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Governor Sanusi Lamido Sanusi of the country’s apex Federal Reserve Institute, the Central Bank of Nigeria and its monetary policy committees retained the benchmark interest rate at 12 percent. The market did not anticipate any change of the monetary interest rate; therefore there was no negative or positive reaction to the outcome. Sanusi's CBN cannot be accuse of not trying its best possible to utilize the tightening of the monetary policy as a tool to rein in the surging inflation, although the result has been mixed. Now CBN can realize that monetary policy alone that rests on the manipulation of the interest rate and supply of money has its limitation. Sanusi promised to hold down interest rate below 10 percent, but the subsequent disinflation was not grounded on fundamentals but on momentum and that's why it is difficult for inflation rate to stick below 10 percent.
Nigeria's economy has a structural problem that cannot be corrected with tinkering of the interest rate. First and foremost the resource derived from oil based economy is not realistic indicator and determinant of a functional economy. The external forces determine the price of oil and make it difficult for Nigeria to plan and implement a realistic budget due to price gyration of oil. The instability deems it necessary that Nigeria should move beyond oil based economy. But the quick, sweet and rush of easy money from oil have not allowed the policy makers to be logical and visionary on the strategic outlook of the economy.
With the regards of controlling inflation, the attention of the executive arm of government must be sought. There should be a coordinated platform to enable CBN and the presidency to work together. The fiscal policy coming from the presidency must be in tune with monetary policy of the apex bank. The point here is that as monetary tool functionality lapsed with regards to checkmating inflationary trends, then the need for putting fiscal policy into action becomes apparent.
Nigerian economy is weak in spite of the robust growth it has registered. The source for the generation of foreign exchange from the economy is limited and the economy is not export orientated. A major problem of the economy; it’s the inability to produce enough jobs to commensurate to the robust economic growth. As for naira even with its recent appreciation, it is also weak and malleable when compares to dollar.
To enhance the value of naira the country's war chest must be strengthened in order to withstand the threat coming from speculators. The country's reserve stood at US$ 32.64 billion in December and the inability to replenish the dwindling reserve in spite of high price of oil was due to the constant defense of the weaken naira. The CBN has eventually restored to the devaluation of naira up to N160 to $1. But the bulwark is not the panacea because it is focusing on the symptoms of the problem not on the root cause. The country does not produce arrays of agricultural and finished products to export in order to raise a quantifiable foreign exchange that can make naira stronger and that can discourage currency speculators.
Central Bank of Nigeria may be happy with partial removal of fuel subsidy but that cannot accomplish the targeted purpose of propping up foreign reserve. There are immediate effects and implications that come with the removal of the fuel subsidies. The first major problem will be higher inflation which may accelerate to 13 percent or more. Then the prices of agricultural products and household products will escalate due to transportation and energy cost. The standard of living will likely to depress and that is not a good trend in a country with 70 percent of the population survives with less than two dollars a day. The increasing poverty does not augur well with the stability of society and that can be translated to higher crimes and poor security. Poverty and insecurity discourage economic development and have the propensity to encourage capital flight and weaker attraction of direct investments in the non-oil sector of the economy.
The economic growth of the Gross Domestic Product at fourth quarter of 2011 was 8. 68 percent while inflation rate was at 10.3 percent in December. The fourth quarter GDP growth was impressive but it did not make a difference on the people due to lack of jobs and increasing poverty.
According to the Domestic Macroeconomic and Financial Developments issued by Sanusi's Central Bank of Nigeria the "real Gross Domestic Product (GDP) grew by 8.68 per cent in the fourth quarter of 2011 up from 6.64, 7.72, and 7.40 per cent in the 1st , 2nd and 3rd quarters, respectively. The overall GDP growth rate in 2011 was estimated by the NBS at 7.69 per cent, marginally lower than the 7.87 per cent recorded in 2010. This projection is based on the estimated Quarter III and Quarter IV growth rate of 7.40 per cent and 8.68 per cent respectively. The 2012 Budget proposal assumed a growth rate of 7.2 per cent." Without doubt the data looks wonderful on piece of paper, how far does it fare in the real world?
Looking at the data the Central Bank of Nigeria should have been excited together with streets and villages of Nigeria of the surging economic growth buttressed by the rosy numbers. But that was not apparent because it did not translate into more jobs. The unemployment rate stood at almost 24 percent (23.9) at the fourth quarter according to National Bureau of Statistics (NBS). But the real unemployment rate is definitely higher when urban joblessness among the youths is factored in and rural unemployment statistic is properly gathered. Due scientific and technological limitations, the unemployment number was not correct.
Faces of poverty in Nigeria
Sanusi Lamido speaking at the lecture he delivered at London School of Economics could not explain succinctly the real reason why the unemployment was escalating despite the rosy economic growth in the country. His words, “Major bottlenecks and supply-side constraints, including enabling legal framework” have “slowed the responsiveness of some CBN reform measures.” And he continues, “The link between major growth drivers, particularly agriculture and manufacturing, continue to be weak and the required costs of the expected infrastructural needs of the economy are daunting and remained a major challenge to financial sector, “the need for a low-cost long-term infrastructure financing requires more than the CBN alone can tackle.” All he was saying that there is no answer for what is happening in the economy with regards to economic growth and higher unemployment.
Sausi's CBN did some good: The Recapitalization and Quantitative Easing (QE) brought back confidence in the banking sector. The down side is that over stimulation and over supply of money may induce higher inflation. The billions of naira that was used to propped up and bail out collapse banks probably overheats the economy and that could trigger higher inflation. That will make the job of controlling inflation more difficult.
Notwithstanding, CBN deserved huge credit for salvaging the failed banks but the banking sector cannot function alone to the exclusion of the whole economy. CBN cannot do it alone; the country's economic problem cannot be resolve by moping of the liquidity and tightening of the monetary tool to rein in inflation. A country with structural problem needs a committed and visionary leadership.
Nigeria's economy needed to be over hauled to make it more productive, not only relying on oil export. The problem of infrastructures must be tackled not with lip service but with pragmatism. The refinery must be built and those ones in progress must be completed to bring down the price of petrol and to meet the local demands. Roads, schools, electricity and most important the security must be improved. Political instability and social unrest are gateway for capital flight and investments repatriation. Nigeriamust reject these ailments that can threaten and deter economic growth.
Dangote Group opened a one-billion-dollar cement industry at Ibese, in southwestern Ogun State. The chairman of Dangote Group is Mr. Aliko Dangote, a business magnate and seasoned capitalist has always been a committed investor particulary in Nigeria and Africa in general. With one-billion-dollar investment in Nigeria, it will kiick-off the drive for others to follow the foot steps of Dangote Group. This is one of the largest investment in the non-oil sector of the economy and this is significant to the economic wellbeing of Nigeria, as the country struggles to diverify its oil based economy.
In his own words the chairman of Dangote Group Mr. Aliko Dangote said, "We are working towards making the company one of the eight biggest producers of cement in the world and with the commissioning of the Ibese plant, Nigeria has been transformed from major importer of cement to self-sufficient in production and export."
Nigeria's President Goodluck Jonathan was at hand to commission the Ibese cement plant and he was pleased with the investment. President Jonathan was quoted in a AFP report, "Whenever you call me to come and commission new investments, I will come again because these are the kind of stories we want to hear in Nigeria."
Nigeria needs a good news which has not been coming lately, with the social unrest fueled by MEND and Boko Haram the country has been rocked with uncertainty. Inspitte of the social unrest the country's economy is expected to grow robustfully in 2012 at rate 6.7 percent to 7 percent.
The great thing about the one-billion-dollar cement plant is the job's avaliability and that will help to lower unemployment in the area. The new plant at Ibese will be producing six million metric tonnes of cement yearly and together with Dangote Group other two cement plants, the company will increase its annual production capacity to 20.25 metric tonnes.
The rap star flew to Dolo, Somalia, on Wednesday. Tens of thousands of women and children have fled there over the last year to flee a devastating famine that killed tens of thousands of people across Somalia. WFP said the rapper, whose real name is Curtis Jackson, has committed to provide 1 billion meals for the hungry, and is donating to WFP 10 cents from every sale of a new energy drink called Street King that he is promoting.
The U.N. last week declared an end to Somalia’s six-month famine, though it said tens of thousands of people still need food aid to survive. The British government estimates that between 50,000 and 100,000 people died from the famine’s effects.
50 Cent at orphaned children in Kenya's biggest slum, Kibera in Nairobi. (ROSE OGOLA/AFP/Getty Images)
According to the conductor of the bus, Samuel Ekwueme who was crying uncontrollably, the police, at Anambra State Broadcasting Service (ABS) Awka Road Onitsha junction check point, had stopped the Coaster bus driver with registration number AA 763 AHB and asked for N50 tip, but the driver gave him the normal N20.
The policeman said to be a Hausa man refused and insisted on collecting N50, but was told by the driver that they just came out and that they should allow them to go and come back.
The conductor said: “The policemen insisted that we must give them N50 before we move. The driver, after pleading with the unyielding policemen, drove off and one of them entered a commercial motorcycle and accosted us at Anionwu street by New Market Road Onitsha where he shot the driver through the bus window and ordered the commercial motorcyclist carrying him to move for him to escape.”
The killing of the driver exploded the bottled up anger of residents of Onitsha and the fragile peace in the state that have lost over 30 people to the bombing and shooting of the Boko Haram as residents took to the streets in protest of the killing of the bus driver said to be member of the Movement for the Actualization of the Sovereign State of Biafra (MASSOB).
...the coaster bus where Edwin was shot
It was gathered that four passenger in the bus sustained bullet wounds while others in an attempt to escape sustained serious injuries when the bus became uncontrollable following the shooting of the driver by the trigger happy cop.
The situation however took a dangerous turn when angry mob comprising of drivers and commercial motorcyclist popularly known as ‘okada riders’ went on rampage with the corpse of the driver, for reprisal attack on Hausas people in Onitsha.
The bus was said to be fully loaded with passengers who took off from Nkpor junction and was heading to the Ose Okwodu and Onitsha Main Market, when the incident happened.
One of the passengers who gave her name as Ifeoma Obi told Vanguard that “the deceased did not do anything that warranted his killing, adding it was just sheer wickedness on the side of the policeman who because of just N50 wasted this young man’s life”
Gov. Obi and Anambra Police command
She also said that when the policeman first demobilized the bus by shooting at the tires of the vehicle and it could not move again, a situation she said helped the killer cop to shoot at the deceased from the window on closed range after shattering the glass of the vehicle.
The killing took an ethnic sentiment as Coaster drivers and angry mob in Onitsha went on rampage demanding the killing of Hausa people on the ground that the policeman who shot the deceased was a Hausa man.
The situation also escalated when angry mob descended on the police team earlier sent by the Anambra State Commissioner of Police, Mr. Muhtari Ibrahim to come and appeal to the rampaging crowd as the team were almost lynched but for the intervention of MASSOB Director of Information, Mr Uchenna Madu who pleaded with the aggrieved protesters that their leader Chief Ralph Uwazurike is against any reprisal attack.
The Onitsha Ploice acting Area Commander, Mr Roland Omatoje and the Divisional Police Officer in charge of Central Police Station, Onitsha Mr. Abdul Yusuf escaped death by the whiskers when the angry mob descended on them when they led their men to the scene of the incident .
Reacting to the development, MASSOB leader, Chief Ralph Uwazurike advised his members not to touch any Hausa man but should dismantle every police check point within the zone with immediate effect.
MASSOB leader, Chief Ralph Uwazurike
Uwazurike who spoke through his director of information, Mr Uchenna Madu said dismantling of all police check point has became imperative at a time when the security of Ndigbo was no longer safe even in their land.
He however, urged MASSOB members to leave Hausa people alone and concentrate on dismantling all police check points within the zone”.
When contacted, the Anambra State Police Commissioner, Mr. Muhtari Ibrahim said the killer cop had been arrested and would soon undergo orderly room trail and prosecution. He called on the rampaging mob to calm down as efforts to settle the matter had commenced.
ACCRA, Ghana (MarketWatch) — In a light blue, three-story concrete house in the suburbs of Ghana’s capital, young entrepreneurs are developing online applications they hope will make them into the Mark Zuckerbergs of Africa.
They spend long days and nights coding, strategizing and preparing to launch new software companies in an environment where competition is becoming stiffer and more Ghanaians are striving to create Web-based offerings they dream might become the next Facebook.
These entrepreneurs are the top graduates of the Meltwater Entrepreneurial School of Technology, an academy at the center of one of the highest-profile efforts to boost software development in sub-Saharan Africa. At the school’s incubator, as well as in other classrooms and informal gatherings around the country, a burgeoning number of tech-savvy people are charting the future of the Web in Africa and hoping to influence the world’s online ecosystem. But they face high hurdles in a continent with low Internet penetration and poor infrastructure, as well as scant progress in literacy.
MEST, set up in 2008 by Jorn Lyseggen, a Norwegian tech entrepreneur and chief executive of the Meltwater Group, graduated its first 20 students in 2010 and 20 more last year. At the light-blue incubator next door, graduates are using seed funding of between $30,000 and $200,000 to develop software businesses that will reach both Ghanaian and global markets.
“What we are trying to do is create a demonstration effect through companies and illustrate that software is a medium to achieve great things,” said Michael Szymanski, MEST’s director of business development.
Just on Tuesday, some notable personalities converged on Lagos to appraise the state of the nation. Their damning verdict was that Nigeria, the most populous black nation and richly-endowed was already gaspimg for breathe. Their mission, according to most of the personalities, was to save the country from an impending catastrophy. Ironically, a handful number of the discussants had played one active role or the other in official capacities during Nigeria’s gradual march to infamy.
Indeed, all of us are in trouble. The reason is that all those virtues that had made us stand out as highly progressive and humane are on the verge of extinction. We have lost our sense of neighbourliness. A lot of people in our midst are no longer their brothers’ keepers.
Instead, they are incredible killers. The Boko Haram vividly captures the ugly phenomenon. It is the greatest height of the degeneration in our values as a people.
We are faced with a spectre of battles across the land. Banditry, militancy, ethnic cleansing and all manner, of bloodbaths underscore the dilemma of country, which at independence, in 1960, held a lot of promises for mankind. Thanks to a capricious section of the economic and political elite, whose actions and inactions have created the current frightening climate in the country.
We do not kill the body alone. The Nigerian system has equally been killing the soul. The kind of serious thing that formed the trademark of the nation’s first generation of political leaders are now in short supply. It has been overshadowed by ego, personal aggrandisement and survival instinct by a few members of the political class left with conscience. Corruption manifests in different shades.
For too long, we have harped on the need to convene a national conference to address the those knotty issues threatening the foundation of the country. The debate has even culminated in producing drafts of the kind of constitution suitable for the close to 500 ethnic groups that make up the federation.
Some made attempts to lobby members of the National Assembly to consider those documents during efforts to rewrite the Nigerian Constitution. Apart from a body of senior citizens called The Patriots, a number of activists also take other steps, such as initiating steps to secure the cooperation of the legislature to pave the way for a national conference.
All these were carried out at the time Nigeria was not faced with the menace of terrorism as we have now. We are back to that period. And how far can we go this time round?
We need a conference. But those forces opposed to it have left the shores of the country. In fact, their ranks may have swelled over time, after building intimidating business empires. Their cronies are many in the political circle, and who believe that current arrangement is the best for the country, because of their narrow interest. I believe that those who constitute a majority in benefiting from the present political arrangement might not give in easily.
The stiffest opposition could come from a section of the country, where those behind the Lagos meeting could ill afford to ignore.
Therefore, the Lagos summit should be seen as the first step in the overall plan to convene a national conference capable of taking Nigeria out of the jaw of the lion. The most crucial step still has to be taken, which is building a national consensus on the subject matter. Except for a few, most of the summiteers had been regular faces at similar gatherings designed to tackle national issues dispassionately in the past. In fact, the Lagos lawyer, Mr Femi Falana apparently inferred this observation during his submission at the meeting.
Again, the political class needs to reassure the people that they would not be let in the renewed quest to reinvent the country. The people laboured hard to enthrone democracy on May 29, 1999, by making sure that the military retired to the barracks.
The general expectation was that the era of “business as usual” was over. It is sad that today, those vestiges that made military rule unpopular and tragic are being replicated by political leaders, a few of who had professed to be democrats. They have not only abandoned the people, but also impoverished them through unpopular economic policies and programmes. A lot of them are dropping the names of nationalists of blessed memories, who did all they could to wrest Nigeria from colonialism.
Besides, the initiators of the Lagos talk must guide against the possibility of their actions of being misconstrued. There is the need to achieve spread in representation. It is by so doing that they can allay the fears of those that might think that the initiators harbour a hidden agenda. In other words, all efforts must be made not to make the current exercise a sort of gang-up against any section of the country, which may cause more harm than the good the leaders have set out to achieve.
CENTRALIZED POLICE FORCE: AN OUTDATED RELIC OF COLONIAL AND MILITARY CONTROL.
The President, Goodluck Jonathan in his response to the rising crime problems in Nigeria, offered to reform the Nigeria Police Force. What the Nigerian Police Force needs is total and radical balkanization. Reforming the Nigerian Police without State and Local Government Police will be an exercise in window dressing. The most effective Police concept is Community based Police. You cannot have community based police force in a highly centralized and mobile police command structure.Can a Police Command Centered in Abuja be an effective crime fighting Command and control force in far away Ideato Local Government in Imo State. How effective are Police officers who are aliens to their designated crime fighting environment. Can officer Okoronkwo from Abakaliki effectively control crime in a village in Taraba state, that he had never been to before and whose language he cannot speak nor understand. Is mobile police concept an outdated instrumentality of dictatorial colonial and tyrannical control or a failed crime fighting force. Nigerian Police Force with its centralized structure and custom of transferring officers to communities they have minimal contact, if any, be effective in controlling the rising crime rate in the country. Crime fighting, like politics, is local. Nigerian police force as currently structured, with its rigid centralized command and control is an outfit designed to fail.
The single, one size fit all police structure, is the remnant of colonial police. The colonial Administration needed to setup a police force with the dominant objective of centralized control. The Alien colonial government was not familiar with the regions and very distrustful of the people under its colonial administration. It needed a police force with one identifiable commander that controls all units within the colony. The single central command and control force was designed for easier control of the force and not for effective law enforcement. The subsequent military governments we had, were also distrustful of decentralized police force. Regional Police Force was a threat to Military governments, who were paranoid about losing power and less interested with law enforcement and crime control.
This culture of a police force that the central government can control, has failed to fight the rising crime problems in Nigeria. The Nigeria Police Force is too big, too detached from local environments, lack knowledge of local communities and too transitory, to be an effective crime fighting organization.
Crime fighting is a local issue. Most crimes are committed by people within the community. It is logistically difficult for people not familiar with a locality to commit crime in that area successfully. Knowledge of the local environment is needed for successful criminal enterprise. Logic also detects that to fight crime in the same locality, you need law enforcement personnel familiar with the area. Using police officers from Abeokuta and Udi to fight crime in Owerri is illogical at best. The local criminals with good knowledge of the area will always outwit the stranger police officers. Too often, you read news reports that the criminals escaped thru the bush. The bush escape was possible because the criminals being locals, know the bush paths, while the alien law enforcement officers do not. You cannot effectively fight crime unless you have good knowledge of your crime fighting environment.
Intelligence gathering is an important and indispensable element in crime fighting. You cannot get good Intel, unless you know the people very well, and they trust you. The very mobile nature of Nigerian Police Force does not make for good intelligence gathering. People are very distrusted of strangers. It’s not possible to trust somebody you do not understand their language and do not share the same religious beliefs. Can you imagine how a commissioner of police of Igbo ethnicity in Gombe, will be effective in getting good intelligence report about the Boko Haram sect. The Moslems in that region will not trust him. His is an alien to their culture, their religion and their interest. He is as good as a potted plant as far as affective Intel is concerned.
The mobile and centralized police force does not breed the sufficient contacts and interests with a community needed for effective crime control. Most police personnel that I have come in contact with, are not in their posts with their families. They serve alone. If your family live in the same community and you are from the community, you have a vested interest in having that community crime free. The current practice where you send officers to communities they do not have any interest in, and no attachment, breeds ineffective law enforcement . The motivation to be a brave crime fighter is minimal. An Ijaw officer will not be as motivated fighting crime in Jos as he will be fighting crime in his town of residence. You have a better vested interest in defending your place of residence where you have friends and family, as against a strange place where your stay is very fleeting.
The Boko Haram crime problem is a test case. The criminal profile is entrenched on religion and ethnicity. The criminal elements are locals who view non locals as infidels. How can an igbo person be effective in controlling that crime problem. The community will not trust him and he is an attractive target for elimination. But a native law enforcement officer can infiltrate the criminal organization and can get intelligence about the criminals. The officer understands the environment and the people better, and that makes him a more effective crime fighter, than an officer with a transient contact with the community.
Any restructuring of the Nigeria police force that preserves the centralized and mobile nature of the force will fail. Effective restructuring will be to have local police force. The Federal Government can maintain a Federal police that deals with Federal crime enforcement. The Federal Police should use residents of that community as law enforcement officers.
The state should establish state police force. The state police should be responsible for law enforcement within the state. State police officers should be residents of the communities they serve. The state police command should be under the control of an independent police commission. The state police commander should be a tenured officer, who can only be removed for cause, by the legislature.
The local governments should also have a police force with limited authority within the local government. Progressive countries all over the world have National, State and Local Police Forces. Crime and criminals are not one size fit all. Crime and criminals have local peculiarities that can only be addressed by local law enforcement officers that understand the local peculiarities. A smaller and better trained state and local police force is more tailored to fight our current crime problem. It’s time we junk the unfocused, big Colonial police force that has been over whelmed by local based crime syndicates. Local crime problems calls for local law enforcement solution. Decentralized Police Force will be more efficient and better funded. The State and local governments will exercise better oversight powers over the Police Force. A smaller Police unit will be easier to train. Training is one of the problems of the huge and uncontrollable Police structure that we currently have. But if the Nigerian Police Force is broken into state and local government police forces, it will make for easier training.
A federal system of government without federal system of Police structure is doomed to fail. Nigeria needs to embrace a system that is the norm in most advanced countries. If we are serious about law enforcement , we must creat state and local government Police.
Take a walk in downtown Lagos and you’ll see bustling shopping malls and streets populated not just by domestic restaurant chains but increasingly by global brands like KFC, which will soon have 20 restaurants in Nigeria, and Walmart, which is expected to soon open two flagship stores. At Lagos airport you’ll see planes owned by more than 20 international airlines, from countries such as China, Qatar and Turkey. You will also see many of Nigeria’s nearly 90m mobile phone subscribers who together sustain four major telecommunications companies.
Capitalism is alive and well in Africa. Some observers will worry about the recent violence arising from the removal of fuel subsidies. The truth is that today’s Nigeria is strong enough to avoid a protracted crisis. This is down to the growing power of the African consumer. A decade or two ago, the rash subsidies decision taken by President Goodluck Jonathan could have brought the country near to a full political meltdown. But in 2012, Nigerian consumers want to buy their groceries and get back to work; they have too much vested in the economy. It’s a pattern mirrored across the continent.
Africa is quietly catching up after a period of isolation from the rest of the world between the late 1990s through to 2008. Policymaking has justifiably been criticised for its multi-decade approach of ring-fencing Africa. This created an “us-versus-them” culture, which hinged on one set of development policies – trade, foreign direct investment, capital market access – for certain countries like China, India, Brazil, but prescribed an aid-centric policy for other (mainly African) countries.
This catalogue of policies prompted the economist Paul Collier to caution that many African countries were “shearing off” from the rest of the world. In part, as a consequence, although Africa is home to nearly one billion people, the continent’s share of world trade hovers around 2 per cent. Meanwhile, of roughly $1.12 tn worth of total global foreign direct investmentin 2010, sub-Saharan Africa received a paltry 3 per cent. However, this is about to dramatically change.
We now see some of the inadvertent benefits from this isolation: Africa is less exposed to the fallout from the radioactive economies of the developed world.
The credit crisis could take a decade to unwind. Already, many investors have been burned entering illusory recovery trades such as eurozone sovereign bonds, emerging market equities, and big financial institutions too early.
It is against this backdrop that African economies looks particularly stellar. Sub-Saharan Africa is forecast to grow at 5.5 percent for 2012, according to recent estimates by the IMF, nearly 4 per cent higher than the anaemic growth projected for advanced economies. Most African countries have no massive leverage problem to work through – if anything even good investment opportunities have been starved of capital.
And in some African countries, South Africa being a pertinent example, banking regulation is a model for the rest of the world. While the political risk premium remains relatively high, over the past decade real efforts have addressed many of the reasons for this – corruption, lack of transparency, and nervousness over property rights.
What’s more, the story extends well beyond the well-hyped resources sector – the majority of the stocks that trade on African exchanges are non-commodities; including telecommunications and consumer goods, and financial services, where even relatively small countries like Zambia has 18 registered foreign and domestic banks.
Investments will continue to benefit from the Africa demographic story, which is decidedly skewed towards the young. Over 60 per cent of Africans are under twenty-four years of age. If well harnessed, such statistics portend a boom in local private demand in decades to come. Changing dietary preferences from grain-based to protein-based foodstuffs, underlie a boom in food producers. Africa is home to many of the 2bn people who have a mobile phone but no bank account. The rapid integration between the financial products and mobile telephony creates a myriad of opportunities to directly serve the consumer, and to cut out the bureaucratic middle men.
Through conversations with policymakers from around Africa, including heads of state, the perspective is clear. They see what happened in the rest of the world as a failure of governments not a failure of capitalism. In its true form, capitalism is thriving in Africa, dragging millions out of poverty and into the shops. It is a happy and poignant irony that the isolated continent will succeed by following the rules of the market that the rest of the world forgot.
Dambisa Moyo is the author of Dead Aid, How the West Was Lost and the forthcoming book Winner Take All
Washington, February 7, 2012 – With African leaders now calling for a continental free trade area by 2017 to boost trade within the continent, a new World Bank report shows how African countries are losing out on billions of dollars in potential trade earnings every year because of high trade barriers with neighboring countries, and that it is easier for Africa to trade with the rest of the world than with itself.
According to the new report―De-Fragmenting Africa: Deepening Regional Trade Integration
in Goods and Services―regional fragmentation could become even more costly for the continent with new World Bank forecasts suggesting that economic slowdown in the Eurozone could shave Africa’s growth by up to 1.3 percentage points this year. As the authors write, “while uncertainty surrounds the global economy and stagnation is likely to continue in traditional markets in Europe and North America, enormous opportunities for cross-border trade within Africa in food products, basic manufactures and services remain unexploited.”
The reports says this situation deprives the continent of new sources of economic growth, new jobs, and sharply falling poverty, factors which accompanied significant trade integration in East Asia and other regions. The cross-border production networks that have spurred economic dynamism in other regions, especially East Asia, have yet to materialize in Africa.
“It is clear that Africa is not reaching its potential for regional trade, despite the fact that its benefits are enormous—they create larger markets, help countries diversify their economies, reduce costs, improve productivity and help reduce poverty.” says Obiageli "Oby" Ezekwesili, The World Bank’s Vice President for Africa, and a former Nigerian Minister of Extractive Industries. “Yet trade and non-trade barriers remain significant and fall most heavily and disproportionately on poor traders, most of whom are women. African leaders must now back aspiration with action and work together to align the policies, institutions and investments needed to unblock these barriers and to create a dynamic regional market on a scale worthy of Africa’s one billion people and its roughly $2 trillion economy."
In a special World Bank video at: http://vimeo.com/32976732 produced for the new report, women traders on the border with the Democratic Republic of Congo (DRC) and neighboring countries in the Great Lakes region describe how they routinely encounter violence, threats, demands for bribes, and sexual harassment, at the hands of the large numbers of customs and other government officials at the border. As one egg and sugar trader from Goma says on the video: “I buy my eggs in Rwanda; as soon as I cross to Congo I give one egg to every official who asks me. Some days I give away more than 30 eggs!”
Barriers blunt trade in goods as well as services
The report says that until the onset of the financial crisis, most sub-Saharan African (SSA) countries grew rapidly and often at much higher rates than the world average. Economic growth in these countries was robust and driven by the boom in commodity prices, which led to very high growth in export values, especially for minerals, to new fast-growing markets such as India and China.
While exports have grown strongly over the last decade, and the region’s trade has recovered well from the global crisis, the impact on unemployment and poverty has been disappointing in many countries. Unemployment remains around 24 percent in South Africa. In Tanzania, extreme income-poverty appears to have remained broadly constant at around 35 percent of the population. This shows that export growth has typically been fueled by a small number of mineral and primary products with limited impacts on the wider economy and that formal sectors remain small in many countries.
As a result, the report suggests that Africa will have to diversify its exports from depending solely on precious metals and other commodities and encourage more people to trade goods and professional services in accounting, law, education, healthcare, among others. The region’s large number of young people also calls for significant numbers of new jobs, intensive trade, and growth.
“Imagine the benefits of allowing African doctors, nurses, teacher, engineers and lawyers to practice anywhere in the continent, but responsibility for making this happen lies with countries first and foremost,” says Marcelo Giugale, the World Bank’s Africa Director for Poverty Reduction and Economic Management. “The final prize is clear: helping Africans trade goods and services with each other. Few contributions carry more development power than that.”
Changes are needed in three areas
To escape the current straightjacket of trade fragmentation, the report says that African leaders, need to pursue changes in three key areas.
1. Improving cross-border trade, especially by small poor traders, many of whom are women, by simplifying border procedures, limiting the number of agencies at the border and increasing the professionalism of officials, supporting traders associations, improving the flow of information on market opportunities, and assisting in the spread of new technologies such as cross-border mobile banking that improve access to finance.
2. Removing a range of non-tariff barriers to trade, such as restrictive rules of origin, import and export bans, and onerous and costly import and export licensing procedures
3. Reforming regulations and immigration rules that limit the substantial potential for cross-border trade and investment in services.
In one notable example of trade barriers, report co-editors Paul Brenton and Gozde Isik of the World Bank describe how the South African supermarket chain Shoprite spends US$20,000 a week on import permits to distribute meat, milk, and plant-based goods to its stores in Zambia alone. For all countries it operates in, approximately 100 (single entry) import permits are applied for every week; this can rise up to 300 per week in peak periods. As a result of these and other requirements, there can be up to 1,600 documents accompanying each truck Shoprite sends with a load that crosses a border in the region.
As the co-editors write, “lack of coordination across government ministries and regulatory authorities also causes significant delays, particularly in authorizing trade for new products. Another South African retailer took three years to get permission to export processed beef and pork from South Africa to Zambia.”
How the World Bank supports regional integration
Trade and regional integration are core elements of the Bank’s new Africa strategy, launched in March 2011, to help countries create opportunities for their transformation and sustained growth. The Bank has doubled its investment in regional integration from US$2.1 billion in 2008 to US$4.2 billion in July 2011, and it will rise to $5.7 billion by July 2012.
It is estimated that Islamic sect Boko Haram has killed 500 people in 2011 and 250 in the first weeks of this year in numerous gun and bomb attacks. Although Boko Haram, which is Hausa for “Western education is sin”, has been in operation for a number of years, its attacks have become more sophisticated and deadly in recent times. Several bombings on Christmas Day claimed dozens of lives. On 20 January, the group launched its most bloody attack yet in the northern city of Kano, killing over 180 people.
To add to the troubles, 1 January 2012 marked the more than doubling of the pump price of petrol, from 65 naira per litre to around 140 naira, due to the Nigerian government’s decision to stop subsidising fuel. This led to a nationwide strike and protests that brought economic activities to a halt in many parts of the country. Although the government initially said the price increase was irreversible, it was forced to reach a compromise by restricting the fuel price to 97 naira.
Negative impact on sales and production
These issues are not only keeping politicians and security chiefs awake at night, but companies are also experiencing pain.
PZ Cussons – a producer of household and personal care products – this week said in a statement that the turmoil in Nigeria is impacting sales and production. “Two events have affected Nigeria … First, social instability over the Christmas period led to a state of emergency being declared in a number of northern states which has impacted sales in those areas. Second, the removal of the fuel duty subsidy led to civil disruption during January and a week-long national strike which affected production in all factories and sales on a national level, during what is a peak trading period. Whilst the strike has now ended and the fuel subsidies have been partially reintroduced, continued social instability in the north together with ongoing fiscal reforms may create further unrest in the balance of year.”
PZ Cussons is based in the UK with operations in Europe, Africa and Asia. Nigeria is its largest single market.
The company said that performance over the coming months partly depend on “the severity of any further disruption in Nigeria as well as any impact on consumer disposable income from removal of the fuel subsidy”.
The higher fuel cost is likely to lead to a rise in prices, affecting consumers’ disposable incomes, which could hurt the sales of companies like PZ Cussons. Renaissance Capital noted in a recent report that “the impact of the petrol price hikes could go beyond simply pushing up transport costs. It is also expected to affect the cost of producing goods and services. In particular, the prices of food, clothing and footwear, furnishings, as well as housing and utility costs may tick up on the back of the scrapping of the petrol price subsidy. In addition to higher petrol prices, the cost of producing electricity from petrol-powered generators is also expected to rise.”