SPEECHES

Consul General Brian L. Browne

"Speed is the Key to Economic Success, Nigeria, Let's Get Rolling"

Institute of Directors Secretariat, Ikoyi, Lagos
April 13, 2006
8:00 a.m.

Good morning. Distinguished directors, chairman of companies, business and government leaders, and ladies and gentlemen, all protocols observed. I am happy to be here today to talk about how groups like IOD can further the cause of economic reform so that Nigeria can take its rightful place in the global economy, a place that is commensurate with Nigeria's size, population, talent pool and resource base.

For now, the gap between where Nigeria is and where it ought to be is too large for comfort. Some genuine progress has been registered but much more work needs to be done. Let's roll up our sleeves and get to it.

Before I enter into the substantive of my talk, permit me to thank the organizers of this seminar and the director general of the institute of directors for inviting me to be with you this morning. Such seminars can be instrumental in advancing the bilateral
economic relationship between the U.S. and Nigeria and furthering Nigeria's integration into the world economy.

Today, I will make mention of a quartet of factors key to Nigeria's economic performance. That quartet is not intended to be comprehensive, but indicative of a certain condition that affects a great swath of the national economy. Consequently, I will like to explicitly identify a unifying theme that links these factors. That theme is the centrality and importance of speed in an individual's, a firm's, and a nation's economic performance.

As the expansion of technology makes every part of the globe more accessible to all other parts and as formerly disparate economies now interface across great distances, time and speed have become more important agents of economic performance than ever before.

If you look at the march of economic progress, particularly the recent events of our current technological/information age, you will see that one of the driving forces has been the reduction of time it takes to complete an economic event - be it the assembly of a product or the completion of a transaction or provision of a service.

In other words, speed has become increasingly essential when it comes to economic performance. Those firms and nations that understand and embrace the spirit of this postulate and maximize the velocity and volume of their economic transactions will profit and prosper. Those that do not grasp this essential truth will lag further and farther behind. Their better days will already be behind them and their future will be one of watching the distance widen between them and those who have been more receptive to this fundamental precept.

Today, I hope to focus on the relation of speed to a few key components of economic growth:
1) Land use and real estate transactions,
2) The rule of law,
3) The need to rationalize tariffs and Import bands, and
4) Of course, transportation infrastructure

Let's briefly discuss the interplay of land and economics. While we like to signal the advance of economic and technological complexity, here we go back to basics. Despite the advances in software and information technology that now bring much of the world to your keyboard; one cannot escape the reality that a business has to have physical location. One can live anywhere but, in the end, has to build his house somewhere.

Thus, before you can have a factory, bank, or housing estate, you need land. In an optimal economic environment, land conveyance should be completely unfettered and unrestricted in order to allow the most dynamic economic actors the opportunity to acquire sufficient realty to effectuate their economic plans. Of course, land transactions cannot be completely unregulated and must occur within the context of a government's duty to protect society from potential impediments such as the undue concentration of power in the hands of a few individuals.

While some regulation is necessary, a society must be careful not to be overbroad in regulating land use. A liberal real estate market is a prerequisite to sustained economic growth. For not only is the real estate important in and of itself, it also is the basis for activity in other sectors such as banking, construction and related industries for instance.

Unfortunately, layers of land use restrictions and regulations disabled real estate from being a true catalyst for growth in Nigeria. Conveyance of a parcel of land in Nigeria takes too long and requires too many administrative approvals from too many governmental entities. What may take a week or two elsewhere will take several months in Nigeria. Additionally, the World Bank in it's "Doing Business in 2005" report, singles out Nigeria for it's expensive property registration cost - more than thirty percent of the value of the property.

Thus, due to the slowness and cost of transactions, not as many occur as should occur. Thus, the requisite amount and right type of land is not in the hands of the most active economic agents. Thus, land is not put to optimal use in terms of modern economics. As a corollary, funds that should have gone to land and associated transactions, go elsewhere. Banks, construction firms and other industries suffer. Employment is not maximized and land remains idle and dreams of factories and office buildings go unrealized. Wealth that might have been created to the benefit of thousands will now be enjoyed by none.

Difficult titling procedures drive property into the informal sector, where it cannot be used as collateral for bank credit, or otherwise benefit its owner. Unregistered property does not build the middle class, the economic bedrock of every democracy, and cannot be integrated into the modern economy Nigeria is working to build. Arbitrary restrictions on land titling and transfer have created artificial scarcity, driven up land prices, and stifled economic activity. Confusion in the titling system causes companies to pay two and three time over for access for their land - at what cost to Nigeria's growth? This should change.

If the Land Use Act were amended, Nigeria could fulfill its potential to develop home-ownership across a wide spectrum of geographic and economic classes, build a robust real estate market, and grow a thriving mortgage industry. More frequent real estate transactions allow for more efficient utilization of land, and encourage faster growth. China and India have adopted key land reforms in recent years, and have thereby benefited from double-digit economic growth. Nigeria should be leading this charge in Africa.

You are a stakeholder in the land reform process, and organizations like IOD can be a voice for positive change. Efficient, affordable, and transparent land titling and conveyance procedures benefit you, your clients, and Nigeria's national economy.

Various public and private sector stakeholders, have initiated a land reform program and our Agency for International Development is lending is assistance to this process. I hope the IOD will join this effort to make titling reform a reality, so Nigeria can unleash this potent force for driving economic growth.

Rule of Law
I'd like to turn to another critical aspect of the nexus between business and government - the need for rule of law and efficiency in the judicial court system to support commercial instructions. Justice deferred is justice denied. While no one hopes to go to court, business disputes will undoubtedly arise.

An efficient court system - where commercial disputes are resolved quickly and impartially - will bolster the confidence of the business community; encourage greater investment and support increasing numbers of transactions. Time is a valuable commodity. Time spent trudging through slow court procedures equates to money lost, even for the eventual winner. Swift efficient courts are a form of insurance for a businessperson, only to be relied upon when things go wrong. But the knowledge of their existence will give people confidence to enter into contracts and execute deals with a wider range of business contacts - thus increasing the galaxy of actors and quantity of transactions within a given period of time.

Unfortunately, according to the Economist's Intelligence Unit, Nigeria's judicial system is still "deeply undermined by corruption and hugely under funded, resulting in poor administration and long delays in the hearing of cases." Trials can last years and the appeals processes can drag on even longer.

In too many cases officials and judges are forced to take side jobs which affect their quality of work and their low salaries leave them susceptible to bribes or influence peddling. Time saving conflict resolution procedures such a mediation, and arbitration are also under-utilized.

Strengthening the Nigerian legal system is fundamental to ensuring the rule of law and improving Nigeria's investment climate. Rule of law - including systems which ensure the sanctity and enforcement of contracts - provides predictability and stability for investors, without which they will go else were.

Closely linked to the rule of law in creating an environment conducive for trade and investment is effective enforcement of Intellectual Property Rights, or IPR. IPR violations cost legitimate Nigerian and international companies millions of dollars in lost revenue and jobs, as these firms' products compete with fake and adulterated products.

We encourage the Nigerian government to allocate more resources and intensify efforts in the fight against IPR violations. We also encourage you, as directors of companies and business leaders, to make protection of IPR a priority in your respective companies.

Tariffs and Trade Bans
High tariffs and import bans are other impediments to economic growth. Most critics of bans and tariffs focus on the higher costs of the domestically produced goods that are the beneficiary of the restrictive trade measure.

I too endorse this argument against indiscriminate tariffs and bans. True, narrowly defined measures to support domestic industries or for purposes like national security have their place; however, these measures should be few, far between and strictly construed to achieve their objective while minimizing their collateral damage to other aspects of the economy. In this vain, indiscriminate or over broad measures not only increase costs, they stifle and slow economic activity.

The higher cost domestic goods are usually slower to produce as well. Thus, there are fewer transactions involving these products. The fewer the transactions the less wealth gets produced. Additionally, the absence or reduction in quantity of the imported goods also will extinguish or delay transactions to which such goods otherwise would have been integral. All of these problems, from decreased investment to higher consumer prices, also mean a reduction in the number and speed of transactions over a given period of time.

Furthermore, trade barriers undermine investors' quest for stability and predictability, which international investors tell us they value more highly than an optimal investment climate. Nigeria's history of bans shows they have often been imposed arbitrarily and with little warning. For example, a major U.S. investor suffered a factory shut-down when their key manufacturing inputs were banned. One such story, repeated in international investment circles, scares off many credible potential foreign investors. Finally, bans do not automatically create a local source for the banned products.

Programs to create access to investment incentives, capital, and expertise can more effectively create locally-manufactured and competitively produced goods, than just banning the competition.
As a founding member ECOWAS, Nigeria committed to implementing Common External Tariffs. We commend the Government of Nigeria for taking that initial step, but encourage her to follow through on her commitment to lift its import bans on several agricultural products by January 2007.

Transportation Infrastructure
An obvious factor in what we can label as "economic or transactional speed" is the transportation infrastructure. Insufficient road networks and roads in disrepair add time to transactions. A trip that would take two hours may take six hours. Apart from the obvious increase in transportation costs and lost time, there are also the hidden costs associated with lost time - fewer deliveries and transactions can occur because of the slow travel.

This will result in loss of potential market share for a producer. That loss of market share will have serious secondary effects on his suppliers and work force. Log jams at the seaports have the same effect both for imports and exports. Again, the longer it takes to complete an economic activity, the less profitable that activity will be.

In conclusion, these are but a few key examples of the essence of transactional speed in economic performance and competitiveness. Given that we are in an era where information can now be passed instantaneously across great distances, speed will become of even greater import in economic growth and development. Nigeria is making some progress in areas such as IT, Telecom, and financial markets, but in these other areas upon which more traditional economic performance is based, Nigeria has not yet learned the importance of speed.

Part of the reason is that, in IT and Telecom, Nigeria has had to start largely from scratch. This means there were few prior institutions standing in the way of innovation. In these more traditional areas, there were pre-existing institutions that now pose a restraint or limitation on Nigeria's ability to accelerate economic activity in these spheres.

Let me reiterate, greater economic velocity is essential to Nigeria's growth and thus it becomes the responsibility and duty of IOD and similar groups to fashion and shape creative ways to address these impediments so that Nigeria can turn it's much vaunted potential into a reality that benefits all Nigerians of all walks of life. Good morning, again, and thank you for listening!

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