NOT too long ago, I read an article in the Harvard International Review (HIR) with the headline“Where did Adam Smith Go Wrong?”. As most, if not all economists accept, Adam Smith is regarded as the godfather of economics. He built his iron-clad reputation on the belief that unfettered free market, guided only by the “invisible hand”, is the surest way to economic development and wealth accumulation. He delivered this sermon in his classic book “The Wealth of Nations, written in 1776. The Smithian paradigm attributes economic growth to a natural propensity in human nature to maximize wealth. Smith posits that individuals find it rational to carry out full-scale production by cutting their costs, and as a corollary, what’s good for individuals is supposedly good for the aggregate economy. The author of the article in question was trying to decipher this theory in the context of today’s hyper-globalization. He made a case that the path that the so called “Asian tigers”, namely, Singapore, Taiwan, South Korea and Hong Kong and for that matter, Japan, trod on their way to developmental height, seemed at odd with the time-honored Smithian tradition. I seconded his motion.

For a start, it should be noted that Adam Smith was a pretty complex individual. The book itself is a buffet of concepts, from which individuals could pick their choices and be happy. He made room for both liberal and conservative economists to figure him out differently. It was he who said, “No society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and miserable”. It will certainly take a “visible hand” to create such a society. Mr. Smith’s theory needs a surgical reexamination in light of the current low-level war between the Dangote Refinery and the International Oil Companies, (IOC). In a recent interview on CNN, with Eleni Giokos, Mr. Aliko Dangot expressed his difficulty in purchasing crude oil from his home base, Nigeria, the biggest African oil producer and one of the biggest in the world. While I was still doubting if this could be true, about a week later, the VP of oil and gas of the conglomerate, Mr. Devekumar Edwin vented out in the most furious way, the frustration of the company on the same issue. “It seems that the IOCs’ objective is to ensure that our petroleum refinery fail”, Mr. Edwin lamented. This is pretty damning. In fact, he used the word “sabotage” which to me is highly intense if not harsh. If conspiracy is later established, that would be a completely different story.

While I strongly deplore the behaviors of the IOCs, if found to be true, my problem is not with that group at all. They are acting in their own self-interest, though may be unethical. The problem here is about the government of Nigeria with multiple interests in this project, the biggest in Africa, but chooses to leave it vulnerable to this kind of manipulation. If my information is correct, the government of Nigeria has 10 percent investment in this project. But far beyond that, the interest of Nigerian workers, the anticipated corporate taxes and many more. The success of this endeavor ought to be a major priority to any government that is worthy of people’s mandate The president and the national legislature should come up with the appropriate legislation that would mandate a certain percentage of local crude to be reserved for the local refineries. This multi-billion dollar refinery, the pride of Africa and the envy of the world should not be left to its own devices. There are powerful international forces that could make it redundant and that would be a shame. The protection of this refinery should be an utmost priority to the President and the national legislature. Crude oil might be an international commodity traded in the open market, it’s still subject to national law.

There is no country in the developed world that does not in one way or the other support and protect its valued industries. Protectionism in the United States was at its highest at the turn of the 20th century. It culminated with the passage of the Smoot-Hawley Tariff Act of 1930 and signed by President Herbert Hoover. The title of the bill says it all. “An Act To provide revenue, to regulate commerce with foreign countries, to encourage the industries of the United States, to protect American labor, and for other purposes”. This is precisely what I am asking from the National legislature. Nigerian labor, national prestige and prosperity are all at stake on this issue. It’s the duty of the national legislature with the backing of the president,to respond quickly and appropriately. It was not the “invisible hand” of Adam Smith that kindled the rapid growth in those “Asian tigers”of South East Asia mentioned earlier. Rather, it was the very visible hands of government intervention.

In 1993, the World Bank sponsored a landmark study on the “Asian Tigers”. The conclusion was,“the success in the South Korean and Taiwanese economies has not been due to their fidelity to “non-state intervention” but rather a reliance on heavily interventionist industrial planning”. State intervention in the Asian Tigers not only ignited rapid industrial growth but also afforded the incentives for the young and growing industries to mature. These countries thus reject the neutral role of government and deregulation, and instead settle for the selective sector promotion of the economy by the government.

Nigeria should not do any less for the emerging and vibrant young entrepreneurial class. Certainly, such strategy of selective intervention would not in any way or fashion impede economic growth., so long as they are steadfastly and appropriately applied. They do act as prerequisites for economic success.

It’s noteworthy that Japan which is an enthusiastic free trader today developed its economy through a clever manipulation of protectionist and free policies. During that period, the Western countries were not very happy. In fact, regardless of the stage of development, no government subscribed to absolute “free trade” A report in Reuters business couple of years ago, states that “The world’s top 60 economies have adopted more than 7,000 protectionist trade measures……. that the United States and European Union were each responsible for more than 1,000 of the restrictions”.

It would be plainly insincere for any development economist to ignore the fact that strategic industries, when they are in an unfavorable competitive position, compared with those of advanced countries, needed to be adequately promoted and protected in the interest of national economic development. Suffice it to say that no single economic path is applicable to all economies. It is reasonable in this respect to call unrestricted free trade the logic of the strong and powerful. The success of the plant would significantly contribute to the objectives of the national planning framework.

In fact, this refinery and others like it, should be classified as “Too Big to Fail” (TBTF). This is a theory that developed in the US during the financial melt-down of late 2000s. It refers to “a business or sector that its critical functions and interconnectedness are so important to the economy or financial system, that its failure would be disastrous”.There is a conjecture coming mostly from the independent marketers that the refinery’s products might not be as cheap as previously thought. That the price of gasoline might even jump higher because of the added cost of imported crude from the U.S. That sounds like a campaign of calumny, but it actually makes my point for legislative action stronger.

If the company has to resort to importing more of its crude from abroad, when it’s well-known that local crude could make it function at almost installed capacity, that should be widely condemned. The refinery should be able to source the local crude at reasonable market price instead of importation at higher cost. Nigerians deserve the benefit of cheap gasoline from this plant and it would be unfair to deny them just because government inaction. If this endeavor should fail, with thousand of jobs riding on it, Nigeria and Africa would be a laughing stock. The government should act decisively so as to not be culpable in the cupidity of the foreign companies, whose interest lies somewhere else, other than the national interest Nigeria. I believe in free-trade but no country does it recklessly. Typically, as the gap between economic development among nations narrows, the enthusiasm for protectionism wanes. Let’s protect this one!

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by Kayode L. Akintola