Failure Of Economic Policies In Nigeria,By Gabriel Omonhinmin

It is a known fact, that the very powerful and the rest of society will often disagree about which set of institutions should remain in place and which ones should be changed.
I was therefore not too surprised that with the level of dust raised, when government introduced its latest policies, on the gradual phasing out of used vehicles’ (popularly known as Tokunbo) which has ironically become part of the Nigerian society, the same government recent decision on October 1st to hand over license certificates to 14 private companies that have been allowed to buy chunks of Nigeria’s dismally incompetent state-owned electricity behemoth was another source of acrimony. The Jonathan administration I presume is of the opinion, that if a lot more people had reliable electricity by 2015 that may win him some crucial votes.
A point that must be clear, to the Jonathan’s administration is the fact, that institutional legacies is what shape the modern differences between the present day United States and Nigeria. The contrast between how Bill Gate and Carlos Slim became the two richest men in the world, while Warren Buffett is also a contender, illustrates the forces at work. The rise of Gates and Microsoft is well known, but Gate’s status as the one of the world’s richest person and the founder of one of the most technologically innovative companies did not stop the U.S. Department of Justice from filing civil action against the Microsoft Corporation on May 8, 1998, claiming that Microsoft had abused monopoly power. One Particular issue was the way Microsoft had used its Web browser, Internet Explorer, to its Windows operating system. Before then, the government of the U.S. had been keeping an eye on Gates for quite some time, and as early as 1991, the Federal Trade Commission had launched an inquiry into whether Microsoft was abusing its monopoly on PC, operating system. In November 2001, Microsoft reached a deal with the Justice Department in which it had its wings clipped, even if the penalties were less than demanded.
Now the case of Carlos Slim in Mexico. Slim like most Nigerian billionaires’ did not make his money by innovation. Initially, he excelled in stock market deals, and in buying and revamping unprofitable firms just as Jimoh Ibrahim is doing now. His major coup was the acquisition of Telmex, the Mexican telecommunications monopoly that was privatized by President Carlos Salinas in 1990. The government announced its intention to sell 51 percent of the voting stock (20.4 percent of total stock) in the company in September 1989 and received bids in November 1990. Although Slim did not put in the highest bid, yet a consortium led by his Group, Carso, won the auction. Instead of paying for the shares right away, Slim managed to delay payment, using the dividends of Telmex itself to pay for the stock. What was once a public monopoly now became Slim’s monopoly, and it was hugely profitable.
The economic institutions that made Carlos Slim who he is, is similar to what is obtainable in present day Nigeria. This is quite different from those in the United States. If you are a Nigerian or Mexican entrepreneur, entry barriers will pay a crucial role at every state of your career. People like Oranu Christopher Chidume, Group Managing Director of Krisoral Group of Companies, who have managed to overcome these barriers have long stories to tell. These barriers included expensive licenses you have to obtain, red tape you have to cut through, politicians and incumbents, who will stand in your way, and the difficulty of getting funding from the financial sector often in cahoots with the incumbents you are trying to compete against. These barriers can be either insurmountable, keeping you out of lucrative areas, or your greatest friend, keeping your competitors at bay. The difference between the two scenarios is of course whom you know and whom you can influence-and yes, whom you can bribe. Carlos Slim, a talented, ambitious man from a relatively modest background of Lebanese immigrants, like most rich men in Nigeria, has been a master of obtaining exclusive contracts; he managed to monopolize the lucrative telecommunications market in Mexico, and then to extend his reach to the rest of Latin America.
Unlike in the United States, where Bill Gates perceived excesses were curtailed, and efforts to check Carlos Slim’s Telmex monopoly has not been too successful. This is a clear picture, that the political situation in Mexico is every sense similar to that of Nigeria. An example of the similarity of Nigeria and Mexico, in 1996 Avantel, a long-distance phone provider, petitioned the Mexican Competition Commission to check whether Telmex had a dominate position in the telecommunications market in Mexico. 1n 1997, the commission declared that Telmex had substantial monopoly power with respect to local telephony, national long-distance calls, and international long-distance calls, among other things. But attempts by the regulatory authorities in Mexico to limit these monopolies have come to nothing. One reason is that Slim and Telmex can use what is known as a recurso de amparo, literally an “appeal for protection”. An amparo is in effect a petition to argue that a particular law does not apply to you.
Slim has made his money in the Mexican economy in large part and thanks to his political connections. This is the same position with most of the rich people in Nigeria. When Slim ventured into the United States as one of local media mogul did some years back into the South Africa market, Slim, like his Nigerian businessman failed dismally. The questions that logically follows, is why is Slim and his likes successful in Mexico and most Nigerian businessmen equally successful in Nigeria, but fail to make a head way in developed economy? The answer is simply, policies and infrastructures that exist in the developed economies do not allow too much room for manipulations. In 1999, Slim Grupo Carso bought the computer retailer CompUSA. At the time, CompUSA had given a franchise to a firm called COC Services to sell its merchandise in Mexico. Slim immediately violated this contract with the intention of setting up his own chain of stores, without any competition from COC. But COC sued CompUSA in a Dallas court. There are no amparos in Dallas, so Carlos Slim lost, and was fined $454 million. The lawyer for COC Mark Werner noted afterward that “the message of that verdict in the U.S. is “if people like Slim want to come to the United States for business, they must first learn how to respect the rules of the game”. When Slim was subject to the institutions of the United States, his usual tactics for making money didn’t work. I venture to say, if most of the businessmen who are making a kill in today’s Nigeria are subjected to the institutions of the U.S. like Slim most of them will fail. To further buttress this point, a retiring Justice of the Supreme Court of Nigeria, Justice Shenko Aagoa, recently cried out that politicians, businessmen and traditional rulers belong to the class of persons that bribe, intimidate, harass or influence judges to subvert the course of justice in the country. Any surprise therefore, that with the abundance of talent in the country, most Nigerian youths are not venturing into entrepreneurship? Any serious government, must first put a stop to the so called businessmen antics that is not helping the growth of the economy, what our so called businessmen do daily is to violate our polices and balkanising our infrastructures’, this is not the way to travel if we must grow our economy. Government must as a matter of urgency must begin to put in place structures that will punish people that violate our economic policies and encourage genuine entrepreneurship and inventors. Once this is seen to be done, I trust Nigerians; genuine inventors would join in helping Nigeria’s economy to grow.
Omonhinmin is a Media Consultant based in Lagos.