Nigeria’s economic structure promotes capital flight, says Folarin
Otunba Kunle Folarin, Chairman, PCC
BY FRANCIS EZEM
Chairman of Nigerian Ports Consultative Council PCC, Otunba Kunle Folarin has said that Nigeria’s economy as presently constituted is inadvertently structured to promote huge capital flight in terms of foreign exchange, which can only be addressed through deliberate long term plans that would change the current economic narratives.
Nigeria, biggest exporter of crude oil in West Africa and sixth largest in the world and member of Organisation of Petroleum Exporting Countries OPEC, depends largely on crude exports for her foreign exchange needs in addition to being an import-dependent nation, having to import almost all her raw materials, plants and equipment, medicaments and most other goods to sustain her over 180 million population.
Otunba Folarin, who delivered a lecture entitled: ‘Shipping and International Trade in Nigeria’s Maritime Domain’ at the recent public presentation of the book ‘ABC of Shipping and Ports Operation’ written by Charles Okorefe, observed that international trade was the practice of exporting what a country has a comparative advantage to produce and importing what she has less competitive advantage to produce.
According to him, Nigeria as a the largest sub-regional power in the West and Central African sub-region accounts for over 70 per cent of the political economy of the sub-region, imports over 100, 000 million metric tonnes of non-oil cargo and about two million units of containers annually, which he believes might be higher if the informal trade statistics were added.
He also cited recent statistics, which show that ship traffic into the nation’s seaports is in excess of 5, 307 per annum, insisting that over 85 per cent by value of all the goods and service that entres the country come in by seaports, a development that reinforces the belief that the country contributes significantly to the global trade and must therefore be given a mention in international trade discussions.
He however traced the origin of capital flight in the country to the post-civil war reconstruction programme, when the military government ordered building materials, which arrived the country in 600 ships when the existing port facility then could accommodate only 12 vessels, a development that gave rise to the ‘cement armada’ and a lot of other trade malpractices such as over-declaration and other foreign exchange fraud, which gave rise to capital flight.
“In 1970, following the end of the civil war in Nigeria, the government adopted a policy that focused on the need to reconstruct the infrastructure and superstructures of those areas that are crucial to the restructuring of the commercial and industrial sectors of the country. In order to give effect to the implementation of this policy, massive importation of building materials were placed on order and shipped about 600 vessels, most of which arrived at the same time.
“The cargoes included heavy lift items and millions of metric tonnes of cement. The available port infrastructure could not handle more than 12 vessels at a time in Lagos Ports Complex, Apapa, which was the largest port facility in the country at that time. The result was long waiting days, weeks and even months at the anchorage. The ships incurred running costs. Since the vessels were chartered, the party charter clauses provided penalties for any breach of the provisions of the charter, the consequences of resulted into demurrage, lien on cargo and other actions for default. The Federal Government was exposed to inestimable financial liabilities and losses while the cement armada lasted.
“Lessons were learnt, it was then obvious that physical and infrastructural planning and survey of the port and harbours should be mandatory. The fact is that if we do not prepare for boom, we should be ready for doom, since managing prosperity proved to be more difficult than managing poverty. The attitude then was to get the job done and never mind the cost. Due diligence and cost benefit analysis were postponed to tomorrow, revenue was being generated by all sides of the economy-agricultural produce, crude oil and non-oil mineral resources.
“Banking and insurance businesses and other services were growing, finance was available for commercial and industrial development not growth, the elites’ dress code changed to imported materials, as imports increased, exports decreased, additional seaports were built in Koko, Sapele, Onne and Aladja, the demand for raw materials increased. Besides these, sharp practices began with the importation of sand in containers and empty drums purported to be carrying raw materials and machinery for industry. The arrangement enjoyed five per cent or lower import duty but gives opportunity for foreign exchange allocation in millions of dollars. This was the beginning of capital flight in dollars”, he said.
Folarin regretted that the running a dollar-based economy apart from promoting capital flight, also impacts negatively on the value of the local currency, which compels the Central Bank of Nigeria CBN to spend huge sums of money in dollars to maintain foreign exchange stability, which portends great danger for the economy. He argued that the value of the local currency is significantly influenced by external factors.