Nigerian Urban development Bank recently stated that Nigeria would need N32t to repair and invest in new infrastructure. Clearly, we do not have N32t and we really cannot borrow it, that $213b, we cannot get it from oil sales because we make average $11b a year from oil, and immediately spend in on salaries and allowances. We cannot get it from import duty and VAT either, combined all non-oil revenues bring in average $5b a year. What about Foreign Direct Investments? We got $11b last year, even though this figure has been rising, it is not guaranteed, one bad MEND headline and poof! So where?
I think we should focus on our citizens offshore who are earning foreign currency, have access to credit, and can channel financial assets to Nigeria.
Nigeria is called the Giant of Africa why? It not because our landmass, Sudan takes that, it’s not our heritage Egypt has that, it’s not our oil wealth, Libya has that, it’s not our mineral wealth that Congo so what? It is our people. It is not just our population of 150m in Nigeria but the 12m or so offshore.
The World Bank released a report showing that $21b was remitted to Africa in 2009; out of that figure, $10b went to Nigeria I.e. Nigerian citizens sent cash via Western Union and the like to their families etc. That is massive economic power, to put that in perspective, Western union payments of $10b bring in as much as FDI and Oil! Astonishing. That figure was just 6% of our GDP..
So is it possible to tap this group of Nigerians and raise the remittances to say $30b a year from $10b? Yes, it is, considers that India got $35b in FDI in 2009 but got $55b in the same 2009.
However, we need foreign currency investments and not just remittances, remittances are simply cash sent home, FDI are cash sent in to make or take a stake in a business or enterprise. Our bad perception means we might not get the huge foreign FDI, but we already have huge remittances. The paper proposes we instead focus on increasing the level of remittances and locking them in as investments. Remittances are from Nigerians, they will likely understand the headlines about kidnapping, bombings and 419, oyibo wont. In effect, sell Nigeria to Nigerians.
What Nigeria needs to do is to create a series of 10-year dev bonds to invest directly in specific revenue generating infrastructure i.e. airports, tolls roads, inland port in Lokoja etc, each with its own earnings stream. Lets the investors pay directly to the bonds SPV, not the federation account, the SPV collect the fees from the project and pay back to the SPV which will pay off the investors., the coupons should be tax free and allow the repatriation of 100% the proceeds in forex with no restrictions back to the country where it came from.
In effect, break the total N32t needed for infrastructure into separate project based bonds. The main point is that we match the revenue projects to bonds and let the projects not the federation account pay off the debt. We can add sweeteners, the proceeds can be used to buy oil at discounted prices or pay for federal or state land at a discount. Central to this is that if Emeka can send back $100 to Chidi in Aba, he can invest $1,000 in a bond.
It is not mere patriotism, its business, if you invested $1,000 in a 10 year US, UK or Euro zone bond you would get 3% at best, in Nigeria you would get 8%.But Kalu, Nigerians offshore don’t have $213b, where will they get it from? They can take a mortgage. They might not have that amount in cash but they have access to credit, which we do not have in Nigeria.
Right now Tunde in Baltimore can borrow $1,000 from bank of America at 3% interest rate buy the Nigeria development bond earn a 4% premium, tidy and everybody wins. If without a remittance programme we get $10b with this programme, we will get a lot more. This will allow Nigeria build the infrastructure off balance sheet i.e. off budget
Yeah, but almost all the states in Nigeria have sold bonds, even the Nigerian govt has a plan to sell $500m bonds, yet we are still hungry, what different? The states have raised bonds mainly to smooth out their revenue streams, i.e. the bonds are not designed to be deployed to a particular project but are simply raised to go into the accounts of the state governments who spend as they see fit. If we consider that the federal and state spend far more on recurrent than capital projects, it then presumes that the bonds are raised to pay salaries and allowances.
In this model the states will generate revenue backed projects they want the FGN to fund from the Nigerian Development bonds, let the FGN set out specific revenue and payback criteria to access the bonds, no Federal Character here, if states can match it the criteria, they don’t get the funds.
On the average, Nigeria spends about 30% of her budgets on capital (infrastructure) projects, that's hardly enough. This model will also ensure only capital projects are financed through the development bonds.
However, i suspect no one will invest in North Korean bonds if they are paying 100% a month. This is the challenge for Nigeria leaders, they must install confidence in investors, investors must know that if they invest in Nigeria they will get their coupons back, that some politician will not take it way or some major will do a coup, We should be transparent, conduct a fair poll in 2011, pass the FOI, show we are serious about fighting corruption. Its important to note that Nigeria has never failed to honour any interest payments on any debt since the creation of Nigeria
Once we secure the infrastructure funding, the govt can them use the oil money for education and health and increase the minimum wages to grow consumption and recreate an educated middle class. As consumption grows, our GDP rises.
However, not just the offshore money but the brains as well. In every western university, there are Nigerians, learning or teaching, in every Fortune 500 company there are Nigeria working or doing business with them. Just as India and China used the brainpower and entrepreneur drive of her returning western-trained citizens to add points to their GDP board, Nigeria must do the same.
Imagine if Emanalo and Finidi both come back from Betis and Chelsea to manage Sharks and Enyimba. Now imagine if our doctors and engineers also came back.
Imagine our offshore doctors bringing in equipment and knowhow and pass on to the Nigerian based doctors. Imagine our lecturers bring in experience on how to access research grants to our local lectures, our engineers installing solar panels in Katsina. With all the money, we need brainpower and Nigeria has it in abundance offshore.
But not just Nigerians, lets get radical and offer Nigerian citizenship to investors willing to invest $1,000,000 in the 10 year bonds no questions asked, if the Chinese want to come , let then come, but let them pay. Just like the Canadian do the points based auction for immigration.
There is a unique opportunity for Nigeria, capital is flowing from North America to Asia, Nigeria should position Nigeria as a mid way destination, the bond yields, the distance, the market and the English language all favour Nigeria.
Time and chance happens to them all, let’s not let this chance go to waste
It is our problem, let us fix it.
