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The central challenge Nigeria faces today is this: how
do we create sustainable prosperity and opportunity for
our citizenry. I believe that if Nigeria is to be a
successful open society, it must radically reform itself.
Such reform would entail building a market economy, where
individual economic actors are responsible for creating
prosperity. Backing that liberal, open and free economy,
would be an unyielding government commitment to an
efficient regulatory system, and public education and
health care for citizens who are not well off. Now, the
real challenge is how do we reach that point? How do we
move beyond the recriminations and problems of the past
to understanding the need for a new state-society
dialogue and strategy for creating prosperity? The
approach embedded in Vision 2010 while useful, is flawed
because of the political irregularities under which it
was drafted. A real reform process must hand back the
right of economic activity to citizens, not in piece meal
but in one fell swoop. Such an approach will break the
oppressive ties between wide poverty, citizen political
apathy and the zero–sum approach to political power
in Nigeria. Returning to the initial question, how do we
do that?
Preliminary Reform Requirements
To build a high performing and competitive economy
which can generate sustainable wealth, reform will have
to take place at two levels: the structural and mental.
Structural Reform
First, the structural reforms. Based on my revealed
preferences for an open economy, I identify a few as the
most important.
- Exchange Rate Reform. The dual exchange
rate system must be abolished. A free floating
foreign exchange market must be authorized. The
Naira’s value must be determined by
underlying economic fundamentals (such as the
growth rate of the economy, the level of
inflation, the health of the financial system,
the depth and speed of foreign investment flows
into Nigeria).
- Fiscal Policy: All levels of government
must adopt a conservative fiscal policy, with the
intent of maintaining a balance between
government revenues and spending. Thus,
government spending on non-essential items must
be curtailed, with the bulk of spending going
towards education, healthcare, social welfare,
and some public good type long term
infrastructure investments.
- Monetary Policy Reform: The Central Bank
of Nigeria must be given operational and legal
independence from government so that it can
properly set monetary policy. Maintaining price
stability is of utmost importance. An honored
tradition of using open market operations, or
targeting the growth rate of monetary variables
such as M1, among other tools of monetary policy,
has to be developed so that our central bankers
can focus on imparting stability to the economy,
rather than fighting political games with Aso
Rock.
- Trade Reform: Nigeria must become a
diversified export economy. The focus on oil and
natural gas will not be sufficient to meet the
nation’s financing needs. Government must
remove all impediments such as anti-competitive
laws, subsidies that favor importers, reduce
tariff and non-tariff barriers, and open
Nigeria’s borders to imports and exports
alike. For Nigeria to become a successful trading
nation, a mental shift is required to embrace the
idea that one trades in order to expand
one’s consumption choices. Thus, Nigerians,
government and citizens alike, will need to
rethink our attitudes to entrepreneurs, who are
responsible for creating wealth. In so doing, we
would be locating ourselves within a time-tested
framework, which show a clear positive
relationship between higher non-mineral exports
and a better standard of living.
Attitudinal Reform
Second, a different attitude has to be embraced. To
move from being one of the world’s 20 poorest
nations, to one which possesses a high performance
economy, a number of vital mental shifts have to occur.
First, the Nigerian state has to admit that it should not
dictate the economic choices her citizens will make.
Instead, it must create the legal environment for them to
exercise their own choices and have these respected. The
role of the state should be that of a humble participant
in frank dialogue about prosperity, and not as a
domineering partner. Of course, to reach that position,
the Nigerian state must be willing to admit that its
approach to economic development thus far has been
flawed, and it is willing to concede the stage to private
actors. Second, and equally important, private actors
must accept the responsibilities and challenges that come
with successfully running a free, open economy.
To build competitive advantage in Nigeria
Putting both set of issues, structural and
attitudinal, together, forces a profound question: can
Nigerian firms succeed on the world stage? Can the
introduction of a free market and free trade help us
build prosperity in Nigeria? Should we not expect a rise
in unemployment, poverty and as one famous Nigerian
economist once noted, enslavement to the outside world?
Would Nigeria not be better off if we turned inwards and
handed control of the economy to the government, or its
representatives? No, I argue. With her shrewd,
innovative, entrepreneurial and hardworking cultures,
Nigeria would be better off opening its economy to full
international trade and creating a free market inside her
geographical borders. However for that effort to be
successful, we as a nation must come to terms with a
number of flaws we have.
And what are these flaws I speak of? They are what
strategy consultants, (and colleagues), Michael Fairbanks
and Stacey Lindsay, call the "seven deadly patterns
of uncompetitive behavior." In no particular order,
they are excessive reliance on natural comparative
advantage, poor knowledge of final clients, poor
knowledge of a firm's (or country) position relative to
its competitors, making inadequate choices regarding
forward integration, weak or non-existence inter-firm
cooperation, high levels of paternalism, and
defensiveness. These shortcomings, argue Fairbanks and
Lindsay, doomed many seemingly promising Latin-American
firms. The authors draw examples from work carried out by
our parent company, Monitor Company, a Cambridge,
Massachusetts–based global strategy consulting firm.
For example, they work through a number of cases
including Colombian leather products firms, Peruvian
alpaca wool processors, Bolivian soy processors, Peruvian
fish meal companies, Peru’s tourist industry,
Colombian flower farmers, and the Venezuelan national oil
and petrochemical firm. In the process they interacted
with corporate leaders, community leaders, heads of
government, ministers, and non-governmental groups. In
every single case, and overwhelmingly so, the central
problem encountered was the absence of an explicit
competitive strategy, a term that captures questions of
pricing decisions, degree of innovation, and inter-firm
cooperation among others.
In the case of Colombia's flower growers, represented
by their industry grouping, Asocolflores, the planters
firmly believed that Colombia's natural advantages, that
is, cheap labor, good weather, and fertile soil, would
guarantee success in exporting flowers in the highly
competitive United States market. Their intuition was
correct in so far as they where the only players. Once
Mexican and Ecuadorian growers, who matched and often
undercut the advantages the Colombians possessed, came on
the market, the days of the Colombian exporters were
numbered. Fairbanks and Lindsay systematically work
through the weaknesses of the Asocoflores strategy, and
conclusively demonstrate that unlike their real
competitors (Dutch producers), the Colombian had little
to no knowledge of the final client, relied too heavily
on quickly eroded competitive advantages such as an
overvalued exchange rate, cheap labor and fertile land,
and created a draining alliance system with brokers in
Miami when one was not needed. For that reason, it was no
surprise that Colombian flowers had only one real market:
Valentine's day, as opposed to the entire year as
Asocoflores had erroneously assumed.
The central lesson the authors and I want to drive
home is this: if a firm does not map out an explicit
strategy, even one as basic as competing on the basis of
cost or product quality, the market would implicitly
force one on it. Thus, as was the case for Colombian
leather products firms, they unwittingly found themselves
located between the high differentiation, high
value–added Italian houses, and the low–cost
producers from East Asia. For anyone who has been
following the debate on Nigeria's textile industry since
its 1994 liberalization, the plight of the Colombians
sounds too familiar. Nigeria's unsuccessful producers
have either been hurt on cost or product differentiation
grounds. The more successful Nigerian firms (Afprint for
example) have already started engaging in explicit
decision making, in the process working to counter the
plaguing many a developing country firm. They are the
firms who can and will create prosperity. Thus, for any
Nigerian company to create wealth, a unique strategy is
vital. To be successful, CEOs, management and workers,
all the stakeholders in a firm, first have to change
their frame of reference, and start learning anew ways
that put themselves at the center of business decisions.
In essence, an appeal to government to reverse
liberalization policies, fix exchange rates, or a general
cry of helplessness cannot be a reasonable escape valve.
The core point Fairbanks and Lindsey make, and a
compelling one at that, is that people can make choices
about who they want to be and then map out what steps
they will take to achieve those goals. Among those
choices are decisions on how much human capital to
develop, technological innovations to utilize, and what
type of knowledge to acquire.
In Search of The Rising Sun Economy
As we debate how it is we shall reverse the legacy of
recent poverty, I am confident that this approach will be
useful to Nigeria’s citizens, corporate community,
labor movement, and government officials for the
following reasons. For too long, we have blamed each
other for the nation's economic malaise. While government
has taken steps to correct some flaws, and in the process
liberalized significant portions of the economy,
something key is yet to undergo a systemic change:
popular attitudes about the source of prosperity, wealth
and job creation, and their impact on poverty reduction.
In many minds, the government still retains
responsibility for job creation. That should not be. And
how then shall we create such wealth? We return to the
themes I earlier hinted at: the need to build a free
market economy, in which individual entrepreneurs, who
trust each other, organize in firms of all sizes, to
create prosperity and jobs. We must all enter into
partnerships for creating prosperity. To be successful,
we must identify common goals, commit to a long–term
perspective, invest in human resources, and assign new
leadership roles for business leaders and policymakers;
every stakeholder thus must have a discernible role in
generating prosperity!
Let me be more specific. As I read the case of
Colombia's petrochemical giant, Propilco, I could not but
help slot the Nigerian National Petroleum Company (NNPC)
into the text. To properly define its competitive
strategy, the Colombian stakeholders (public and
private), working closely with Monitor Company, undertook
a strategic audit against competing corporations,
Mexico's Pemex, Indelpro and Venezuela's Propilven. When
put through that type of scrutiny, it became painfully
obvious that the perceived competitive advantages
Venezuela possessed were rather transient. Naturally, a
new strategic focus had to be mapped out. I cannot but
help think that NNPC (and the broader oil industry) needs
to go through a similar process. It would not hurt our
corporations if they undertook, within their limited
financial capacities such studies, and then made explicit
strategic choices based on the results, rather than
complain that industrial capacity utilization still
ranges in the low thirties. Appealing to government for
more contracts or a bailout must remain out of question.
That is not a real solution. Nigerian companies can
thrive, only if they are honest enough to admit whether
they ought to be in a line of business or not.
A number of Nigerian firms such as the United Bank of
Africa(UBA), Michelin, Nigerian Breweries, among others,
who have made clear strategic choices, demonstrate that
these are changes can be spread across the economy. Take
for example UBA’s decision to reform itself. UBA
aggressively studied the global banking industry,
determined who its clients are, and began to bench mark
against Citibank, among other changes. Today, after three
years of continuous innovation, the bank is one of the
finest in any emerging market, despite the immense
challenges operating in Nigeria constitutes. UBA’s
management is also working on obtaining the right to list
her stock on the London and New York stock exchanges, so
that international investors can also buy her stock. To
obtain that right, and reap the capital and technological
inflows that go with it, UBA’s bankers, senior and
junior, have worked exceedingly hard, constantly working
to raise their operating standards to global best
practice. Their success is a bold testament to the
possibilities before Nigeria’s entrepreneurs if only
the entire society would be willing to sit down and
negotiate a new role for her members. And the
responsibility does not stop at the door of the
government. To survive, create jobs, wealth and tackle
mass poverty head on, Nigerians need to cooperatively
change their mindset about competitive strategy, and our
capability to navigate the global economy
Conclusions
Openness, political and economic, should not create
fear in our minds. Quite to the contrary. It is a keen
opportunity for us to rebuild our economy and break the
cycle of poverty. We can do whatsoever we set our minds
to, so long as we do our homework! Our challenge is to
move beyond the current structure of society and develop
a more dynamic system that encourages innovative
entrepreneurs and rewards merit. Given the slide in our
national reputation in international affairs and
business, we will have to go many extra miles to ensure
that we regain our credibility. For those who believe
Nigeria possesses a rightful place in the world, you are
wrong. Respect is earned not handed out for free. Nigeria
will gain long lasting credibility by building a liberal
democracy and open economy that challenges the norm. We
must learn to challenge the world and push out the
frontiers of human achievement.
Jude Uzonwanne is a
strategy consultant with The Monitor Company, a firm that
advises the world’s leading companies, and numerous
governments on issues of strategy.
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