I am moved by the recent policy statement of the new Imo State governor on his intention to bring-in a foreign Chinese automobile manufacturing company to begin operations in Imo state and South-East Nigeria. My standpoint is that this policy may be detrimental to the developmental envisions of South-East Nigeria, Nigeria and Africa in general.
Sustaining one’s vital indigenous macroeconomic enablers is what I mean and doing so selfishly at least for the start is the macroeconomic strategy. That’s the macroeconomic logic behind the Trump economic plan that is creating the 45-year record, massive jobs wonder in the US!
The US cannot continue allowing Chinese companies control their steel manufacturing industry especially when the US has a more advanced steel manufacturing base which was left unattended to. And you will agree with me that steel is a common denominator for supporting key industries like the aviation, building and construction, electrical power generation, automobile and other form of transportation and the logistics sector, military and weapons industries, etc.
If for instance the US allows China control their Steel industry, more capital that would have been retained in the US would go to China and when considering that China is a major geopolitical contender, it would not be good foreign policy to allow them control this vital part of the economy and become financially stronger, more stronger than the US to control the US Dollar (if I hold your money I control you).
The US and its current monopoly-style economic policy is a vivid case that I sight for explaining my case for South-East Nigeria’s developmental plan and why it is a bad idea to bring in foreign automobile capacities that would definitely stifle indigenous capacity.
You cannot develop your own market economy when you continue to flood your market economy with foreign capacities that can be developed in-house. It is detrimental to your economic wellbeing especially when such foreign capacities posses better infrastructure and means of production than your own. Even when you have such indigenous capacities, it is still dangerous to flood your own with capacities that can intimidate your own.
If the governor of Imo state invites China to build the same automobile manufacturing capacity that Innoson operates, it would stifle the production and market prospects of Innoson and face it out in a short while, besides, Innoson would be unable to compete with the Chinese companies who have better financial wherewithal and technological know-how to support their venture. The “competition margin” will be so unbalanced and this would be detrimental for both Innoson, South-East Nigeria, Nigeria and Africa in general.
Monopoly is bad when it becomes a continual but when re-building dead economies, monopolies can be useful and must be encouraged to raise indigenous capacity to substantial levels before flooding such markets with foreign capacities that can face out one’s indigenous might. This is the economic logic behind banning the importation of foreign rice or most textile goods in countries where they can be produced in-house. If for instance you continue encouraging the importation of foreign rice (or inviting foreign companies that have such capacity) without sustaining your own local capacity for producing rice, with time, your indigenous capacity would fold-up and you’ll loose that comparative advantage of what you could have earned with what you have. Same goes for the textile industry and other key sectors like oil and gas. Nigeria’s refining of our crude oil in foreign refineries and re-importation of this refined crude (petrol) for instance is one of the main reasons why our refineries have continued to be lame for decades.
Some Monopoly at the beginning of “waking-up comatose economies” is healthy. The Americans did it with the Marshall Plan as their main macroeconomic policy for rebuilding Germany after the Second World War. You do not begin feeding a patient who just woke-up from a long coma with various varieties of exotic food, you start with food that can be easily digested and then increase gradually to the exotic ones “as the patient regains strength”. This is the same for handling developing or comatose economies, you do not discourage monopoly when the indigenous capacity of the economy is weak or lacks strength.
Indigenous capacities were encouraged with the Foreign Direct Investment (FDI) input through the Marshall Plan and Germany’s production and export capacity began to gain momentum. This wouldn’t have been possible if the US allowed all types of foreign capacities to do same.
Again some monopoly at the beginning stages of developing economies helps to retain some capital which can be re-used for building more indigenous capacities and meeting capital and non-recurrent expenditure demands. It can also serve as interest-free capital which can be used effectively. When foreigners flood your market and provide even your governor with the singlet, tie and pant he wears, money made would be removed from your economy for the development of distant nations. And you are making them stronger when this happens while you become weaker and dependent on them.
South-East Nigerian governors should encourage the development of local capacities and give them time to form the bulk of products and services that we consume in our region before opening it up for competition with foreign capacities. At this stage, the competition can be within local capacity range (with minimal completion margin) and not trying to outrightly contend with foreign capacity. If indigenous companies thrive, then we retain the capital for our own internal developmental needs without waiting for Abuja. If we want to collaborate with foreign capacities, the arrangement should be one that will have us retain at least 80 % of whatever capital or infrastructural input, that would reflect at least everything 80% indigenous, to enable us have a win-win in whichever way the market turns out or decides to operate or handle outside market forces.