Nigeria and the Asian Tigers

Nigeria and Asian Tigers have many things in common. They were former British colonies. Malaysia became independent in 1957, three years before Nigeria achieved independence in 1960. The economy of both countries was agrarian, prior to the oil boom era in Nigeria. They are republican states operating bi-camera legislature.

Malaysia has built a “knowledge economy” woven around hi-tech and all-round specialization. Technology and telecommunication are already advanced. Mobile phones were common place, since 2001, even among school children.

Malaysia is cited as a good example of well managed capitalism. Every sector of the economy is tightly controlled by government, with indigenous expertise driving them. For more than 20 years, when Dr Muhammad was the Prime Minister, his Finance Ministers had consistently emerged the second most powerful men, a reward for watching the health of the economy.

There are no subsidies in Malaysia. Though government is active in every sector, this is in the form of ensuring compliance with economic policies by both the public and private sectors.

At the turn of the last century, large quantity of palm seedlings was ferried from Nigeria for transplant in Malaysia. Today, the country boasts of millions of flourishing palm plantations all over its land scope. Indeed, Malaysia is the world’s largest producer of palm oil and third largest producer of rubber.

The country has a national car called Proton, manufactured in collaboration with Mitsubishi of Japan. There are other less popular brands.

In 1998, the bubble burst and the country, along its neighbors, plunged into its first recession. It promptly tightened capital controls and rejected prescriptions of the International Monetary Fund (IMF). It reduced the 21 commercial banks, 12 merchant banks and 25 finance houses to only six in each segment. The economy bounced back two years later.

Its Gross Domestic Product (GDP) averaged 12 per cent in over two and half decade resulting in a bullish emerging market and powerful member of the famed Asian Tigers.

To underscore Malaysia’s technological and financial muscles, the nation’s capital, Kuala Lumpur currently houses the world’s tallest office complex, the Petronas Towers, which is 1,482 feet high, all massive steel and glass. It has 88 storeys and was completed in 1996.

Nigeria is a Federal Republic modelled after the United States, with executive power exercised by the President.

The President’s power is checked by the Senate and House of Representatives, which are combined in a bicameral body called the National Assembly. The Senate has 109 seats with three members from each state and one from the Federal Capital Territory, Abuja. The House contains 360 seats and the number of seats per state is determined by population. Members of the National Assembly are elected for a four-year term that is renewable.

Nigeria’s three largest ethnic groups (Hausa, Igbo and Yoruba) have maintained historical preeminence in Nigerian politics; The two major political parties at present are the ruling People’s Democratic Party (PDP) and All Progressive Congress (APC) that emerged from the recent merger of three opposition parties, All Nigeria Peoples’ Party, Action Congress of Nigeria and Congress for Progressive Change.

Nigeria is classified as a mixed economy and an emerging market. It has already reached a lower middle income status, according to the World Bank. It has abundant supply of natural resources. The Nigerian Stock Exchange, which is the second largest in Africa. Nigeria is ranked 30th in the world in terms of GDP (PPP) as of 2012. Nigeria is the United States’ largest trading partner in sub-Saharan Africa and supplies a fifth of its oil (11 per cent of oil imports). It has the seventh-largest trade surplus with the US. of any country worldwide. Nigeria is the 50th-largest export market for US. goods and the 14th-largest exporter of goods to the US. The United States is the country’s largest foreign investor.

Previously, economic development had been hindered by years of military rule, corruption, and mismanagement. The restoration of democracy and subsequent economic reforms has successfully put Nigeria back on track towards achieving its full economic potential. It is now the second largest economy in Africa (following South Africa), and the largest economy in the West Africa Region.

During the oil boom of the 1970s, Nigeria accumulated a significant foreign debt to finance major infrastructural investments. With the fall of oil prices during the 1980s oil glut Nigeria struggled to keep up with its loan payments and eventually defaulted on its principal debt repayments, limiting repayment to the interest portion of the loans. Arrears and penalty interest accumulated on the unpaid principal which increased the size of the debt.

However, after negotiations by the Nigeria authorities, in October 2005, Nigeria and its Paris Club creditors reached an agreement in which Nigeria repurchased its debt at a discount of approximately 60 per cent. It used part of its oil profits to pay the residual 40 per cent, freeing up at least $1.15 billion annually for poverty reduction programmes. Nigeria made history in April 2006 by becoming the first African Country to completely pay off its debt (estimated $30 billion) owed to the Paris Club.

Nigeria is the 11th largest producer of petroleum in the world and the eighth largest exporter, and has the 10th largest proven reserves. Petroleum plays a large role in the Nigerian economy, accounting for 40 per cent of GDP and 80 per cent of government earnings. However, agitation for better resource control in the Niger Delta, its main oil producing region, has led to disruptions in oil production and prevents the country from exporting at 100 per cent capacity. Although it is a producer of oil, the country has no functioning refinery.

Nigeria is one of the poorest oil producing countries, according to the United Nations report citing “the economic policy orientation during the 70s left the country ill prepared for the eventual collapse of oil prices in the first half of the 80s.

“Public investment was concentrated in costly and often inappropriate infrastructure projects with questionable rates of return and sizeable recurrent cost implications while the agricultural sector was largely neglected.”

The country has a highly developed financial services sector, with a mix of local and international banks, asset management companies, brokerage houses, insurance companies and brokers, private equity funds and investment banks.

Nigeria also has a wide array of underexploited mineral, which include natural gas, coal, bauxite, tantalite, gold, tin, iron ore, limestone, niobium, lead and zinc (72). Despite huge deposits of these natural resources, the mining industry in Nigeria is still in its infancy.

Many experts have attributed the wide gap between Malaysia and Nigeria to the poverty of leadership. They contended that, with visionary and incorruptible leadership, it is still possible to reposition the socio-political economy because Nigeria has the potential for growth and development.

Ibrahim Hadejia wrote this piece from NOUN, Gusau Study Centre.