Nigeria’s Challenges Rise as Oil Prices Fall

By William Kabagambe

Africa’s economic expansion over the last decade can be attributed to natural resource production and increased manufacturing productivity that has caught the attention of foreign investors. The continent is seen by some as the next economic frontier, as seven of the ten fastest growing economies in the world are located in Africa. However, as commodity prices continue to fall African, oil exporters face serious challenges in the form of depreciating currencies, corruption, and deep cuts in government spending. In many ways, Nigeria is emblematic of this reality. In 2014, Nigeria surpassed South Africa as the largest African economy with a Gross Domestic Product (GDP) of nearly $510 billion. Nigeria, like many African countries, faces serious challenges in the form of plunging oil prices, security threats, corruption, and economic turmoil. As a result, fear and uncertainty now overshadow rapid growth in the once hopeful West African nation.

Nigeria’s economy has enjoyed sustained growth for over a decade, with an annual real GDP increase of seven percent. The attractiveness of doing business in the country has caught the eye of global investors, as Nigeria received nearly $6 billion of foreign direct investment (FDI) in 2013. The non-oil sector is seen as the major driver of this new-found growth, where activity in the manufacturing, agriculture, and service industries are increasing. While Nigeria’s economy has diversified relative to other oil-rich nations such as Venezuela and Gabon, oil production remains a vital sector for the country’s fiscal revenue. In 2013, oil and gas represented 70 percent of Nigeria’s government income revenue as well as 94 percent of the country’s total export revenue.

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Women bargaining for fruits in the ‘Park’ market, Nigeria. As commodity prices fall, increases in food prices become more apparent to the local community. Photo by Andrew Moore via Flickr.

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Putting the Cart Before the Horse: A Look into Afghanistan’s Decision to Join the WTO

By Ryan Lasnick

Having completed the bulk of the accession formalities, Afghanistan is scheduled to become the thirty-fifth least developed country (LDC) member of the World Trade Organization (WTO) and only the sixth LDC to join since the organization’s inception. The country received approval to join the WTO on December 17 and will have until June 30 to ratify the agreement. LDCs often lack the capacity, both economically and governmentally, to make the necessary changes that WTO accession requires, which is why only six have joined in the past 20 years. Beyond this initial difficulty, the economic disadvantages for an LDC joining the WTO have been shown to be significant; yet Afghanistan has decided to accede despite these hazards. This leads to the question: Why has Afghanistan seemingly ignored conventional wisdom and decided to join the WTO?

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Men involved in a money exchange business in a market in Afghanistan. On December 17, 2015 Afghanistan was approved to join the WTO and will have until June 30 to ratify the agreement. Photo by Gerard Carreon for the Asian Development Bank.

Since 2002 the United States has poured over $100 billion into state-building and establishing democratic institutions in Afghanistan, but little has changed. In fact, the influx of money has created new revenue channels for an existing and growing oligopoly. In the absence of a free market with functioning state regulation, the oligopoly and local power holders have determined access to economic resources in many markets across the country. Lack of interest and capacity by political authorities has created weak formal economic institutions, largely unaccommodating economic policies, and regulatory failure. Continue reading

Why Integrating Democracy, Human Rights, and Governance into Development Programming Matters

By Daniel F. Runde

 Integrated development is a process that seeks to link the design, delivery, and evaluation of projects across different sectors. Integrated development is not a new phenomenon but has returned over the last 15 years as part of a search for greater effectiveness and coherence especially in the context of fragility and conflict.  Integrated development was applied in some sectors in the 1970s and 1980s with mixed success. There are important reasons why we should care about integrated development and its relation to democracy, human rights, and governance (DRG):

  • First, the development “zeitgeist” is returning to more integrated approaches, making an impact on the practice and implementation of development, including in the U.S. bilateral context. The new Sustainable Development Goals (all 17 of them and their 169 sub-indicators), which are the “what” of international development, are to be approached in an integrated way.  The Paris/Accra/Busan/Global Partnership process – the “how” of development – presupposes an integrated approach to development.  Finally, the Addis Ababa Financing for Development process, the “how we are going to pay for development process,” refers to “integrated financing frameworks.”

In the U.S. context, the Millennium Challenge Corporation (MCC), Partnership for Growth (PFG) and Country Development Cooperation Strategies (CDCS) reflect U.S. attempts to think about U.S. assistance in an integrated way, and one should expect expansion of these approaches in the future.  Recent changes in how the President’s Emergency Plan for AIDS Relief (PEPFAR) spends money also reflects integrated development concerns. Continue reading

Paper Orphans: The Implications of Shortsighted Humanitarian Assistance

By Amy Chang

Estimates from the Indian Ocean tsunami and Kashmir earthquake demonstrate that the number of orphans created by such large-scale disasters typically stands at two to three percent of death toll. Following the Haiti earthquake, however, the media released stories claiming that more than a million orphans were created by the disaster—a figure that would amount almost four times the total death toll. These exaggerated figures have won international attention, causing U.S. families to flood adoption agencies with requests for inter-country adoptions. While recognizing the good intentions of these compassionate individuals, this outpouring of sympathy has resulted in less than ideal situations: children are forced to separate from their families without being correctly identified as orphaned, either placed in orphanages or flown away to live with new families without undergoing the proper release procedure. There is an increased opportunity for child trafficking after large-scale natural disasters, as organizations find it difficult to discern actors interested in well-intentioned adoptions as opposed to those who are child smugglers.

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Children displaced by the Nepal earthquake play with building blocks in a temporary classroom created at one of the 83 open spaces in the Kathmandu Valley. USAID is building classrooms and child-friendly areas to create community and restore a sense of normalcy to the lives of children and families affected by the disaster. Photo by Kashish Das Shrestha for USAID.

In the post-disaster environment, these orphans’ fate is complicated by the multitude of actors who join relief efforts. In most cases, private firms, local and international NGOs, and individuals can all contribute to multilateral and government aid efforts, despite lack of experience in the adoption process. Security is relaxed to move aid in faster, and coupled with the outpouring of sympathy from donor countries, the process of adoption may be expedited. After the earthquake in Haiti in 2010, the United States employed the use of a “humanitarian parole” process where American families were allowed to expedite Haitian adoptions without checking to confirm that the child does not have existing kin. Family-tracing efforts after the Indian Ocean tsunami have taken months, or even years, to bear fruit; yet merely two weeks after the Haiti earthquake, 33 children were found being illegally taken out of the country by Baptist missionaries. Save the Children and World Vision quickly called for a halt to adoptions after the earthquake, recognizing that sentimental stories of Haitian orphanages struggling after the disaster may have led to premature overseas adoptions – separating these children from their families forever. Continue reading

The Bedrock Institution for Development: Property Rights in Latin America

By Moises Rendon

In 1763 immigrants to the North American colonies had more secure property rights than a native-born Venezuelan does in the twenty-first century. Property rights in the U.S. were “constituted, secure, and out of reach of oppression from the most powerful” even before America’s independence. The concept of property rights runs in the blood of North America, fueling its market system, and helping the country to prosper. While the importance of having well-defined and strongly protected property rights is now widely recognized among policymakers, Latin America lags behind on securing the property of its people.

Property rights are the laws that allow individuals to manage, benefit from, and transfer property. Government enforcement of strong property rights is generally linked with more prosperous and developed countries. As the 2015 International Property Rights Index (IPRI) shows, the five best performing countries have an average GDP per capita of $72,000, whereas the five worst performing countries have an extremely low average of $3,900. The Latin America and the Caribbean region ranks just ahead of Africa, and countries with ongoing-armed conflicts like Nigeria or Chad have better protection of land rights than Argentina, Haiti, and Venezuela. Countries that flourish economically understand the difference between prosperity and poverty: property.

In Latin America, Venezuela and Argentina stand out for the consistent and institutional undermining of property rights. Venezuela, a country that the International Monetary Fund (IMF) identified with inflation of 720 percent this year, is ranked second to last on the protection of property rights in the region. In fact, more than 1,200 private companies were expropriated during Hugo Chavez’ administration from 1999 to 2013. Similarly, Argentina has a poor track record of respecting property rights. In 2012 Repsol, a Spanish oil group, underwent the traumatic experience of seeing its subsidiary unit in Argentina stripped from it by the government of President Cristina Kirchner. The expropriation of private property is the perfect recipe to frighten off investors. With few exceptions like Colombia and Peru, Latin America has seen major capital flows trying to reach other, more investor-friendly regions.

 

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Brazil has a significant slum population and weak property rights, leading to a large informal economy.

 

On the other hand, Peru’s success in reforming and improving its property rights has helped to transform the country into one of the best-performing economies in the region. In the 1980s, the Institute for Liberty and Democracy (ILD) helped to move Peru’s street vendors, transport drivers, poor farmers in remote areas of the Andes, and millions of other participants in Peru’s huge informal sector (or the “extralegal economy”), into the legalized economy. Policy reforms like simplifying administrative processes, improving access to public information, unifying business registries, and democratizing rulemaking have helped make Peru the second highest ranked country in Latin American and the Caribbean in the World Bank’s 2016 Doing Business report. Hernando de Soto, ILD’s founder, affirmed that they have received more than 44 requests from reform-minded governments from all over the world seeking to learn from Peru’s positive experience on protecting property rights. As a matter of fact, this kind of policy reform put Peru ahead of countries including Canada, the UK, and Japan on the Registering Property Indicator of the 2016 Doing Business report. Continue reading