Profit without production... The Scourge of the Nigerian Economy

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In recent years, the Nigerian business landscape has witnessed a surge in the philosophy of profit without production. This approach to business involves the pursuit of profits through means that do not necessarily involve the production of goods or services. While this may seem like an attractive and easy way to make money, it can have severe consequences for the economy and society as a whole.

One of the ways in which this philosophy manifests itself is through speculation in the foreign exchange market. Individuals and companies buy up foreign exchange (mainly USD) with the anticipation that the Naira will gradually weaken against the Dollar. This has been an easy, yet highly lucrative investment strategy in Nigeria for a number of years now. If "lucky" (or connected) enough to purchase at official rate (N430/$1) and sell at the parallel market (N730/$1), you don't need a fancy finance certificate to make easy profits... To the detriment of the country's foreign reserves. The same holds true for the stock market. Many individuals in Nigeria invest in the stock market solely for the purpose of making quick profits without any regard for the underlying fundamentals of the companies whose shares they are buying. This approach can result in a volatile and unstable stock market that is detached from the realities of the economy.

The "Naija" way
Another way in which profit without production is pursued is through corrupt practices. Many business people in Nigeria engage in corrupt practices such as bribery, embezzlement, and fraud to gain access to government contracts or other sources of income. This approach can lead to a culture of lawlessness, where success is measured not by the value of one's contribution to society but by the amount of wealth one has accumulated through illicit means. Apparently, the source of wealth does not matter any more. "Yahooze o!"

Additionally, some individuals pursue profit without production by engaging in rent-seeking behavior. This involves seeking to obtain economic benefits from others without creating any new value. For instance, some individuals buy up land or other assets without any intention of developing or utilizing them. They then sit on these assets and wait for their value to appreciate, profiting from the efforts of others without contributing anything themselves. What is wrong with that, I hear you say? Well, speculative investing leads to asset bubbles where prices become disconnected to their underlying fundamentals, leading to a rapid increase in prices. This is one of the factors that push up property prices and reduce the ability to develop affordable housing.

Furthermore, speculative activity can divert resources away from productive activities, which may not contribute to overall economic growth. That money that could be used to build a factory that will provide jobs, is stuck on an unproductive piece of land. You can remove the word "land" and replace with "foreign currency" and you will get the same outcome.

While these approaches to business may yield short-term gains for those involved, they can have significant long-term consequences for the Nigerian economy and society. They can contribute to a culture of corruption and lawlessness, impeding progress and development. Furthermore, profit without production can exacerbate income inequality and widen the gap between the rich and poor. This has led to increased insecurity and other socio-economic ills.

It is essential to recognize that profit without production is not a sustainable or ethical approach to business in Nigeria. The pursuit of profit should be aligned with the creation of value for society through the production of goods and services. Entrepreneurs should focus on building businesses that create value for society, promote economic growth, and contribute to the common good. Only by doing so can we build a prosperous and equitable society in Nigeria.

Thanks for taking time out to read this article. Please feel free to send me a message or comment on the article. I am always happy to discuss other perspectives and explore different philosophies.

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