Over the few years, the success of the banking reform and the on-going strides by the Central Bank of Nigeria (CBN) suggests a complementary approach in liberalizing the economy to encourage the needed growth in all sectors. Of course, an economy with a buoyant banking sector without articulated growth on other service sectors could be seen as only an “end to a means”.
The existence of a favourable economy would attract overseas companies to invest, bringing with them international best practices and better skills and technologies. The entry of foreign services providers is not necessarily a negative development and can lead to better services for domestic consumers, improve the performance and competitiveness of domestic service providers, as well as simply attract FDI/foreign capital into the country. In fact, some research suggest a 50% cut in service trade barriers over a five – to ten – year period would create global gains in economic welfare of around $250 billion per annum.
Economic liberalization and good governance are crucial for rapid, sustained economic growth and political progress in Nigeria. Higher growth directly reduces poverty and in tandem with enlightened governance, bolsters increased investment in crucial public goods and services – primary education, public health, rational management of natural resources, infrastructure, peace and order, and access to justice. Most first world countries, in order to remain globally competitive, have pursued the path of economic liberalization: partial or full privatisation of government institutions and assets, greater labour-market flexibility, lower tax rates for businesses, less restriction on both domestic and foreign capital, open markets, etc. Although the benefits of liberalization to an economy may be enormous, it also carries substantial risks that necessitate careful economic management through appropriate regulation by governments.
It had been argued on several instances that foreign providers crowd out domestic providers and instead of leading to investment and the transfer of skills, it allow foreign providers and shareholders to capture the profits for themselves, taking the money out of the country. There could also be risk of financial sector instability resulting from global contagion, risk of brain drain, risk of environmental degradation, etc. These are “accommodative” problems in a sustainable democracy; the risks are observed to be out weighted by the benefits, and this can be complemented with careful regulations and legislative protections that would be needed to allow domestic companies the chance to develop before they are exposed to international competition.
What’s more on liberalizing the economy for growth? The Economic Committee of West African States (ECOWAS) has taken a drive towards adopting a uniform currency for member countries; that would encourage trade within the sub-region could be seen as a measure to induce member states to adopt economic liberalization; in more words, the bottlenecks associated with different currencies that had hampered movement of persons, trade and exchange of technological ideas and expertise would be brought to a near collapse. Knowing that service exports are an important part of many developing countries’ growth strategies, service sector would compete internationally, contributing to GDP growth and generating foreign exchange.
Investment, rather than exports, has been the main factor in expansion of industrial capacity. Changes in economic policies have so far depressed the investment environment in Nigeria; high lending rates, unfavourable treasury bills rate that only usher immense benefits to commercial bank at the detriment of the economy, high cost of operations, lapsed legislations, has deterred plausible investment propels away from the Nigerian economic environment. However, positive liberalization could be reawakened, first by reviewing the treasury bills rate that would benefit the economy rather than the commercial banks, then proactive governing financing of key sectors that would set a benchmark for others to follow. A quick step would be a fortified concentration of the country’s agricultural sector which is seen to contribute 42% of the nation’s GDP but remains largely in primary production, with only 4% of GDP coming from manufacturing.
What’s more? If a country cannot finance its imports because of disruption in the flow of foreign capital and/or borrowing, or because of changes in external demand due to changes in world economic conditions, growth in the GDP will be seriously affected. One succour in this regards is to mount vulnerable effort at influencing the success of one sector on the other. Giving the spectacular performance of Nigeria’s aviation industry in recent years, despite the protracted environmental effects, the success in this sector is in fact an example of “targeting” and “selectivity”; it is also the proof that liberalization can be effective in making an industry competitive when it is near the stage of maturity.
Even though its cogent that liberalisation is as a propel for economic growth, there is the need to plan a model that suites the prevailing economic conditions rather than simply adopting models of other countries as we have witnessed in our struggling Micro-Financing
Salim Salihu Muhammed