INTRODUCTION:
The
current global reality reflects a world that is becoming more inter-dependent
and integrated into a common expression referred to as globalization. It is an
immense global machinery with different components. The most important of which
are the political, economic, technological and cultural. Economic globalization
is technology driven. Technological development determines the dynamism of the
market place. The constant interaction taking place in the market against the
backdrop of political and cultural aspects of globalization, where goods and
services, technological developments and capitalist with keen competitive
instinct freely interact, to create a massive global phenomena—
globalization.
It is imperative that for an economy to
survive, it must strategically plug into this massive economic tide and not be
swept off. With liberalization sweeping across the globe, an economy must
create structures that will enable it flow in the positive direction of the
general current so that it can operate effectively and enjoy long-term
sustainable growth and development. Two major events in the 1980s have
precipitated the prevailing negative economic condition in Nigeria: The
spending spree of the civilian Administration and the subsequent unguarded
Structural Adjustment Program (SAP) introduced in 1986.
To understand the domestic environment it is
first necessary to have a global mindset. The global environment is the
backdrop from which any economic environment gets its bearing for a focused
domestic economic activity.
Given this background, investment opportunities warrant looking at the entire
global landscape vis-à-vis the local environment. The NEEDS (National Economic
Empowerment and Development Strategy) is the strategy initiated by successive
administrations administration as a panacea for the economic predicament. It is
targeted to meet the MDGs (Millennium Development Goals), which is a larger
global strategy to address the grave human concerns of the time,
specifically
in the broad areas of peace, security and development.
Against the backdrop of the NEEDS reform agenda and given specific economic
trends and indicators, we can derive some useful pointers to help us identify
opportunities, make informed decisions, while minimizing any risks involved.
THE CONCEPT OF GLOBALIZATION
The greatest driving economic force on the
earth is the capitalist instinct for profit. It is this force that drives the
entire market system. For organizations to remain competitive they must evolve
newer technologies to increase their profits and keep them a step ahead of the
game. Increasing liberalization on both the political and economic front has
meant that every economy must braise itself to operate according to established
international rules where only the fittest survive. Globalization has therefore
created both challenges and opportunities particularly for developing countries
like Nigeria. Many developing nations are restructuring and moving gradually
towards western models of free, egalitarian market oriented economies: the main
executors of this are the private sector, leaving government to concentrate
mainly in providing a conducive environment for efficient economic activity.
CURRENT ECONOMIC
ENVIRONMENT AND THE NEW SCIOECONOMIC AGENDA
The current global trends have necessitated a
move towards more liberalized economic systems. In Nigeria the move was a false
start that eventually failed. Rather than a cautious and strategic approach to
SAP, the wholesale option introduced, wrecked havoc on the entire system. It
has had a lasting impact, which is still being felt today. Unemployment stands
high,. The Gross Domestic Product (GDP) averages only 3.6% below the acceptable
level of 5% necessary to prevent worsening poverty. It is also far below the
recommended 7% rate to meet the MGD targets by 2015. The urbanization rate is
at an alarming 5.39%: the highest in the developing countries.
The NEEDS reforms programs ,was directed to specifically deal with these dismal
economic trends. It was aimed more specifically at poverty reduction, wealth
creation, employment generation and value re-orientation.
This action by government has in principle altered the socio-economic
configuration by injecting a new sense of purpose and direction into the system,
while providing the needed impetus for the revival, of the economy if
implemented according to the original thinking, bearing in mind the principle of
social responsibility with a moral face.
CURRENT ECONOMIC INDICATORS AND TRENDS
It is virtually impossible to paint a
comprehensive picture of the country’s economic environment, however, certain
key indicators would help throw some light on the current economic landscape.
ExchangeRate —
Exchange
rates express the purchasing power of the country’s money in another country’s
market place. It is only meaningful when compared with other currencies. Each
country operates its own set of rules. The government has in the past employed
different exchange regulations until it was eventually liberalized. When dealing
with import export type businesses the rate of exchange will determine the
value to be derived.
Interest Rate:—It
indicates what it will cost to borrow money. The interest rate at any
particular time is determined by the level of money supply. Like in any
competitive environment an oversupply of money will force down interest rates
to induce people to borrow. When money is tight as is the current situation in
the country, there is pressure to push up interest rate as the competition for
scarce funds becomes intense. Interest rates are important in determining the
rate of savings and investments in an economy.
Government introduced guided deregulation in the late 1990s, which was later pegged at 19%-20%, effective December 2004. Certain interest groups believe at 20% it is artificially low and will not induce banks to be willing to lend. Instead as is the case today banks are having to engage in other methods of income generation such as trading activities. Successive Nigerian governments have made concerted efforts to curbing infrastructural and public sector spending.
Many people now believe that beyond welfare
schemes like Education, Health and Environmental cleanliness, government should
not overstretch the scarce resources, provide the enabling environment for the
private sector to take up the challenge of providing public services in a
commercial arrangement that ensures reasonable returns to investors. The
privatization program in Nigeria began
in 1988. By 1993, 110 enterprises were involved. At the end of the exercise 81
enterprises were privatized. The current phase of the exercise involves several
enterprises covering various sectors of the economy. There has been mixed
results. While the government raked in several billion naira, the program has
been lopsided in favor of certain interest groups.
Micro Small and Medium Enterprises (MSME) -
MSME
is the government’s new posture on economic growth and development in Nigeria.
The Federal Government in collaboration with the World Bank have fashioned out
a new proposal focusing on an empowered MSME project
to facilitate employment, National Growth and Poverty Reduction. The financial
backing for this project is the SMIETS (Small and Medium Industries Equity
Investment Scheme) Fund, which is the contribution of the Banker’s committee.
Banking
Reforms;The
Banking Reform was a very important aspect of the NEEDS agenda. It
is all about repositioning the banking sector to benefit from internationally
competitive banks that can mobilize international capital to develop Nigeria.
Bank apathy towards smaller savers and an abandonment of traditional banking
traditions for more expedient trading activities like foreign exchange trading,
treasury bills and direct importation of goods using fake companies.
The banking reforms are aimed at making it
consistent with changes taking place globally. The sole aim is to make this
sector strong, reliable and competitive. In human terms it should address the
needs of the customer/investor for a win-win scenario for all stakeholders.
INDUSTRIAL INVESTMENT
With restrictions on imported items into the
country, investment in production is becoming very attractive. This window of
opportunity, however, implies that we must be able to produce goods that are
competitive internationally.
Incoherent government policies, low levels of skills and education as
well as low levels of technology are some of the problems militating
against a vibrant industrial sector.
A Japanese model of production has been
adopted in some developing
countries with remarkable results. The Kawaski production model is a three-step
strategy:
1.
Aims to satisfying the needs of a
targeted market segment.
2.
Re-organizing the structure of the
company.
3.
3. Developing schemes that
ensures both incentives and participation in the decision-making process by
production line workers.
The results have been increases in production efficiencies, a significant cut
in costs and a corresponding increase in the value of products produced.
Table
1.0
RESULTS OF APPLYING KPS TO CARTSCO (ZIMBABWE)
BEFORE KPS AFTER KPS
Time taken to pass through factory 8 days 80
minutes
Distance traveled by W-I-P 3.2 km 100metres
Labour input per item 23hs l3hrs
Overall reduction in cost afterKPS 35%
(Statistics, Kap!insky 1994)
*
KPS:
Kawasaki Production System
*
W-I-P:
Work In Process
The government program on cassava has opened
another window of opportunity for commodities trade. The export potential of
cassava has made the business of cassava very attractive to all stakeholders.
The prospect of earning money in hard currency has been dampened by the
inherent structural problems of the financial sector. However, specialized
banks like NEXIM and AFREXIM banks are developing products which will
considerably mitigate some of these difficulties.
The dismantling of the commodity boards has led to the emergence of new,
smaller independent exporters who lack the tract record demanded by banks With
such high performance risks banks are unwilling to lend.
The warehouse receipt has emerged as a
veritable product of international repute. The possession of this paper considerably
strengthens the position of the exporter as a negotiable instrument. He can
thus access short-term domestic borrowings for working capital as well as
access international financing. The warehouse receipt performs the function of
considerably lowering the performance risk of the exporter.
CONCLUSION:
Understanding
the current economic environment will require a human resource input to make it
into a tangible reality. The concept of Human Resource Development incorporates
the elements of Education, Training and Development of the individual. Total
quality management (TQM) is a concept that balances the need to satisfy the
customer as well as address the welfare of the employees.
A socially responsible employer or
organizations will consider income redistribution amongst members of an
organization to create a sense of belonging: Thereby purchasing the commitment
and loyalty of such members in creating and maximizing value for all.
In essence the show of genuine love and
acceptance by the employer will also create love and acceptance towards the
employer. Inevitably, high value, high productivity and harmony will be the
natural outcome of such activities.
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