In Nigeria the private sector is dead. We wait for the government to bring electricity, we wait for the government to bring roads, clean water, steel factories, refineries etc.

The Federal government is expected to provide everything needed to bring development to the county, is this right? A system like this is the polar opposite of the way development occured in places like Europe of America, where entreprenuers made the business and industries of the nation... based on the wishes of the market and the laws of supply and demand.

Why is Africa different, why does the free-market not work here?

They already had everything to bring growth.
Roads
Electricity
Health care
Loans.

Beside the informal sector is working, in fact most of the so called jobless people are working in the informal sector aka kind private sector tho. if the private sector wasn't working you would see people dying of hunger in the streets. True talk, however our private sector is yet to reach the level of the small businesses/private sector in the US for obvious reasons.

Hmmm.. good point about the informal sector, but isn't that basically the same thing as the private sector just without paying taxes and being included int he GDP?

@ all does anyone know how the tax system works in Nigeria?

Anyway true talk, West Africa is not doing as bad as people often think.. no one is starving. But i still get the sense that something is not working properly. Nothing big happens without the government for example NEPA and the refineries. Why does the Nigerian government have to solicit foreign companies to provide those services?

According to free-market economics if the service was not good the market would have produced a competitor (on its own) to compete with them, bringing down prices and improving quality.

What is this one saying? Dnt jes talk witout researh, pls!

^ um sir... i've done plenty of research. I'm an accounting/economics major

If you have something to contribute, do so.... but if you want a E-beef we can do that also. mmk?

Dont be fooled with western capitalist ideology,
You shd look at all the bail outs, public fund given to private sector.
all infrastructure in aurope were developed first before been sold for management and economic reasons.
mostly pocket reasons

I feel your point 100%

But when i made this thread: https://www.nairaland.com/1001242/nigeria-must-leave-global-economy

Most people said that western capitalism was the way to go. Now Im asking why its not working

CAMEROONPRIDE: They already had everything to bring growth.
Roads
Electricity
Health care
Loans.

No they didn't, with the exception of maybe loans, the free market produced all of those without or before help from the government.

All these things you mentioned were made by private companies, why cant nigeria do the same?

In economics, everything works on the ceteris paribus principle. In Nigeria, nothing is equal, hence the disorganisation and total disequilibrium in all facets of life.

pleep:

No they didn't, with the exception of maybe loans, the free market produced all of those without or before help from the government.

All these things you mentioned were made by private companies, why cant nigeria do the same?

it was created by their economic think tanks, unfortunately naija no get one.

J12: In economics, everything works on the ceteris paribus principle. In Nigeria, nothing is equal, hence the disorganisation and total disequilibrium in all facets of life.

My friend this is way too vague.

kunlekunle:

it was created by their economic think tanks, unfortunately naija no get one.

Economic think tanks?

I don't think so man... much of the infrastructure was already controlled by the free market before the government started getting heavily involved. For example; in the early 1800's America's roads were terrible, most were unpaved dirt trails that drastically impeded the process of shipping goods and people across the country

The free market recognized this need and the private sector started building the railroad industry. Making a profit and drastically improving the infrastructure of the country.

Damn, my comments got erased , Damn phone.okay I will try to give some explanations about our problems

I think our biggest challenge is access to capital/fund. Look at the interest rate of developed countries US(25 basis point which is .25percent), UK .5 percent, EU/ECB btw .2 and .5, Australia1.25. But look at Nigeria 12percent and this figure is the one btw CBN and banks while btw banks and their customers is like 25 percent. So my dear their is serious lack of fund, that I think is the major issue then when u add wastage of available resources by the political class with no right infrastructures like power which will aid in the growth of the economy.

CAMEROONPRIDE: They already had everything to bring growth.
Roads
Electricity
Health care
Loans.

Beside the informal sector is working, in fact most of the so called jobless people are working in the informal sector aka kind private sector tho. if the private sector wasn't working you would see people dying of hunger in the streets. True talk, however our private sector is yet to reach the level of the small businesses/private sector in the US for obvious reasons.

At least our country is not bad enough for our athletes to abscond during the olympics lol maybe they are tired of enjoying the steady electricity in Cameroon.....................maybe not!
http://www.edition.cnn.com/2012/08/10/world/africa/olympics-cameroon-missing-athletes
http://www.dailymail.co.uk/news/article-2184943/Cameroon-athletes-missing-Olympic-Village-London.html

Go check Atlanta 96 and come back at me.

I'll be very honest and say that this topic is senseless and probably created out of ignorance. If any country in d world has "free market economy" then that country exists in Africa.

a perfectly free market economy = black market. period. There is very little law enforcement and policing in Nigeria so that entrepreneurship is abundant. legal (govt!) barrier is very low.

u must have been reading too much american econ books. free market my azz. do u ever wonder why they have a god called "invisible hand"? how magical. since when did USA start getting into superstitious voodoo economics.

kunlekunle: Dont be fooled with western capitalist ideology,
You shd look at all the bail outs, public fund given to private sector.
all infrastructure in aurope were developed first before been sold for management and economic reasons.
mostly pocket reasons

don't mind the child.

J12: In economics, everything works on the ceteris paribus principle. In Nigeria, nothing is equal, hence the disorganisation and total disequilibrium in all facets of life.

GBAM.
I'm assuing that ceteris paribus principle roughly translates to "all things being equal"
nothing is equal. all their theories are nothing but theories.

is that you in your profile?

lol

Everyone is pretending to be smart on this thread, using big words to say nothing. Look people... if you have nothing to contribute leave. Stop all this "cetreris paribus, economic forums, diseqilibrim, bla bla bla" and make a reasonable post.

I can tell when someone doesn't know what there are talking about...

@99cents the "invisible hand" is a metaphor to describe the way the free-market self regulates.

you dumbass.

kunlekunle: Dont be fooled with western capitalist ideology,
You shd look at all the bail outs, public fund given to private sector.
all infrastructure in aurope were developed first before been sold for management and economic reasons.
mostly pocket reasons

But free market doesn't imply the exclusion of government from the market. Free market is simply price being subject to the forces of supply and demand. Government, as a player in the market, can buy distressed companies at a low price, and sell at a profit. For instance, the US tax payer made profits from shares acquired by the government in the the US Auto industry, AIG, and the Banks. And Government can also make a loss from acquisition i.e UK government bailing Royal Bank of Scotland.

Government spending in infrastructure can also be likened to an investment. When governments build infrastructure, it enables commerce which in turn generates receipts (taxes) for the government. Government pays its workers who are also consumers, and hence contribute to price action, growth, etc.

Someone (@djohn78) already danced around the answer to your question without mentioning the real culprits - Banks! The banks are the reason our private sector is yet to take its position in the scheme of things.
Any country that intends to develop must develop two key areas, her industrial/manufacturing sector and her Agric sector but neither of those sectors can be developed without the Banks playing its role. The banking sector is KEY to the success of the private sector, without a Banking sector with a comfortable pool of funds that can support and encourage "VENTURE CAPITALISM" we are left with a struggling private sector and a whole lot would have to depend on the govt.
There's a lack of "idle fund" in the system and that's what has made "External borrowing" very sensible despite the very ignorant criticisms you get to read daily from Nigerians - it's about the only way to reduce the "crowding out effect" and give the private sector some breathing space. The problem is the govt doesnt seem to be doing enough to "sway" events. The govts hands-off policy seems to be leaving too much in the hands of an unprepared private sector and there's just too much to be done.

wesley80: Someone (@djohn78) already danced around the answer to your question without mentioning the real culprits - Banks! The banks are the reason our private sector is yet to take its position in the scheme of things.
Any country that intends to develop must develop two key areas, her industrial/manufacturing sector and her Agric sector but neither of those sectors can be developed without the Banks playing its role. The banking sector is KEY to the success of the private sector, without a Banking sector with a comfortable pool of funds that can support and encourage "VENTURE CAPITALISM" we are left with a struggling private sector and a whole lot would have to depend on the govt.
There's a lack of "idle fund" in the system and that's what has made "External borrowing" very sensible despite the very ignorant criticisms you get to read daily from Nigerians - it's about the only way to reduce the "crowding out effect" and give the private sector some breathing space. The problem is the govt doesnt seem to be doing enough to "sway" events. The govts hands-off policy seems to be leaving too much in the hands of an unprepared private sector and there's just too much to be done.

this is basically what my comment that got erased was saying.banks/loans are the key of any economical development. Banks are in sur liquidity in Africa, the money is kept in coffers. When in America banks are turning empty the money is most of the time outside etc.long story short there's no money to fund people business the money most starter have come from family members and friends you will agree with no matter what that money can't b enough to startup a regional business talk less about a continental one. Nigeria is even Lucky you already have the market .

In Nigeria, crude oil made both private and public sectors lazy and incompetent. The factors necessary for growth are absent in most African countries. Chinese growth is based on manufacturing, discipline, a huge market, and stable leadership. Indian growth is based on a huge market, education, frugal innovation (India leads the world in reaching poor consumers). Nigeria has just Oil and a huge market. Infrastructure is lacking, education is falling, corruption and cronyism are masters of the day, consumers outside Lagos, Abuja, PH, Kano are mostly ignored, political leadership is shaky, capital is expensive, etc. But having said that, most Nigerians depend on the private sector (the informal sector). They are merely surviving; growth is flat for the reasons mentioned previously. For there to be proper growth, manufacturing must be embraced, infrastructure must be developed (Angola's explosive growth is due to infrastructure projects in the last decade), corruption must be reduced drastically and education (especially technical/engineering) must improve.

Like 99cent stated, most African economies are the closest you can get to with regards to free markets because their governments hardly regulate (required to reduce inequality), put up protectionist policies (most African countries are dumping grounds), provide welfare or subsidies (well Nigeria provides fuel subsidy). To put it bluntly, African governments hardly interfere and are mostly invisible except that are corrupt and incompetent. But corruption and incompetence affects supply and demand. Having said that, African governments distort the free market by encouraging monopolies/duopolies through companies held by friends and family.

wesley80: Someone (@djohn78) already danced around the answer to your question without mentioning the real culprits - Banks! The banks are the reason our private sector is yet to take its position in the scheme of things.
Any country that intends to develop must develop two key areas, her industrial/manufacturing sector and her Agric sector but neither of those sectors can be developed without the Banks playing its role. The banking sector is KEY to the success of the private sector, without a Banking sector with a comfortable pool of funds that can support and encourage "VENTURE CAPITALISM" we are left with a struggling private sector and a whole lot would have to depend on the govt.
There's a lack of "idle fund" in the system and that's what has made "External borrowing" very sensible despite the very ignorant criticisms you get to read daily from Nigerians - it's about the only way to reduce the "crowding out effect" and give the private sector some breathing space. The problem is the govt doesnt seem to be doing enough to "sway" events. The govts hands-off policy seems to be leaving too much in the hands of an unprepared private sector and there's just too much to be done.

This, along with what cameroon and djon78 said seems to be the culprit.

I'm assuming you all believe the banks are not playing their role because interests rates are too high?

However, we have to keep in mind that the financial sector is subject to the invisible hand also, so if they are charging high interest rates there must be a reason. I don't see how it is the governments fault, the banks can only get their funds form the ordinary citizens savings..

So why do the banks have such a small "pool of funds" as you said. Is it not the citizens fault?

Does anyone have an idea what role a lack of a digitized monitary system may play into this?

pleep: ^ um sir... i've done plenty of research. I'm an accounting/economics major

If you have something to contribute, do so.... but if you want a E-beef we can do that also. mmk?

Well, you have not done enough research! Govt provides infrastructure for businesses to thrive. In Naija, no power, bad roads, no broadband Internet, insecurity, lack of access to capital, inadequate transport network, poorly educated workforce. So what is it that the government has done? RSA generates 40k MW of electricity for about 40 million people, that is about 1000W per capita while Naija with 160 million generates about 4000 MW, that is 25W per capita. 25W cannot ligt a bulb. It takes 8 hrs to drive from Asaba to Lagos with a distance of about 460km, that is average of 57km/hr whereas posted speed limit on federal highway is 100km. So it would less than 5hrs with good roads from Asaba to Lagos. Naija problem is infrastructure!

cuz foreigners are gettin kidnapped all the damn time

pleep: This, along with what cameroon and djon78 said seems to be the culprit.

I'm assuming you all believe the banks are not playing their role because interests rates are too high?

However, we have to keep in mind that the financial sector is subject to the invisible hand also, so if they are charging high interest rates there must be a reason. I don't see how it is the governments fault, the banks can only get their funds form the ordinary citizens savings..

So why do the banks have such a small "pool of funds" as you said. Is it not the citizens fault?

Does anyone have an idea what role a lack of a digitized monitary system may play into this?

Banks don't have a small pool of funds; Nigerian banks are heavy with funds. For funding to work efficiently, there must be 1. a way to price risk - with data lacking, how do you price risk for different consumers
2. Corrupt and incompetent Police and judiciary - how do banks recover their funds when laws can't be enforced failrly and justly?
3. Inflation is at double digits - Can you lend funds at 5% when inflation is at 10%?
4. An enabling environment - good infrastructure, enterprising and competent leaders.

Nigerian banks make their funds from other sources and don't need to finance commerce to survive.

Katsumoto: In Nigeria, crude oil made both private and public sectors lazy and incompetent. The factors necessary for growth are absent in most African countries. Chinese growth is based on manufacturing, discipline, a huge market, and stable leadership. Indian growth is based on a huge market, education, frugal innovation (India leads the world in reaching poor consumers). Nigeria has just Oil and a huge market. Infrastructure is lacking, education is falling, corruption and cronyism are masters of the day, consumers outside Lagos, Abuja, PH, Kano are mostly ignored, political leadership is shaky, capital is expensive, etc. But having said that, most Nigerians depend on the private sector (the informal sector). They are merely surviving; growth is flat for the reasons mentioned previously. For there to be proper growth, manufacturing must be embraced, infrastructure must be developed (Angola's explosive growth is due to infrastructure projects in the last decade), corruption must be reduced drastically and education (especially technical/engineering) must improve.

Like 99cent stated, most African economies are the closest you can get to with regards to free markets because their governments hardly regulate (required to reduce inequality), put up protectionist policies (most African countries are dumping grounds), provide welfare or subsidies (well Nigeria provides fuel subsidy). To put it bluntly, African governments hardly interfere and are mostly invisible except that are corrupt and incompetent. But corruption and incompetence affects supply and demand. Having said that, African governments distort the free market by encouraging monopolies/duopolies through companies held by friends and family.

You sound a bit too idyllic IMO. If Nigeria had all those problems you mentioned fixed then I guess we'd be in Utopia!
India and China grew their economies despite nonsensical restrictions and shocking levels of iniquity, and there's nothing to suggest Nigeria can't do same with the impediments you've mentioned, we have all the ingredients for success like both India and China had, what saw them through was the Spirit of enterprise and I believe with a little help we'll replicate their success despite the obvious burden we bare.

Like 99cent stated, most African economies are the closest you can get to with regards to free markets because their governments hardly regulate (required to reduce inequality), put up protectionist policies (most African countries are dumping grounds), provide welfare or subsidies (well Nigeria provides fuel subsidy). To put it bluntly, African governments hardly interfere and are mostly invisible except that are corrupt and incompetent. But corruption and incompetence affects supply and demand. Having said that, African governments distort the free market by encouraging monopolies/duopolies through companies held by friends and family.

Maybe Nigeria is not as free as you think. Atleast not in the sectors vital to development; namely Petrolum, Minerals and Energy.

1. If you own land and want to mine that land for minerals that is called "illegal mining"

2. If you get get raw petroleum and want to refine it in an artisanal factory, like they do in the delta, that is illegal
also

Yet those two sectors are absolutely vital

In addition to this, the areas where the market is free, foreign companies prevent indigenous companies from gathering the capital neccessary to compete with an economy of scale.

wesley80:

You sound a bit too idyllic IMO. If Nigeria had all those problems you mentioned fixed then I guess we'd be in Utopia!
India and China grew their economies despite nonsensical restrictions and shocking levels of iniquity, and there's nothing to suggest Nigeria can't do same with the impediments you've mentioned, we have all the ingredients for success like both India and China had, what saw them through was the Spirit of enterprise and I believe with a little help we'll replicate their success despite the obvious burden we bare.

You miss the point - I listed everything wrong with Nigeria and contrasted with countries that at least have something going for them. The question is, what does Nigeria have going for it?

adconline:

Well, you have not done enough research! Govt provides infrastructure for businesses to thrive. In Naija, no power, bad roads, no broadband Internet, insecurity, lack of access to capital, inadequate transport network, poorly educated workforce. So what is it that the government has done? RSA generates 40k MW of electricity for about 40 million people, that is about 1000W per capita while Naija with 160 million generates about 4000 MW, that is 25W per capita. 25W cannot ligt a bulb. It takes 8 hrs to drive from Asaba to Lagos with a distance of about 460km, that is average of 57km/hr whereas posted speed limit on federal highway is 100km. So it would less than 5hrs with good roads from Asaba to Lagos. Naija problem is infrastructure!

Then why isn't the private sector building railroads?!

Katsumoto:

Banks don't have a small pool of funds; Nigerian banks are heavy with funds. For funding to work efficiently, there must be 1. a way to price risk - with data lacking, how do you price risk for different consumers
2. Corrupt and incompetent Police and judiciary - how do banks recover their funds when laws can't be enforced failrly and justly?
3. Inflation is at double digits - Can you lend funds at 5% when inflation is at 10%?
4. An enabling environment - good infrastructure, enterprising and competent leaders.

Nigerian banks make their funds from other sources and don't need to finance commerce to survive.

I cant argue with this.. i think you are right. However i have a few questions that i hope you can answer

1. Where are the banks making their money if not from loans?

2. Where does the federal gov keep its funds, and are all funds kept in cash?

3. Are all Nigerian citizens required to keep their money (over a certain limit) in the bank?