PolicyNG – Economy Watch

Nigeria’s Smuggling Problem: A Self-Inflicted Wound?

PolicyNG — Tue, 10 Sep 2013 07:43:32 +0000

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

In 2012, customs sources say that Nigeria lost nearly $200 million in potential tax revenues to rice smuggling. Added to the annual losses from oil and other forms of commodity smuggling, Nigeria may be losing billions each year through its borders. But while the government is spending millions in order to secure its borders, perhaps it should look at its own trade policies, which may have encouraged the rampant smuggling in the first place.

If you follow business and policy in Nigeria you have probably heard this story before:

We are being driven out of business by cheap imported products. If care is not taken the whole local industry will collapse and we will lose thousands of jobs. The government should ban these imports or at least place tariffs to support our local industry and help keep these jobs.

There is another variant of the story centred on kick-starting local industry but the gist is the same. The government usually responds with something along the lines of an outright ban or at least some kind of increase in tariffs on these imported goods. The imported goods become more expensive for a while, local producers get some temporary relief and everyone is happy…until the story changes:

We are being driven out of business by cheap imported products smuggled into the country. If care is not taken the whole local industry will collapse and we will lose thousands of jobs. The government should secure our borders and help keep these jobs.

Now the government would probably like to respond by securing the borders, but that is a bit more difficult.

To understand just how difficult it is we should take a trip to a parallel universe. In this parallel universe the western border of Nigeria is actually 100km east of where we think it is. Turns out in this universe, Ibadan, Badagry, and Abeokuta are all in the Benin Republic. Now in this parallel universe, if the government of Nigeria decided that it wanted to stop some goods from flowing from Ibadan to Ekiti, or from Badagry to Akure, how possible do you think that would be? It may not be impossible but it would still be highly improbable, or at the very least extremely expensive to try.

Now teleport back to our universe where the western border is as we know it. This time the same government is trying to control the flow of goods between Cotonou (in Benin) and Lagos, or between Parakou (in Benin) and Ilorin. How likely is it that the government will successfully be able to restrict trade? Again, it would probably be the same conclusion as before – unlikely and very expensive to try.

[quote]The thing is the border between Nigeria and Benin is really just a line on a map. Trade between these areas has gone on for so long and at such scale that it is near impossible for any agency to control it. The same can also be said for Nigeria’s northern borders with the Niger Republic and the Eastern borders with Cameroon to some extent.[/quote]

It is not surprising then that government actions to manipulate prices of goods in Nigeria, either through tariffs to artificially raise prices of imports or subsidies to artificially lower locally produced goods, have almost always led to smuggling of such goods. For instance, if the government forced the price of a litre of fuel in Lagos to be N65 but the same fuel sold at N150 a litre in Cotonou, you don’t need to have a Harvard MBA to see the opportunities there.

The potential profit by smuggling fuel across the border far outweighs any cost if caught. A Central Bank of Nigeria governor even once claimed that with the kind of margins being earned, he could potentially bribe every customs agent along the way. For regular citizens, who have been trading for centuries with their neighbours, a few laws are unlikely to stop from taking advantage of these opportunities and making lots of money.

Perhaps the biggest example of the perverse nature of bad trade policy is what happened when imported rice was banned in 2006. The price of imported rice in Lagos quadrupled but the price in Cotonou, where there was no ban, remained relatively fixed. No prizes for guessing what happened next.

Benin Republic went from importing half as much rice as Nigeria to importing almost four times the amount in the following quarters. We know where all that rice ended up. Of course Nigeria could have “secured the border” to prevent that from happening. However we already know how that would have ended.

Image source: http://www.fas.usda.gov/gainfiles/200711/146292904.pdf

So what is the point of all this?

[quote]This is the point; implementing any kind of trade or price control policy without cooperating with our neighbours is unwise. The presence of alternative markets will probably render any restrictive trade policy useless. [/quote]

Cooperation with Benin Republic, Niger Republic and Cameroun is essential to any successful trade policy in Nigeria. Cooperation that eliminates cross border price differences and does not create perverse incentives will probably lead to better results.

Also yes I deliberately left out the effects of the famous duty waivers. That is a political story for another day.

By Dr. Nonso Obiliki

Dr. Nonso Obikili is a policy associate at Economic Research Southern Africa and was formerly a Lecturer at the State University of New York at Binghamton. His research interests focus on Economic History, Development and Macroeconomics in Africa. The opinions here do not represent the views of his employer.

Rethinking Trade Policy is republished with permission from PolicyNG, Nigeria’s foremost policy analysis platform. Follow them on twitter: @PolicyNG.

Get more special features in your inbox. Subscribe to our newsletter for alerts and daily updates.

Do you have a strong opinion on this article or on the economy? We want to hear from you! Tell us what you think by commenting below, or contribute your own op-ed piece at [email protected]

The post Nigeria’s Smuggling Problem: A Self-Inflicted Wound? appeared first on Economy Watch.

Deconstructing The Psychology Of The Nigerian Tax Regime

PolicyNG — Wed, 21 Aug 2013 09:42:16 +0000

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

In Nigeria, as well as around the world, a majority of taxpayers view tax not as a contractual contribution to government expense, but as an involuntary tribute to be paid to avoid prosecution and penalty. Merely transcribing taxes from economic textbooks into local law will not work; tax regimes have to be developed from within the society, and targeted at the peculiar needs of the government. Tax policies have to be written by the people – and for the people. Only then would a sense of participation and expectation be truly generated, and the tax system manifestly effective.

Tax, as a subject of discussion, is not one of the easiest topics to read or write on. The natural inclination of the average Nigerian reader is to turn away from this subject with undisguised alacrity. However, this attitude itself is a part of the subject matter under discussion, and on the supposition that you are still reading this, we will commence with a postulation – or more accurately, a generic postulation that, quite simply, we can categorize the attitudinal nature of Nigerians to the existing tax regime under three headings: (i) those who are knowledgeable about taxes but use their knowledge to avoid or evade tax obligations; (ii) those that are ordinarily willing to pay their tax, but have insufficient understanding of the technicalities and the rationale underlying the system; and (iii) those who are enlightened about the tax system and are willing to meet their tax obligations. For the sake of argument, we might add a fourth category—that is, those who are neither knowledgeable about the tax system and are not willing to comply with its requirements; but this category is almost improbable, as a person, logically, cannot avoid a circumstance he is ignorant about.

These categories distinguished, we can then proceed on the premise that the effectiveness of the Nigerian—or in fact, any other—tax regime is predicated on the ability of the tax administration to detect and punish the people categorized under (i); educate and motivate the people in (ii); and justify and reward the people in (iii).

While our theory looks quite straightforward on paper, reality – historical and current – reveals that tax regimes are fraught with peril, and not a few rulers have lost their seats – and their heads – in the process of pursuing an unpopular tax policy.

The Taxpayer On The Street

And how does this work out in Nigeria? Today, a form of organized chaos seems prevalent within the tax system. Organized, because there are rules, agencies, and enforcement procedures. Chaos – because, well, none of it seems to work as efficiently as it should. The citizens in category (ii) above are the majority and, whether as a result of administrative inefficiency or inherent deficiency, the average Nigerian is no more interested in the intricacies of the Nigerian tax regime than he is in the cultural ceremonies of Byzantium.

So who then are the current taxpayers? An analysis of the tax administration would reveal that the revenue that comes into government coffers is mostly from either the automated tax deduction processes, such as the “withholding tax” method and the Pay-As-You-Earn (“PAYE”) method or from individuals and corporate entities too “big” to escape the scrutiny of the taxman. Beyond these two methods of collection, the rest is a topsy-turvy nondescript wasteland of indiscriminate assessments and arbitrary compliance.

And for those who do pay their taxes (whether because the process is automated or because they are within the public glare) the psychology is almost always inclined towards a treatment of the tax as some form of blackmail payoff to the government – an exaction without expectation of social reward, complied with merely to avoid the imposition of punishment and penalty.

And therefore, the current psychology of the majority of taxpaying Nigerians views tax, not as a contractual contribution to government expense, but as a tribute to be paid to avoid prosecution; a modern Danegeld, swiftly ignored in the absence of an effective process of detection, determination of culpability, and enforcement of compliance. Like a recalcitrant child, the Nigerian taxpayer complies with instructions only to avoid punishment, with little or no understanding of the underlying rationale.

But a self-generating and efficient tax system should proceed beyond a one-sided governmental imposition. In fact, in theory, it should involve an equitable social contract between the government and the governed. However, as long as tax is merely seen as a government tribute, then absent a dictatorial administration, citizens would continue to cavort in a swamp of tax ignorance and apathy.

The Efficient Tax System

And what do we mean by a self-generating and efficient tax system? A casual study of any text on the theory of taxation indicates that there are three manifest objectives of a proper tax system: the first, naturally, is to provide a source of income for the government; the second is to ensure social equity by balancing the spread of tax between the rich and the poor, and the third goal is to provide economic incentives or disincentives in specific sectors of the economy.

Within the Nigerian context, two further questions now arise: how committed is the Nigerian tax regime to the achievement of these functions? And how has the aspiration to these functions, if at all, impacted on the attitude of the three categories of taxpayers that we outlined earlier? We can answer the first question, hopefully, by examining the intentions of the Nigerian National Tax Policy (the “Policy”); and the second question by reviewing the practical application of the Policy.

The Nature Of A Tax Policy

A government’s tax policy is, essentially, a government’s taxation manifesto. And just like its political counterpart, a tax policy should, ordinarily, delineate the tax philosophy of the administration and its experiential basis, the obligations of the citizens, the administration’s duties to the citizens and the administrative, economic and social apparatus for concretizing the foregoing. While it is not usually a strict requirement that a government has to have such a policy, it is an advantageous credential that could be useful in promoting the tax regime and boosting public support for the government’s aims. The tax policy is a physical manifestation of the hypothetical social contract between the government and the governed.

But the positive results of a tax policy are not an automatic consequence: the policy should not merely exist qua policy, it should also be a conscious document. And by “conscious”, we mean that the citizenry should be aware of its existence and be involved in its growth. With this in view, to what extent has the Policy achieved both functional relevance and social integration?

Reviewing The Nigerian Tax Policy

Sometime in April 2012, Nigeria’s Federal Government adopted the Policy to, self-professedly, provide a set of guidelines, rules and modus operandi that would regulate Nigeria’s tax system and provide a basis for tax legislation and tax administration in Nigeria. The Policy seems eager to meet these lofty expectations for it includes socio-philosophical topics such as: Overriding Philosophy; Guiding Principles for Stakeholders; Taxation as a Tool for Wealth Creation and Employment; Institutionalizing Tax Culture in Nigeria, among others.

In discussing the Overriding Philosophy, the Policy defines taxes as a “pecuniary burden laid upon individuals or property to support government expenditure” clearly indicating the primacy of the revenue function of the tax regime. However, this seemingly one-sided perspective is ameliorated when, later on, the objectives of the tax system are described to include: “to facilitate economic growth and development”, “to address inequalities in income distribution”, “to correct market failures or imperfections” and other goals of a similarly exalted tone.

The Policy describes the existing taxes (on individuals, companies, transactions and assets) and their components. To avoid confusing the ordinary citizen, the Policy also attempts to distinguish between taxation and other components of government revenue (such as charges paid for the use of goods, services or infrastructure provided by the Government; fees paid for the labour or services provided by a public body, such as a Government entity or agency; fines imposed as punishment for an offence; penalties paid for not meeting a particular; and rates imposed on assets determined via the value of the asset).

Section 3 of the Policy (“Guiding Principles for Stakeholders”) details the administrative apparatus of various stakeholders in the Nigerian tax system. These include the Presidency, Ministry of Finance, the National Economic Council, State and Local Governments, the legislative houses, the Judiciary, tax authorities, professional bodies and tax consultants, and of course, the taxpayers. The Tax Administration section deals with information and intelligence gathering, registration of taxable persons, processing of filings and returns, enforcement of tax laws, audit and investigation tax administration across the three tiers of government.

[quote] In summary, the Policy is an impressive document – physically and contextually – that attempts to capture the philosophy of the administration in about 80 pages—but maybe that also is a problem. While it seems clear that the Policy has covered the basic functions of any self-respecting policy, it seems unclear about its role vis-à-vis the average citizen. Accordingly, it comes across more like a technical manual rather than a social document. The underlying – and fallacious – assumption of the document is that the average taxpayer would somehow be educated merely by the existence of the voluminous document, in the absence of further effort by the administration. [/quote]

There may be little or no statistics for an accurate comparison of tax revenue and the responsible factors for any increment or decrease since the publication of the Policy, however, common sense suggests that little impact has been felt in the socio-economic context either through increased awareness of the tax system or increased discussion on the tax regime. In the absence of this awareness or discussions, the Policy is doomed to a shelf existence, without practical relevance, serving merely as reference text for students, tax consultants – and, of course, taxation article writers.

What The American Experience Teaches

But what remedy do we have for this communal ignorance and apathy? There is an obvious psychological disconnect between the tax aspirations of the government (as defined in the Policy) and the expectant participation of the citizenry. As we stated earlier, even those Nigerians that comply with their tax obligations merely do so as part of an involuntary process. But can this attitude be changed? To answer our question, let us take a quick trip to the American jurisdiction.

America’s love-hate relationship with taxation is hardly news. The country was birthed in a tax induced revolution. The selection of its governments, and the propulsion of its two major political parties, has consistently revolved around tax issues. This situation is, essentially, a concomitant ramification of the peculiar philosophy of the American state. The average American is groomed to value the right to “life, liberty and the pursuit of happiness” and accordingly, any attempt to negate these values has to be resisted with force.

[quote] The historical American therefore sees tax, not as an obligation to the government, but as derogation from the right to own and enjoy money or property. Tax, is therefore a “theft” by government, and not a “duty” of the citizen. The success or otherwise of an administration’s tax regime is therefore dependent on the extent to which the government is able to persuade the citizenry that the tax imposed is necessary for the success of the commonwealth. [/quote]

With that psychology underlying the system, the American tax system has evolved to balance – in general – the rights of the citizens with the requirements of the government, and the modern American, today, is taught to treat his tax “obligations” with seriousness – just for the benefit of the government, but for the benefit of the society. And when an obligated taxpayer fails to perform as required, the punishment meted out is a punishment against the person by all of society, and not just by the government. The psychological balance is fully evolved.

A Homegrown Approach

The lesson to be learnt from the above excursion is evident; the attitude of a citizen to their taxes is a reflection of their attitude to their society and their government. The tax policy of the government, like its political system, has to be grounded in the reality of the social construct. However, the Nigerian tax system is an importation of foreign philosophies into the Nigerian context. Accordingly, a number of expectations on which the tax obligations of Nigerians are premised, fail to take off. This borrowed tax-system is fundamentally elite, more appropriate to a literate and enlightened citizenry with easy access to record-keeping and data management facilities but not to a typical African society, such as we have in Nigeria.

And so because the tax regime itself is not developed from a realistic social philosophy, the Nigerian citizen lacks both governmental expectation and a sense of obligation. It then becomes necessary for the Nigerian government to remodel the Policy through a consultative process that would mirror the realities of Nigerian life.

For example, the income tax can be abolished, except for individuals in paid employment and for defined corporate entities. Also, the federal government tax could be limited to the Petroleum Profits Tax – or a variation of it, while the states are left to pursue Value Added Tax and other taxes whether for individuals or corporate entities. These examples are simply offhand suggestions – and would, of course, require serious discussion for proper implementation. But the point is clear: merely transcribing taxes from economic textbooks and transcribing them – along with the borrowed psychology – local law will not work; the Nigerian tax regime has to be developed from within the society, and targeted at the peculiar needs of the government. A new tax policy has to be written by the people – and for the people. Only then would a sense of participation and expectation be truly generated, and the tax system manifestly effective.

By Ayo Sogunro

Ayo Sogunro is author of the short play, Death in the Dawn. A lawyer by profession, he writes about socio-philosophy at www.ayosogunro.com. Interact with him on Twitter: @ayosogunro.

Deconstructing the psychology of the Nigerian tax regime is republished with permission from PolicyNG, Nigeria’s foremost policy analysis platform. Follow them on twitter: @PolicyNG.

Get more special features in your inbox: Subscribe to our newsletter for alerts and daily updates.

Do you have a strong opinion on this article or on the economy? We want to hear from you! Tell us what you think by commenting below, or contribute your own op-ed piece at [email protected]

The post Deconstructing The Psychology Of The Nigerian Tax Regime appeared first on Economy Watch.

Lessons From Georgia: How Nigeria Can Overcome Its Culture of Corruption

PolicyNG — Wed, 24 Jul 2013 09:31:08 +0000

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

Fifty three years after independence, Nigeria has emerged as a country undermined by the scourge of corruption, so much so that many have come to see it as in invincible institution.

Anti-corruption crusaders believe, and perhaps justifiably so, that corruption is an official language in Nigeria. The frequency of financial scandals – as well as their dimensions – in government circles, baffle even the most sanguine of citizens. Every sector of the economy reeks of stench from the rot that is official sleaze, and as it persists, it manifests itself in acute underdevelopment of the state, decayed infrastructure and avoidable loss of lives.

The current administration, at inception, vowed to wage a war against the societal cancer, just like the administration before it and others before them. From the first military coup in 1966, every successive government had identified corruption as, not just an issue, but the major issue in Nigeria. And with such identification came with – a few times serious, but most often feeble – attempts to curb the monster. Fifty three years after independence, ours has emerged a country overran by official corruption, so much so that many have come to see it as invincible.

But the danger is the scary capacity of corruption to stunt national growth and drive away foreign investors. Most developed economies have less cases of corruption than their underdeveloped – or developing – counterparts. This should inform us of the role transparency in government will play in our desired journey to national development. We must fight corruption; it’s as simple as that.

Interestingly, we don’t necessarily have to reinvent the wheel. We have a template from Georgia, a country which, in 2003, was described by the World Bank as one of the most corrupt countries in the world. In fact, the World Bank noted that in Georgia “the price of obtaining ‘high rent’ positions is well known among public officials and the general public, suggesting that corruption is deeply institutionalized. Higher prices are paid for jobs in agencies and activities that households and enterprises report to be the most corrupt, suggesting that corrupt officials rationally ‘invest’ when buying their public office.”

In a survey, it noted that the percentage of “public officials believed to have purchased their position was close to 50 percent for customs inspectors, approximately 40 percent for tax inspectors and ordinary police officials. More than one-third of the offices of natural resource licensers, judges, investigators and prosecutors were also believed to have been purchased”.

That was such a striking similarity with what currently obtains in Nigeria where people pay bribes to be able to get employed in government ministries and parastatals. But, it also seems, the Georgian case might be worse. The realities were quite scary. In 2012, Johan Engvall, a researcher of the Central Asia-Caucasus Institute & Silk Road Studies Program, did an elaborate work on Georgia’s true transformation under Mikheil Sakaasvilli.

He writes, “The price for a job in the police is said to have been ranging from $2,000 – $20,000, depending on the profitability of the position for sale. Prospective customs officers could pay up to $10,000 to get their jobs, while officials in the civil registry offices invested $5,000-$25,000 to get appointed. In the universities, bribes ranged from $8,000 to $30,000 depending on the prestige of the program. Since the average monthly salary of a street level bureaucrat approximated $35-$40, the money invested somehow had to be retracted unofficially. Structured as a pyramid, revenue obtained from bribery and extortion would pass upward the pyramid. Thus, the system was more organized than what met the eye.”

Such, and many more details, were the stark reality when Mikheil Sakaasvilli got swept into power as president by what was popularly known as the Rose Revolution. He immediately declared a sincere war against corruption, confronting aggressively the criminals of the state. Of note should be that Sakaasvilli was the justice minister of the very corrupt regime he succeeded. Being a minister in that regime also meant that he was familiar with most of the members of the old order, yet he wasn’t afraid to step on toes, to question assumptions of the invincibility of official corruption, to return the country to its citizens. The war he waged was even ruthless at times, but he waged it all the same. Clearly, it seems, somebody can serve a corrupt government and still be worthy for a public office in the future, especially if the person has sufficient love for fatherland to be able to make a detour from the route the government s/he served followed.

President Sakaasvilli sponsored an anti-mafia bill (the Georgian mafia operated like Nigeria’s subsidy cabal) which was passed into law by the legislature in February 2005. The law’s special element was that it allowed for plea bargaining and large-scale confiscation of properties acquired through corrupt and criminal deals. The essence of this was for the state to be saved the exorbitant costs of having to feed and cater for culprits in the nation’s prisons. The law was enforced vigorously, and just within the same year, heads began to roll. High profile figures such as the former president’s son, former minister of energy, that of transport and communication, the chairman of the Chamber of Control, the head of the civil aviation administration, the chief of the state-owned railway company, the president of the football federation, the president of the state-owned gold mining company, and some oligarchs were arrested and prosecuted.

The audacity with which the reforms were implemented struck a unique impression on observers when the country’s President disbanded an entire police force and replaced it with a new, effective one. The state secret service was abolished and its remains merged with the ministry of internal affairs. According to the World Bank report, “a 2010 survey indicates that only 1 percent of Georgia’s population reported having paid a bribe to the road police. Comparable numbers were 30 percent.”

The reforms touched business, the civil service, and even education, and their results were amazing. The World Bank, again, reported that in the sphere of economic policy, “Georgia is the number one economic reformer in the world. According to the World Bank/IFC’s “Ease of Doing Business” rankings for 2010, and much to the delight of Georgian leaders, the country rose from 112th to 12th in the world.”

Worthy of note is that Sakaasvilli’s government rejected World Bank’s economic blueprint, and instead opted to develop his and work with it. But when they saw the outcome of the government’s committed efforts, the same World Bank did an elaborate report on Georgia’s modernization, and then recommended it as a model for export to other corruption-ravaged countries.

[quote] This is where Nigeria comes in. First, the current administration has a need to realize that heavens will not fall if corrupt past and present leaders are prosecuted and given significant jail terms. Secondly, the most important ingredient in the corruption fight is the political will from the topmost leader whom associates and friends would fall back on for intervention when the law enforcement officers begin to do their jobs. [/quote]

A state called Bihar in India fought theirs by sponsoring a legislation that created fast-track courts dedicated to corruption cases. That way, such cases were heard and concluded speedily, and over 66,000 people were jailed for acts that bordered on corruption. Nigeria can commence that immediately. We can create special-purpose courts that’ll give corruption quick attention. And as we do that, the judges must first be examined, and if found guilty of corruption, prosecuted for a crime against the state.

With a clean judiciary comes the confidence in the state to be able to uphold justice and rule of law, two ingredients which presence sends perpetually on exile sleaze and impunity.

By Chinedu Ekeke

On Corruption, Let’s Copy And Paste The Georgian Model is republished with permission from PolicyNG, Nigeria’s foremost policy analysis platform. Follow them on twitter: @PolicyNG.

Get more special features in your inbox: Subscribe to our newsletter for alerts and daily updates.

Do you have a strong opinion on this article or on the economy? We want to hear from you! Tell us what you think by commenting below, or contribute your own op-ed piece at [email protected]

The post Lessons From Georgia: How Nigeria Can Overcome Its Culture of Corruption appeared first on Economy Watch.

Can Foreign Policy Cure Africa’s Dependency Syndrome?

PolicyNG — Fri, 12 Jul 2013 09:56:03 +0000

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

Shrugging off memories of its colonial past, Africa today stands at a precarious crossroad. On one hand, it is being aggressively pursued by international heavyweights such as the United States, China and Japan – all of which promise billions in aid and investment. But on the other hand, will Africa be able fend off the exploitative hawks circling around her?

There are no free meals in International Relations. Any student or International Relations specialist would be familiar with this maxim as it demonstrates the constant interaction between nations-states based on quid pro quo – give and take. With the world becoming smaller as a result of globalization, which has effectively brought nation-states closer together than before, actors within the international system are constantly devising means to remain relevant. Consequently, foreign policy objectives when vigorously pursued could become a veritable means to ensure continual survival, sometimes to the detriment of other nations-states.

For instance, under this globalization model, trade and investment could work to the disadvantage of developing market economies as free trade would ensure the removal of protective measures and tariffs, thereby putting indigenous entrepreneurs at great risk. Therefore, foreign policy objectives (mostly interest motivated) could either correct or add complications to this dog-eat-dog international system.

But the problem with this general idea, as it concerns African countries (like Nigeria), is it restricts the ability of countries to protect her own interest, resulting in a precarious situation where less developed countries end up being dictated by major players in the international system.

This situation is further compounded considering the following features: Firstly, Nigeria – like other African countries since independence – has remained an offshoot of its erstwhile colonial powers and inter-relations are based on the directives of either London or Paris. Secondly, the bi-polar nature of the international system (i.e. Western Bloc versus Eastern Bloc) during the Cold War further militated against African countries pursuing an interest-oriented foreign policy perceived as detrimental to hegemonic influence of either blocs. Finally, in the face of rising emerging economies like China, Brazil, India, Russia, African countries like Nigeria are faced with the challenge of adopting a dynamic foreign policy which could pitch these emerging economies against the ‘old’ ones all to ensure their interest is maintained.

But this appears to be a noble dream mainly because, Nigeria till date (correct me if I am wrong) does not have an ideological framework guiding her foreign policy formulation. What some have called ‘ideologies for foreign policy’ appears to be mere idiosyncrasies of the present administration and as such remains trapped in a flux. Whatever the case may be, Nigeria, like her African counterparts, appears to be a pawn, subject to the demands of a dominant and exploitative international system where different groups or hegemon seems to be benefiting at her expense.

Since the end of the Cold War in the early 90s, the “Flying Geese” pattern of economic development has gained prominence in explaining the raising influence of East Asia in the global economic sphere.

This model, first developed by Japanese scholar Kaname Akamatsu, explains how the accumulation of physical and human capitals caused economies in this region to diversify first to more capital-intensive key industries and then to rationalize them and adopt more efficient production methods. Furthermore, by these countries appreciating and tracing the basic pattern of industrialization – i.e. the successive curve of import, production and export – they have caught up with and even surpassed early industrialized countries in Europe and America. This basic pattern was transmitted in a geese flight mode from Japan (the lead goose) to other follower geese (newly industrializing economies, ASEAN and China).

China has shows us how a developing country can promote its economic growth by specializing in human capital and combining natural resources with adequate export strategies for investments. Under what Xiao Bin, a professor of public affairs at the Sun Yat-Sen University, calls the “Guangdong Model of Transition”, Chinese economic emergence which was based on a government-led market and export-oriented economy since the 1980s and succeeded in opening up China by combining local land advantages and cheap human resources for massive production, and eventually for re-investment into other economies.

Such re-investments poured in Africa, especially through mechanisms like the Forum for China-Africa Cooperation (FOCAC) established in 2002, and has seen Africa as a region reporting significantly higher GDP growth rates, increased GNI and GDP per capita with Chinese goods. In the Nigerian context, the influx of affordable Chinese goods has increased the spending power of the average Nigerian and increased the profit margins for her retailers.

Understanding this model developed by China and other East Asian countries (even USA and Britain developed inward first), arguments have been put forward for every nation-state to first maximize her local resources to her advantage before engaging in this interest-driven competitive international system. Others argue for Nigeria, engaging with East Asian countries remains Nigeria’s best option yet in order to maximize the benefits as opposed to previous arrangements with the likes of USA, Britain and other trade partners.

Currently, Nigeria just like the rest of Africa remains a destination for foreign investment both from East Asia and USA. While President Obama was rolling out the US$7 billion ‘Power Africa’ investment plan, Japan and China are fiercely contesting for new markets in Africa. Recently, even as Japan pledged over US$32 billion USD aid to Africa, Nigeria’s Goodluck Jonathan is swiftly inching closer to a US$3 billion loan from Beijing. Nigeria might not always enjoy this position as policymakers not only in Nigeria, but also in Africa, need to understand the importance of an aggressive foreign policy centered on preserving the interest of Africa within the present scope of economic relations.

The international system is replete with trade and development lessons which Nigeria and Africa can learn from. For instance, ASEAN, clearly understanding the diversity and complexity of its region, designed a Blueprint to “transform ASEAN into a single market and production base, a highly competitive economic region with equitable economic development … fully integrated into the global economy.” With this idea, conceptualized in December 1997, ASEAN member countries have worked in tandem to ensure economic relations between its members are carried out with the goal of “narrowing the development gap and accelerating the place of its member states in the global economy.”

It is therefore little wonder that Indonesia has been able to maintain an average economic growth of 7% since 1997 making her the biggest economy in this region, while others like Singapore, Thailand and Myanmar continue to record impressive economic growth. By assisting sister countries, the ASEAN region has tried to avoid the exploitative tendencies of other economic hegemon in the world, while also ensuring foreign direct investments.

Ultimately, the aim is to break away from dependency syndrome which besets Africa. It seems like just yesterday that Africa was entirely dependent on the West and today it is relying on its relations with Asia to make itself relevant in the global economy.

By Austine Okere

Austine Okere is a Lecturer with the Department of History and International Studies at the Nnamdi Azikiwe University in Nigeria. He has particular interest in International Economic Relations and Sustainable Development.

is republished with permission from PolicyNG, Nigeria’s foremost policy analysis platform. Follow them on twitter: @PolicyNG.

The post Can Foreign Policy Cure Africa’s Dependency Syndrome? appeared first on Economy Watch.