Borrowing more money will not build Nigeria – Ogbimi

• The Chinese Did Not Borrow To Transform China

In this interview with KINGSLEY JEREMIAH, Francis Ogbimi, a Professor of Technology Management at the Obafemi Awolowo University, Ile-Ife, discussed critical issues of the economy, especially the country’s growing debt profile and the attempt to borrow more.

President Muhammadu Buhari is currently trying to borrow about $30b. What is your view on this?
PRESIDENT Buhari said he wants to build critical infrastructure with the $30b he is trying to borrow. What is the critical infrastructure? Where are the roads, bridges, railways, dams, electricity generating and distributing plants Nigeria has been building during the past 60 years? They do not exist. Why? It is the nature of all types of infrastructure. They experience depreciation. They may be likened to a profusely leaking water tank. No wise individual tries to fill a profusely leaking water tank with water. That explains why all the industrialised and rich nations built relevant infrastructure after they had achieved industrialisation and had developed the capabilities to build, repair and restore the value of depreciated infrastructure. No industrialisation, no reliable infrastructure. Only a foolish nation erects infrastructure the citizens lack the knowledge to build with loans.

On December 11, a newspaper carried a report captioned: ‘Federal Government’s $30b loan request.’ The report showed that Nigeria’s external debt in 2015 was $10.32b and it escalated to $22.08 in the second quarter of this year, which is an increase of 114 per cent. Nigeria’s 2020 capital budget is N2.14trn, while the 2020 debt service provision is N2.45tr. Has Nigeria’s infrastructure improved since 2015 from the unusually high borrowing? Why is Nigeria always looking for money to borrow? When did the Nigerian government exit from a debt trap? How long does it take to build a road in Nigeria, judging from the East-West and Ibadan-Lagos highway experiences? Why does a government that has less than four years want to borrow $30bn for infrastructure? What did Nigerians learn from the Obasanjo debt-deal? Nothing!

Nigeria’s development process has always been plagued by the claim that once capital is invested, growth ensues. The truth, however, is that no amount of money builds a nation. Capital investment only erects Depreciating Assets (DAs) and produces growth without development. Nigeria’s frequent borrowing and rapid accumulation of debt are signs of mismanagement of national resources by those in government and high-level corruption associated with erecting infrastructure.

Borrowing is no solution to Nigeria’s problems. Nigeria borrows based on the frivolous claim associated with capital investment. The claim that capital investment promotes growth is a frivolous fallacy. It has no historical basis and also has no logico-mathematical (scientific) basis. It is a very sad claim for Africa. The sad and frivolous claim is responsible for Nigeria’s pitiable state and all other African nations. Nigeria’s borrowings have never been for development. Greece has come face to face with the disgrace of bankruptcy many times since independence in the early 19th century, due to frivolous borrowing. The nation has defaulted on its external debt five times in the modern era (1826, 1843,1860, 1894 and 1932 before the 2008 financial crisis.

How should Nigeria address its economic problems in the face of growing population and unemployment?
No one solves a problem s/he does not understand. I have always insisted that the problem with Nigeria is a lack of understanding of what the growth and development of a human society entails. All the rich nations in Europe, the United States of America and Asia were poor when they were not industrialised and had agricultural/artisan economies like those of all African nations of today. So, the theory is that industrialisation is the solution to mass unemployment, poverty, poor infrastructure, and a high crime wave, among others. A theory is a great reward in science; it is a guide to action. This theory ought to have been the guide to growth and development for Nigeria since 1914 or 1960 when Nigeria gained political independence. But has it? No.

I was bothered by my observation that, whereas all nations in Europe, the USA and some nations in Asia manufacture scientific products, African nations do not manufacture scientific goods, all through the first half of the 1980s. Consequently, I commenced curiosity-driven research, aimed at understanding the scientific basis of the global distribution of wealth and power late 1986. The research has been blessed abundantly. I consider the results of a special gift-package from God to mankind. I have summarised the highlights of the results in a seven-book series.

It took European nations about 2, 000 years of toiling to achieve industrialisation. It took the rich Asian nations about 3,000 years of toiling to achieve industrialisation. The USA toiled for about 120 years to achieve industrialisation and a world-power status. Why did industrialisation take such varied times to achieve? We can only answer this question, if we understand what industrialisation entails. Research by Western intellectuals like Abramovitz (1956), Solow (1957), Gerschenkron (1966) showed clearly that mere capital investment does not promote sustainable economic growth and industrialisation.

Our research at Obafemi Awolowo University revealed that all capital assets experience depreciation with time and usage; hence all structures are Depreciating Assets (DAs). The investment function of a young nation emphasising capital investment is, therefore, a decreasing one and a nation that invests in structure (capital assets) invest in decreasing functions. All types of infrastructure are assets built today, but would not be there tomorrow. This explains the perpetual bad state of Nigeria’s infrastructure.

On the other hand, the learning person appreciates in intrinsic value with time and learning intensity. In the learning process, the learning intensity determines the rate of progress. It took Europe and Asia such a long time to achieve modern industrialisation because they neglected to learn (education, training, employment, and research) for that long. The USA emphasised education and training quite early. Today, whereas European and Asian nations have universities in hundreds, the USA has over 5, 000 degree-awarding institutions.

The learning person builds up capabilities or competences. This can be represented by a growing equation. Industrialisation is a learning and capability-building process. To model what happens in a nation, we considered what happens, when millions of people are involved in the learning process. Our model revealed that five learning-related variables determine the industrialisation status or economic strength of a nation. They are (Ogbimi, 1996a): Ni, the number of people involved in productive activities or employment level in the nation; Moj, the level of education/training of those involved in productive activities; Lk, the linkages among the knowledge, skills, and sectors in the economy; ri, the learning rate or intensity in the economy, especially that of the workforce; and np, the experience of the workforce and the learning history of the society.

All of these relevant variables are related to the learning-man, and they are directly related to the nation’s economic strength. This means that the more the number of people involved in productive activities, the higher the average education/training of the workforce. The more the linkages among the knowledge and skills possessed by the workforce and society or by the sectors of the economy, the higher the learning rate in the society and among its workforce, the healthier the economy becomes.

Our research on the variables that determine the state of an economy showed that employment, productivity and inflation levels determine the health or status of an economy. However, the employment level (in quantity and quality) determines the state of productivity and inflation. Our theory revealed that the higher the level of employment (in quantity and quality) in an economy, the higher the productivity and the lower the inflation.

Adam Smith is regarded as the father of economics. He observed that when one man made the straight pin with one head flat and the other rounded, he made 20 pins a day. He conducted an experiment to demonstrate the practice of our employment/productivity/inflation theory that the more the people who work together, the higher is the productivity (output/input). He observed that there were 18 operations in making the straight pin. He chose 10 men to produce straight pins. They produced 48,000 (forty-eight thousand) pins in a day. Productivity went up by 240 (48000/20) times.

In my experience as a young person in the village, I observed that farmers used to apply the principle that productivity increases with the number of people who work together. Five of them go to each person’s farm to work together in turn. They realised that five of them working together certainly do much more than one man would do going to his farm, alone, for five days or times. We call it Ufo in Isoko language. Many Nigerians know it. It is a type of farming cooperative.

After wallowing in poverty under kings for about 3,000 years, China was lucky to have Mao Zedung as its leader in 1949. He mobilised the entire nation for learning (education, training, employment and research) and industrialisation. He divided the nation into communes. Every able-bodied Chinese was involved in the national learning mobilisation. The Chinese economy began to grow by 17 per cent immediately. Unemployment, poverty and a high crime wave, among others, disappeared immediately from China. That was how China, after being called a sleeping giant for about 3,000 years accelerated its transformation to become a world power.

Nigeria should mobilise the entire population for learning (education, training, employment, and research) and industrialisation. My suggestion relies on our theory of employment, our village cooperative experience, Adam Smith’s demonstration, and the Chinese experience. The transformation programme would be self-sustaining. We do not have to borrow. The Chinese did not borrow to transform China speedily. Population growth is the scapegoat for Malthusian intelligentsia/intellectuals in stagnating economies.