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Why Crony Capitalism Worked for S. Korea, and not Nigeria – Moghalu



Kingsley Moghalu

A former Deputy Governor of CBN, Prof. Kingsley Moghalu has blamed the crony capitalist system in Nigeria as a reason for the high rate of poverty in the country.

Moghalu pointed this out while giving his keynote speech at the annual lecture and international leadership symposium of the Centre for Values in Leadership (CVL) programme on Monday, held at the MUSON Centre, Lagos.

The professor pointed out the different forms of capitalism practiced in the world by top economies, which he said are “entrepreneurial capitalism, welfare capitalism, crony capitalism and state capitalism”.

According to him, the Chinese communist government patented the State capitalism, while South Korea and Russia have thrived on crony capitalism. Explaining that every country practices more than one type of capitalism, he said Nigeria operates both entrepreneurial and crony capitalists’ systems at different levels.

The entrepreneurial capitalist’ system, which is recommendable, is operated at the bottom level to lift citizens out of poverty. However, he said, the system practiced in Nigeria is not sustainable enough to encourage wealth creation.

He added that only the elite in Nigeria practice crony capitalism, giving them access to state resources. He advised that if Nigerians were given opportunity to create wealth, and be lifted out of poverty, Nigeria should adopt the method of crony capitalism South Korea used in reshaping its economy.

Moghalu said that South Korea’s conglomerates owned by top families allowed wealth creation by creating supply chains. Over there, citizens at the lowest levels create wealth by supplying different aspects needed and used by the conglomerates.

Speaking on the topic – “Africa’s Post COVID Economic Evolution”, the ex- CBN deputy noted that the case also applies to Africa because the system of capitalism in the continent is not inclusive.

His statement in part read, “Africans say we are capitalist, but what happens is that we’re creating wealth for a few individuals, not for the masses or citizens. There are three things that you must have for a capitalist economy to thrive and create wealth that is inclusive. You must have property rights, innovation and capital.

“The second thing is that government must make conscious choices between the different kinds of capitalism. There is, and state capitalism, which china is using. The patented form of capitalism. The only one in the world. Normally, no country can be purely one of these. They can be mixed. For Nigeria, I will recommend entrepreneurial capitalism, because we are dynamic people. We hustle, but hustling is not good enough. Honestly, we use that and take pride in it, because we do not have a government that can create an enabling environment for wealth creation.

“But what we find in Nigeria is not really an entrepreneurial capitalism. You have that at the bottom of the pyramid, where the groundnut seller or even the tech start-up guys operate. At the top, what we have is crony capitalism, where people determine the state because they have connections and monopolise the economic wealth. A few people enjoying advantages that are huge because they have access to the state. We have crony capitalism in Nigeria in its worse form.

“You have it as a system in South Korea and Russia. But in South Korea, it builds their wealth. Why, because it was consciously designed. The economy of the country runs on supply chains to those big conglomerates owned by families. This is a system we can use here.”

He said, “A president can decide that he wants 20 to 30 Aliko Dangotes in the country. Our economy can be redesigned, that those big guys (billonaires) become the chain of economic wealth creation downwards,” as those at the bottom level who create and supply different and important aspects, become a part of “their big conglomerates”. He added, “It’s a choice, but it takes a certain point of capacity to manage that can kind of choice.”

The CVL symposium held to commemorate the birthday of former Delta State governorship aspirant, Professor Pat Utomi saw in attendance key economic experts, who include, the African Union Commissioner of Economic Development, Trade, Industry and Mining, Ambassador Albert Muchanga, Vice Chairman, Technical Committee of the National Council on Privatisation (TC-NCP), Dr. Ayo Teriba and other dignitaries.

The chairman of the event tagged, “Economic Evolution of Life After COVID-19: Measured to Rebuilding Economies in Africa”, was a former Permanent Secretary and Chief Economic Adviser to the President, Chief Phillip Asiodu.


Source: Investors King

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August 2023 Witnesses Highest Revenue Allocation of the Year – N1.1 Trillion Shared

The driving force behind this boost in revenue can be attributed to foreign exchange gains that have contributed significantly to the government’s income stream.



Revenue - Investors King

The Federation Account Allocation Committee (FAAC) unveiled its allocation of N1.1 trillion to the three tiers of government for the month of August 2023, Investors King reports.

This substantial increase was detailed in a communiqué following the committee’s latest meeting. August allocation was the highest so far with an increase of N133.99 billion when compared to the N966.11 billion shared in July 2023.

The driving force behind this boost in revenue can be attributed to foreign exchange gains that have contributed significantly to the government’s income stream.

Breaking down the N1.1 trillion total distributable revenue, the statement reveals that it consists of distributable statutory revenue amounting to N357.4 billion, distributable Value Added Tax revenue totaling N321.94 billion, Electronic Money Transfer Levy revenue at N14.10 billion, Exchange Difference revenue of N229.57 billion, and an augmentation of NN177.09 billion.

Of this impressive sum, the Federal Government is set to receive N431.25 billion, while the State governments will be allocated N361.19 billion, and the local government Councils will obtain N266.54 billion.

However, it’s essential to note that the total revenue available for August stood at N1.48 trillion, marking a 14% or 0.26 trillion decrease from the preceding month’s figure of N1.74 trillion.

The FAAC communiqué further underscores that various deductions were made, including N58.76 billion for the cost of collection, N254.05 billion for total transfers and refunds, and N71 billion allocated to savings. Additionally, the Excess Crude Account maintained a balance of $473,754.57.

The statement elaborated, “Gross statutory revenue of N891.934 billion was received for the month of August 2023. This was lower than the N1,150.424 billion received in July 2023 by N258.490 billion. The gross revenue available from the Value Added Tax was N345.727 billion. This was higher than the N298.789 billion available in July 2023 by N46.938 billion.”

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Zambia’s Finance Minister Faces Dual Challenge in Upcoming Budget Address



Zambian economy

As Zambia’s Finance Minister, Situmbeko Musokotwane, prepares to present the nation’s budget, he finds himself at a pivotal crossroads.

The second-largest copper producer in Africa is grappling with two pressing concerns: debt sustainability and soaring living costs.

Debt Restructuring Dilemma: Musokotwane’s foremost challenge is finalizing the $6.3 billion debt-restructuring deal with official creditors, led by China and France.

Delays have hindered disbursements from the International Monetary Fund (IMF) and left private creditors in limbo.

To reassure investors, a memorandum of understanding with the official creditor committee is urgently needed.

President Hakainde Hichilema emphasizes the importance of sealing these transactions to signal closure on this tumultuous chapter.

Plummeting Tax Revenue: The key copper-mining industry, which accounts for 70% of Zambia’s export earnings, is in turmoil.

First-half mining company taxes and mineral royalty collections have nosedived, adding to economic woes.

This, in turn, has depreciated the local currency, exacerbating imported inflation, particularly in fuel prices.

Rising Food Inflation: Musokotwane faces mounting political pressure to combat soaring living costs, with annual inflation reaching an 18-month high of 12%. Corn meal prices, a staple in Zambia, have surged by a staggering 67% in the past year.

Neighboring countries’ demand for corn has led to smuggling and further price spikes, raising concerns about food security.

Currency Woes: The kwacha’s value has been a barometer for the nation’s economic health. It depreciated by 16% since June 22, the worst performance among African currencies, reflecting the ongoing debt-restructuring uncertainty.

In his budget address, Musokotwane faces the daunting task of striking a balance between debt management, economic stability, and alleviating the burden on Zambia’s citizens.

The international community will keenly watch to see if his fiscal measures can steer the nation toward a path of recovery and prosperity.

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IMF Urges Sub-Saharan African Nations to Eliminate Tax Exemptions for Fiscal Health



IMF global - Investors King

Sub-Saharan African countries have been advised by the International Monetary Fund (IMF) to tackle their fiscal deficits by focusing on eliminating tax exemptions and bolstering domestic revenue rather than resorting to fiscal expenditure cuts, which could hamper economic growth.

The IMF conveyed this recommendation in a paper titled ‘How to avoid a debt crisis in Sub-Saharan Africa.’

The IMF’s paper emphasizes that Sub-Saharan African nations should reconsider their overreliance on expenditure cuts as a primary means of reducing fiscal deficits. Instead, they should place greater emphasis on revenue-generating measures such as eliminating tax exemptions and modernizing tax filing and payment systems.

According to the IMF, mobilizing domestic revenue is a more growth-friendly approach, particularly in countries with low initial tax levels.

The paper highlights success stories in The Gambia, Rwanda, Senegal, and Uganda, where substantial revenue increases were achieved through a combination of revenue administration and tax policy reforms.

The IMF also pointed out that enhancing the participation of women in the labor force could significantly boost Gross Domestic Product (GDP) in developing countries.

The IMF estimates that raising the rate of female labor force participation by 5.9 percentage points, which aligns with the average reduction in the participation gap observed in the top 5% of countries during 2014-19, could potentially increase GDP by approximately 8% in emerging and developing economies.

In a world grappling with the weakest medium-term growth outlook in over three decades, bridging the gender gap in labor force participation emerges as a vital reform that policymakers can implement to stimulate economic revival.

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