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.
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.
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 double-deep 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 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.
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 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!
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