Why economic nationalism will fail to grow Nigeria’s economy

Why economic nationalism will fail to grow Nigeria’s economy

INTRO

The current “Buy Naija” campaign, even though well intentioned, draws breath from economic nationalistic principles that calls for protectionist policies, restricted markets and satisfying local markets before venturing abroad, practices that do not sit well in a world where the biggest pie goes to national economies who are globally competitive.

Using the Asian model for comparative analysis, Isaac Anyaogu argues that economic nationalism will fail to grow the local economy unless it is moderated to adopt some critical measures.

STORY

In recent times, some Nigerians have been calling for increased patronage of Nigerian goods and services with Ben Murray Bruce, representing Bayelsa East Senatorial District, as the mouthpiece. The power of social media has also been summoned to drive home the message and to guilt those perceived not to be in support. The national assembly on Wednesday, March 2, passed a resolution urging the Federal government to urgently initiate and implement the First Option Policy on purchase of locally manufactured products for government procurement. The subtext of this campaign is built on the pedestal of economic nationalism.

According to the Global Policy Journal, economic nationalism should be understood as a set of practice to create, bolster and protect national economies in the context of world markets. It says that the economy of a nation should be run for the benefit of its citizens. As policy intervention, it springs from economic crises and nationalist movements.

And if there’s anything Nigeria has in abundance, it is crises and elastic nationalist movements. Hence, while these calls are well intentioned, they do not present the overall picture of what modern realities in a global economy now dictates. In Anthony D’Costa’s book, Globalization and Economic Nationalism in Asia, the author uses the rise of Asian brands like Lenovo, Infosys and Huawei, to advance the notion that while economic nationalism did not lose currency with the dawn of globalisation, it requires a systematic approach, using the process of globalisation to become globally competitive.

Economic nationalism, for example in China, went through certain evolutionary stages when it started engaging with globalisation. During the Denx Xiaoping’s economic reforms, China saw the need to learn from the West. The goal was to technologically upgrade its economy while still protecting its domestic industries. To defend local economy, they invited foreign firms to invest in joint ventures in China between 1971 and 1991.

When China saw the value of exporting to external markets, they altered their economic nationalistic policies towards “gearing with the world” in the 1990s to prepare for entry into the World Trade Organization (WTO) in 2001. From 2002, China adopted aggressive strategies that involved state institutions and firms undertaking outward foreign investments that provide the mutual benefit of helping other nations develop whilst also securing resources for China’s economy.

India, Singapore, South Korea and Japan adopted this model and transformed the nature of their economic nationalistic policies to harness the benefits of globalisation as a means to serve the developmental needs of the state. Such benefits include access to foreign capital, investment, technology expertise and access to markets.

Market access for Asian states and firms has been centered on securing resources and increasing their own investment portfolios, through outward investments and foreign acquisition. Asian states have also been actively promoting their national brands through a moderated variant of economic nationalism to push for integration into the world economy.

So what is wrong with the recent calls for economic nationalism as subsumed under the theme of “Buy Naija”? It is encouraging economic nationalistic polices to insulate domesticeconomy from foreign competition. Also, it has not incorporated value addition to products to make the local productions globally competitive. What is even more worrying is that it has not incorporated in its campaign, advocacy for investment in human capital, to create a knowledge economy that will add value to local produce.

Every international brand that achieves renown has had to compete with foreign firms at home. Worse still, real growth potential for Nigerian manufacturing is playing in international markets, as Nigeria does not just have high aggregate demand due to low earning power of its citizens. In any case, global capitalistic forces will continue to break down any national barrier to allow for the free flow of capital, goods and people in order to optimally promote economic efficiencies and growth.

Some examples will situate this argument in the proper context. According to figures from cocoa barometer,  a global resource for cocoa growth and sales, in 2014 the global retail value sales of chocolate confectionery climbed to $100 billion, while cocoa growers in Africa, including Nigeria, received only 6% of the price that consumers in rich countries pay for chocolate.

According to Sotonye Anga, national publicity secretary of National Cashew Association of Nigeria (NCAN), cashew contributed N50billion to the Nigerian economy in 2015 based on the 144,000 metric tons of the crop produced in Nigeria and exported as part of a global production of 2.4 million metric tons. The problem with these pictures is that Nigeria failed to add value to these agricultural products and failed to create adequate linkages between the products and related industries.

Akin Iwayemi, a professor in the department of Economics, University of Ibadan, had this to say about economic nationalism: “I think economic nationalism should be such that Nigerians produce for Nigerian markets but their products too can be sold outside our borders. So if you go with that mindset that you are producing not only for local markets, but you want to produce products that are competitive, you are going to be more efficient and you are going to use technologies that will help you achieve best practices.”

Austin Avuru, managing director of Seplat Petroleum Development Company Plc, has been championing a facet of economic nationalism in his call to the government to create policies that will encourage domestic energy security- a model that shares similarity with the Asian model.

“We are now fortunately beginning to focus on domestic energy security, so rather than revenue from oil and gas, the only other real use to any nation is to ensure that it grants you domestic energy security which can then galvanise the rest of the domestic economy.

“What would domestic energy security mean to us?  By 2022, we will as a nation be consuming 7bcf of gas a day. Right now, we are approaching 2bcf a day and for electricity alone we are requiring 1.1 bcf a day. 7bcf of gas for the domestic market will generate 15 gigawatts of electricity with multiplier effects.

If we process domestically, 1.2 million barrels of our 2.4 million barrels production, which is achievable, as Dangote will soon be processing 650,000 barrels a day, and we give away our moribund refineries producing 450,000 barrels, we can process 1.2 million barrels a day by 2020 and turn Nigeria to a crude oil processing hub. This will provide all the products we need domestically and for export.”

Economic nationalism that is aimed at protecting local production, labour and capital formation, imposing restrictions on free movement of labour, products, and capital through duties and tariffs and other obnoxious policies have no place in the global economy. So, rather than economic nationalism being the inspiration for policies such as protectionism, import substitution, mercantilism and restricted markets, the Asian model has shown that it can be strategically deployed to benefit from the principles of globalisation.

Donald Trump, the current Republican Party front-runner has risen to the top of the polls on the platform of economic populism. According to Pat Buchanan, in an article for Chronicles, “Trump is winning because, on immigration, amnesty, securing our border and staying out of any new crusade for democracy, he has tapped into the most powerful currents in politics:economic populism and “America First” nationalism.”

This demonstrates that economic nationalism as sound bite, has no shortage of enthusiasts jumping on the bandwagon, but its efficacy to drive national development is doubtful.

 

 

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