The rise of en­trepreneurial econ­omy and glob­al­i­sa­tion

There are three con­di­tions that must be met for an en­trepreneurial cap­i­tal­ist econ­omy to rise or pros­per. These are in­no­va­tion, prop­erty rights and cap­i­tal.

Financial Nigeria Magazine - - Contents -

This be­ing the text of the key­note ad­dress by Pro­fes­sor Kings­ley Moghalu, Pres­i­den­tial Can­di­date of the Young Pro­gres­sives Party (YPP) in the 2019 pres­i­den­tial elec­tion and former Deputy Gover­nor, Cen­tral Bank of Nige­ria (CBN), at the Ex­ec­u­tive Mas­ter of Busi­ness Ad­min­is­tra­tion (MBA) Man­age­ment Lec­ture Se­ries of the Obafemi Awolowo Uni­ver­sity, Ile-Ife, on Satur­day, 29th of Septem­ber, 2018.

Pro­fes­sor Moghalu was rep­re­sented by Jide Ak­in­tunde, the of­fi­cial spokesman of the YPP Pres­i­den­tial Can­di­date, and his ‘To Build A Na­tion’ (TBAN) move­ment.

In­tro­duc­tion

Glob­al­i­sa­tion has been fu­elled by en­trepreneur­ship. With­out the rise of the en­trepreneurial econ­omy in Nige­ria, the coun­try – like sev­eral other African coun­tries – can­not par­tic­i­pate mean­ing­fully in glob­al­i­sa­tion.

But, let us shed light on the con­cepts that we are dis­cussing.

Def­i­ni­tion of Con­cepts

By “en­trepreneurial econ­omy,” we re­fer to the sys­tem of eco­nomic pro­duc­tion that is driven, in most part, by pri­vate sec­tor busi­nesses. The en­trepreneurial econ­omy is ide­o­log­i­cally driven. This will be­come clearer, if we pro­vide the full qual­i­fi­ca­tion for this con­cept, which is “en­trepreneurial cap­i­tal­ist econ­omy.”

With this, we can make quick con­tradis­tinc­tions. There is the statist cap­i­tal­ist econ­omy, where the state is the dom­i­nant eco­nomic player, like China; the wel­farist cap­i­tal­ist econ­omy, where wealth is dis­trib­uted more broadly to en­sure the wel­fare of all the cit­i­zens. This ide­ol­ogy is com­monly prac­ticed in the Scan­di­na­vian coun­tries.

We also have the crony cap­i­tal­ist econ­omy, where, as you have it in Rus­sia, eco­nomic pro­duc­tion and wealth is hi­jacked by a few peo­ple in power and their friends and fam­i­lies.

It is a no brainer that most of you here will ac­cept that Nige­ria does not prac­tice the wel­farist cap­i­tal­ist eco­nomic ide­ol­ogy. Not with the high in­equal­ity and the growth in ex­treme poverty among the Nige­rian peo­ple, es­pe­cially in the last three years.

But it will be more dif­fi­cult for us to agree on which ide­ol­ogy Nige­ria prac­tices. We can re­solve our dif­fer­ences of opin­ion by agree­ing that Nige­ria prac­tices a mish­mash of eco­nomic ide­olo­gies. This, in­evitably, means that the Nige­rian eco­nomic sys­tem is not driven by any dom­i­nant ide­ol­ogy. If you like, Nige­ria is a place where eco­nomic ide­olo­gies are democra­tised. But we only de­ceive our­selves.

It is also im­por­tant to clear the air on “glob­al­i­sa­tion.” Given the con­text of this dis­cus­sion, we are surely lim­it­ing the term to “eco­nomic glob­al­i­sa­tion.” This will in­clude glob­al­i­sa­tion of fi­nance, trade, hu­man cap­i­tal and tech­nol­ogy. We will try to avoid the glob­al­i­sa­tion of con­flicts and other neg­a­tive but prac­ti­cal re­al­i­ties of the phe­nom­e­non.

Ac­cord­ing to the In­ter­na­tional Mone­tary Fund (IMF), eco­nomic glob­al­iza­tion is a his­tor­i­cal process, the re­sult of hu­man

in­no­va­tion and tech­no­log­i­cal progress. It refers to the in­creas­ing in­te­gra­tion of economies around the world, par­tic­u­larly through the move­ment of goods, ser­vices, and cap­i­tal across bor­ders. The term some­times also refers to the move­ment of peo­ple (labour) and knowl­edge (tech­nol­ogy) across in­ter­na­tional bor­ders."

Nige­rian Eco­nomic High­lights

Let us ex­am­ine where the pot­pourri of eco­nomic ide­olo­gies prac­ticed in Nige­ria, or the lack of a dom­i­nant ide­ol­ogy, has led the econ­omy. We will fo­cus on those met­rics that can im­pact the coun­try’s ex­ter­nal com­pet­i­tive­ness – or par­tic­i­pa­tion in the sup­ply side of glob­al­i­sa­tion.

In 2016, the Nige­rian econ­omy shrank by 1.58 per­cent. Af­ter the re­ces­sion of that year, the econ­omy grew by a mea­gre 0.82 per­cent in 2017. While GDP growth rose marginally to 1.95% in the first quar­ter of 2018, giv­ing the hope of trac­tion to the re­cov­ery, growth plum­meted to 1.50% in Q2 2018. The CBN warned ear­lier this week that the econ­omy now faces the risk of a dou­bledeep re­ces­sion. This means eco­nomic growth may likely slip into the neg­a­tive ter­ri­tory soon.

Nige­ria is now the “poverty cap­i­tal of the world.” 45% of the pop­u­la­tion now lives in “ex­treme poverty,” which is de­fined as liv­ing on $1.90 (about N581) or less a day. Nige­ria has now over­taken In­dia as the coun­try with the high­est ab­so­lute num­ber of peo­ple liv­ing in ex­treme poverty. Although Nige­ria’s pop­u­la­tion is un­der 200 mil­lion, 87 mil­lion Nige­ri­ans are liv­ing in ex­treme poverty, while In­dia, a coun­try of 1.3 bil­lion peo­ple, has 73 mil­lion peo­ple liv­ing in ex­treme poverty.

Us­ing the Nige­rian 2018 bud­get, Nige­ria’s per capita spend on ed­u­ca­tion is $9 per an­num. The coun­try’s per capita spend on health­care is $5.9. With re­gard to health­care, what the fed­eral gov­ern­ment al­lo­cates for health, per cit­i­zen, can­not pro­vide a full course of proper malaria treat­ment, based on the WHO’s rec­om­mended Artemisinin-based Com­bi­na­tion Ther­apy. And we are all fa­mil­iar with the ap­palling state of pub­lic schools in Nige­ria.

These are grim re­al­i­ties. Nige­rian chil­dren are not be­ing men­tally de­vel­oped and equipped with skills to com­pete in the global arena. Life ex­pectancy is 53.1 years in Nige­ria, which means those of us here who are above 53 years of age are very lucky. I con­grat­u­late us.

How­ever, let me say that life ex­pectancy in Ghana is 61.5 years; and it is 78.7 years in the United States.

Drivers of En­trepreneur­ship and Glob­al­i­sa­tion

There are three con­di­tions that must be met for an en­trepreneurial cap­i­tal­ist econ­omy to rise or pros­per. These are in­no­va­tion, prop­erty rights and cap­i­tal. Con­trary to what most peo­ple strug­gling to run a busi­ness in Nige­ria think, and I think a lot of peo­ple with en­trepreneurial in­cli­na­tions are here to­day, ac­cess to fi­nance is not the ma­jor ob­sta­cle to the suc­cess of their busi­nesses. It is just one of the three key con­di­tions for their suc­cess.

The West­ern economies be­gan to pros­per to­wards the 19th cen­tury, as in­no­va­tions in eco­nomic pro­duc­tion be­gan to take root in those so­ci­eties. With the in­ven­tion of the steam en­gine and elec­tric­ity, fol­lowed by the com­puter chips and later the in­ter­net, the West­ern so­ci­eties be­gan to pros­per and in­crease in pros­per­ity. Lit­tle won­der now that the big­gest com­pa­nies in the world are in­no­va­tive dig­i­tal busi­nesses: Ap­ple, Mi­crosoft, Ama­zon, Al­pha­bet Inc. – the par­ent com­pany of Google – and Face­book.

Prop­erty rights is sig­nif­i­cant for the de­vel­op­ment of the en­trepreneurial econ­omy. For this rea­son, Amer­i­cans across the sharp po­lit­i­cal di­vide in their coun­try, are united on the need to pro­tect Amer­i­can pa­tents from ex­ter­nal theft. The big­gest world economies also hold the largest repos­i­to­ries of the world’s pa­tents.

I will not put the im­por­tance of cap­i­tal bet­ter than by us­ing a pow­er­ful Yoruba dic­tum: “Olowo lo lowo.” It means, lit­er­ary, that the per­son that has money owns the busi­ness of trade.

At an in­di­vid­ual level, I can­not agree more. But as an econ­omy, we should re­mem­ber that cap­i­tal does not stand apart in de­vel­op­ing an en­trepreneurial econ­omy. It must stand with in­no­va­tion and prop­erty rights.

The economies that ful­fil the above con­di­tions prac­ti­cally mo­nop­o­lise the sup­ply side of glob­al­i­sa­tion. The rest, in­clud­ing Nige­ria, are just the play­ground of the global eco­nomic play­ers. Sadly, our coun­try is one of the poor coun­tries who get poorer by mak­ing the rich coun­tries richer.

The value of global trade (in goods and ser­vices) as a per­cent­age of GDP was 30.7% in 1980. It rose to 56.9% in 2010, and rose fur­ther, to 57.8% in 2015.

The Emerg­ing Mar­ket economies – which should have been peers to Nige­ria – have leapfrogged the coun­try on trade. China’s trade, as a per­cent­age of GDP, grew from 12.4% in 1980 to 37.0% in 2016. Malaysia grew from 113.0% to 128.7%; and South Ko­rea from 65.6% to 77.7%.

How­ever, Nige­ria’s trade, as a per­cent­age of GDP, was 48.6% in 1980. It lat­ter peaked at 81.8% in 2001, be­fore de­clin­ing steadily to 20.7% in 2016.

There are two im­por­tant things to note in the pat­tern of the con­tri­bu­tion of trade to Nige­ria’s GDP. One is that the im­pact of its growth has been blunted, in terms of im­prov­ing the eco­nomic well­be­ing of the Nige­rian peo­ple. This is be­cause, oil ac­counts for over 90% of gov­ern­ment’s for­eign ex­change rev­enue and much of it is wasted or stolen by our klep­to­cratic lead­ers and their acolytes.

The se­cond ob­ser­va­tion is that, as the Nige­rian pro­duc­tive eco­nomic base has ex­panded in re­cent years – a fact that came to light with the re­bas­ing of the GDP in 2014 – eco­nomic trans­for­ma­tion that would help Nige­ria par­tic­i­pate more in global trade has yet to hap­pen. Nige­ria has to start ex­port­ing more value-added and in­no­va­tive prod­ucts for the coun­try to be­gin to pros­per from glob­al­i­sa­tion and for­eign trade.

There is no deny­ing the ef­forts that some of our fel­low cit­i­zens are mak­ing. But we are punch­ing be­low our weight, and be­low coun­tries we, po­ten­tially, can do bet­ter than.

Ac­cord­ing to the KOF In­dex of Glob­al­iza­tion, which mea­sures the rate of glob­al­iza­tion in coun­tries around the world

We will pro­tect the prop­erty rights of Nige­ri­ans. This means, you will not have to give up your land in or­der not to be killed by ma­raud­ing herders. And we will also put a stop to cat­tle rustling.

on a scale from 1 to 100, Nige­ria had a score of 30.76 points in 1970, which im­proved to 54.99 points in 2015. Over the same pe­riod, South Africa im­proved from 40.65 to 68.63; China from 22.40 to 61.23; South Ko­rea from 35.45 to 76.67; and In­dia from 30.46 to 56.77.

Part of the chal­lenge I would like to throw at you, the MBA stu­dents of this great uni­ver­sity, is that you have to make di­rect and in­di­rect con­tri­bu­tions to­wards im­prov­ing Nige­ria’s global com­pet­i­tive­ness. The di­rect con­tri­bu­tions would be your hard work, in­no­va­tion and dis­ci­pline in the mar­ket­place. Your in­di­rect con­tri­bu­tion is your re­sponse to the need to bring into the po­lit­i­cal lead­er­ship of our coun­try, some­one who un­der­stands how glob­al­i­sa­tion works and how to make it work for the Nige­rian econ­omy and the Nige­rian peo­ple.

With all sense of mod­esty, I be­lieve I am uniquely qual­i­fied in this re­gard, hav­ing spent 17 years in the United Na­tions – ris­ing from the en­try-level po­si­tion to the high­est ca­reer rank – help­ing bro­ken na­tions to re­build and mo­bil­is­ing funds for de­vel­op­ment. I was also deputy gover­nor of the CBN for five year – from 2009 – 2014. When I was at the apex bank, I led the re­forms that sta­bilised the Nige­rian bank­ing sec­tor af­ter the 2009 fi­nan­cial cri­sis. We en­sured no Nige­rian lost a kobo of his or her de­posits in the banks. We re­turned a num­ber of the banks from sys­temic dis­tress to prof­itabil­ity; and we en­sured credit be­gan to flow into the econ­omy again.

Game Changer

The big so­lu­tion to Nige­ria’s un­der­per­for­mance in glob­al­i­sa­tion is vi­sion­ary and com­pe­tent po­lit­i­cal lead­er­ship. It is not by hav­ing a tech­no­crat serve un­der the po­lit­i­cal au­thor­ity of the vi­sion­less and cor­rupt politi­cians. That won’t de­liver the scale of im­pact that will achieve the eco­nomic and so­ci­etal trans­for­ma­tion of Nige­ria.

Some­one with my ed­u­ca­tional back­ground and pro­fes­sional ex­pe­ri­ence is the new kind of lead­er­ship we need to es­tab­lish the philo­soph­i­cal un­der­pin­ning of Nige­ria’s po­lit­i­cal econ­omy.

I be­lieve Nige­ria should op­er­ate an en­trepreneurial cap­i­tal­ist econ­omy for three rea­sons. One, it is quite suit­able to the in­dus­try of the Nige­rian peo­ple. Two, we don’t have the money that is re­quired to op­er­ate a wel­farist state. And, three, statist con­trol breeds cor­rup­tion. This is one of the con­tra­dic­tions of Pres­i­dent Muham­madu Buhari’s ad­min­is­tra­tion, which main­tains statist con­trol of the econ­omy and has re­fused to sign the Petroleum In­dus­try Gov­er­nance Bill (PIGB) bill into law, while pre­tend­ing to be fight­ing cor­rup­tion. But we know that un­der him, Nige­ria has ranked lower on the Trans­parency In­ter­na­tional’s Cor­rup­tion Per­cep­tion In­dex.

As you may al­ready know, I am run­ning for pres­i­dent in 2019. I am do­ing so to unite our coun­try, wage a de­ci­sive war against cor­rup­tion and un­em­ploy­ment, and res­tore Nige­ria’s re­spect in the world.

I am run­ning for pres­i­dent to fix the chal­lenges of Nige­ria’s en­trepreneurial econ­omy. This means, my gov­ern­ment will run an in­no­va­tion-based econ­omy. Our medium- to long-term plan for this in­cludes re­form to the ed­u­ca­tion cur­ricu­lum across the tiers of the schools, to pri­ori­tise science, tech­nol­ogy and en­trepreneur­ship knowl­edge de­vel­op­ment. In the short term, we will re­move the struc­tural bar­ri­ers to busi­ness pros­per­ity, in­clud­ing en­sur­ing 24/7 power sup­ply to in­dus­trial zones to boost pro­duc­tion and crash prices.

We will pro­tect the prop­erty rights of Nige­ri­ans. This means, you will not have to give up your land in or­der not to be killed by ma­raud­ing herders. And we will also put a stop to cat­tle rustling. We will re­move the bu­reau­cratic bar­ri­ers to reg­is­ter­ing busi­nesses and prop­er­ties, es­pe­cially land ti­tles. If you have land, you will own it, not just for 99 years. Your prop­erty can only be trans­ferred by you, to your stated ben­e­fi­cia­ries.

My ad­min­is­tra­tion will end the dis­crim­i­na­tion against Nige­rian women in the area of prop­erty rights.

With re­gard to cap­i­tal, we will end the prac­tice of cap­i­tal­ism with­out cap­i­tal in Nige­ria. My ad­min­is­tra­tion will, straight­away, in­tro­duce a N1 tril­lion ven­ture cap­i­tal fund. This VC fund will op­er­ate as a pub­lic pri­vate part­ner­ship. It will pro­vide eq­uity fi­nanc­ing, not debt fi­nanc­ing, for in­no­va­tive SMEs. It will have a spe­cial man­date to in­vest in women-owned busi­nesses.

With the high rate of poverty in our coun­try, the econ­omy is the ma­jor sub­ject of the 2019 elec­tion. The Nige­rian econ­omy is now too bad to be left in the hands of the in­com­pe­tent politi­cians.

It is time to put some­one with com­bined ex­pe­ri­ence in na­tion-build­ing and eco­nomic man­age­ment at the helm of Nige­rian af­fairs in 2019.

Thank you very much!

My ad­min­is­tra­tion will end the dis­crim­i­na­tion against Nige­rian women in the area of prop­erty rights.

Kings­ley Moghalu, Pres­i­den­tial Can­di­date of the Young Pro­gres­sives Party in the 2019 pres­i­den­tial elec­tion

Kings­ley Moghalu in­ter­act­ing with women at an event in La­gos

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