Ambode and What Foreign Direct Investment is Not -By Sanmi Babatope-Obasa

It is heart warning to have a very ambitious governor who is not only thinking about growing his state’s economy or gross domestic product (GDP), but is also consciously paddling it to independence from allocation from the Niger Delta people’s oil money that Abuja shares every month. It is true that if the right investments are made in the right sectors with unique multipliers, Lagos economy will not only grow, it will also achieve the important objective of full employment of labour and other resources that is desirable at this point in time.

However, the above will only be real if the direct foreign direct investments (FDI) that governor Ambode is seeking is the real FDI that galvanises productive forces into action, especially in collaborating with its principal ally, labour, in the production function to bring about increase in output. The role of FDI is a roll back to the microeconomic theory of production that relates given output to a combination of factors of production, especially labour and physical capital in allocative efficiency use of these inputs in production and the resultant distribution of income to those factors. The emphasis on the distribution of income to factors, especially labour is very important in this discourse and we will return to it later.

On the contrary, if Mr. Ambode seeks and understands FDI as in his enthusiasms about Walmart, it may just be another elitist euphoria about what developing an economy entails. Governor Ambode is obviously seeking FDI from diverse organisations, but the relevance of Walmart’s investment in Lagos is what calls for a close scrutiny of what FDI is and is not.

In the classical production model, a combination of labour and capital working on a given piece of land and meeting allocative efficiency criteria will not only produce a desired output, since some of the factors are assumed to have absorptive capacity and capital is actually a galvanising and deepening factor, output is expected to be on increase while demand for factors also increases in an analysis that has done away with diminishing marginal returns. While this model is fulfilling the growth of GDP or output, it is equally rewarding labour, capital and all the resources owned and used in the economy.

The Walmart’s FDI that governor Ambode clamours must not be about opening Walmart Supermarket alias Super Centre in Lagos, as such FDI will only be keeping jobs and expanding jobs and welfare in China and other economies where articles that are sold in Walmart are produced.

Therefore for FDI to be relevant in the growth calculation of Lagos and Nigerian economies, it must lead to increase in the use of local Lagos resources in generating the desired GDP and reward those local Lagos resources. Put differently, a benefitting FDI must lead to local production of goods and services which employs local resources, especially labour and rewards them for the welfare of the state and country.

The Walmart’s FDI that governor Ambode clamours must not be about opening Walmart Supermarket alias Super Centre in Lagos, as such FDI will only be keeping jobs and expanding jobs and welfare in China and other economies where articles that are sold in Walmart are produced. Such model will only lead to tragedy of more unemployment, net balance of payment loss in the appropriate section in the national accounts, accelerated capital loss and the increase in crime rates, prostitution and epidemics.

Mr. Ambode must necessarily show Lagosians and Nigerians that Walmart’s FDI in a supermarket will be preceded by Walmart’s FDI in production ventures that locally produce goods that will be sold in its supermarket employing local resources in the process. Otherwise such investment will only marginally create low wage jobs as cashiers in the supermarket and warehouse hands in the warehouses where Walmart’s imported goods will be kept to be later transported to the supermarket. Even Nigeria will remain the net loser in the accompanying shipping business in the supply chain, as that sector is already taken over by Indians. The only gainers will be the idiosyncrasies of the Nigerian elites that would have been met in that they finally have Walmart, McDonald’s, KFC, and Burger King in Lagos too, just as they were all over the hills celebrating the debut of Shoprite in Nigeria, even if the coming of Shoprite has only confirmed that Nigeria has joined South African’s satellite countries or colonies like Lesotho, Swaziland, Botswana and others in the Southern African Development Community (SADC).

Really the adventure of Walmart, Shoprite, KFC, McDonald’s etc in Nigeria is only massaging the ego and sense of belonging of the neocolonial Nigerian elites. Having these companies in Nigeria does not add anything to us except they are investing in the production of products they use in their business in Nigeria. We always have supermarkets and restaurants. What we need is to get these supermarkets and restaurants to start producing products they sell or use in their production in Nigeria. That is what will lead to a huge Net National Product (NNP) that Ambode indirectly seeks from the big GDP he fantasies; as big GDP is valueless if its NNP component is not more than 60 percent. To obtain less would simply translate to labouring and using our resources for the rest of the world ex gratia. Maybe that will be good for our religious aptitude, as we are a highly religious nation; we wait for our reward in heaven.

Countries like China and India that have correctly defined FDI and its roles have ensured that it comes into their economies to galvanise other resources into local production for the local and foreign markets. They sought and directed FDI into developing infrastructure that are necessary for the production revolution and local production of goods.

Countries like China and India that have correctly defined FDI and its roles have ensured that it comes into their economies to galvanise other resources into local production for the local and foreign markets. They sought and directed FDI into developing infrastructure that are necessary for the production revolution and local production of goods. They knew they have cheap and huge unemployed labour. They know that capital always seeks cheap labour and that the coming FDI will employ labour and consequently distribute income to it.

Certainly China’s Deng Xiapong and his team strategies of modernising China was not about having Walmart that is known for low quality articles in its North America base in China. Rather they attracted Walmart’s FDI to produce for Walmart products it sells all over the world. The impression one gets so far is Nigerian elites are excited that Walmart supermarket is coming to Nigeria and not how Nigeria can join countries that produce for Walmart, whether it has a supermarket in Nigeria or not.

In Nigeria, people carelessly throw words, concepts and terms around or name-drop to show their importance, knowledge and influence. This habit persists because of ignorance and intellectual laziness on the part of a vast majority of Nigerians. Most of the times we don’t go beyond the surface to uncover the real relevance of the words, ideas, terms and concepts our leaders and ‘men of knowledge’ are peddling. Having bought our leaders’ ideas hook, line and sinker, we don’t bother to do any evaluation to find out whether their intervention really did bring about the desired result. Even our academic responses are very feeble. Perhaps it is due to the derelict state of education in Nigeria. And it is really a sad time for education in Nigeria as we have become a huge source income for foreign universities and economies. We keep and expand employment in foreign colleges and universities. They even pay Nigerian agents to keep on doing the good work of ako tile ta (vandal).

For continuous evaluation of various policy interventions, we need a permanent economic analysis unit as part of the presidency and governor’s office manned by professional economists if it is not already in place in those places. Lagos definitely needs FDI to employ labour, grow and expand modernise its economy and Mr. Ambode’s stride is in the right direction. The examples of other economies that have used FDI correctly to achieve their macroeconomic objectives are there for us to follow in defining what FDI must be and do. We therefore commend understanding the routes and notes of those economies to governor Ambode.

Sanmi Babatope-Obasa writes from Mississauga, Ontario, Canada.