Economics

Capital Flows

  • Sub-Saharan Africa
    African Economies: Growing Quickly But Transforming Slowly
    This is a guest post by Diptesh Soni. Diptesh is a master’s degree candidate at the Columbia University School of International Public Affairs (SIPA) studying economic and political development. You can read more by him at: https://dipteshsoni.contently.com/. Poor countries traditionally become more developed by expanding their manufacturing bases and increasing employment, moving from subsistence farming and the exportation of primary commodities to producing a greater share of services and manufactured goods. The African Transformation Report, released by the African Center for Economic Transformation (ACET) on March 3, provides a useful gauge of the successes and failures of African countries in moving up the development ladder. African economies, the report claims, need more than growth—they need growth featuring the five elements of DEPTH: “They need to Diversify their production, make their Exports competitive, increase the Productivity of farms, firms, and government offices, and upgrade the Technology they use throughout the economy—all to improve Human well-being,” claims ACET president K.Y. Amoako. Commodity prices are lower, growth in China is slower, and less easy money is coming from developed economies. Transforming economies  along DEPTH lines will mitigate the risk of shock for African countries and ensure more equitable and sustainable growth in the long term. The report compares a group of fifteen African countries to the performance of sub-Saharan Africa at large, as well as eight comparable countries that have already undergone economic transformations, six of them in Asia and two in Latin America. Overall, it shows how countries that previously transformed exhibited higher savings rates, higher levels of output per worker, greater diversity in exports, and higher levels of technology than is true in Africa today. The African Transformation Index, a ranking of countries based on the progress made in the five elements of DEPTH over the last decade, lists Mauritius, South Africa, the Ivory Coast, Senegal, and Uganda as the top five transformers. Among the twenty-one countries which have data, Burkina Faso has made the least progress, with Burundi, Nigeria, Rwanda, and Ethiopia following. But the debate surrounding economic transformation in Africa is contentious. Optimists cite rising wages in China and recent decisions by large firms such as H&M, Primark, and General Electric to set up factories in Africa as signs of change. They point to India’s economic boom on the back of services as a potential model for Africa. Others are less cheerful: Thandika Mkandawire of the London School of Economics and Dani Rodrik of Princeton believe there is much more work to be done. In line with their doubts, the African Transformation Report is a welcome check on the exuberance of the “Africa rising” narrative. To presume sustained growth in a weak and changing global economy is dangerously misguided. While better economic management, new technology, debt relief, and reduced conflict across the region have abetted growth in Africa, fully transforming the continent into a healthy, productive, and attractive destination for investment will require much-needed structural transformation.
    Blog Post by Guest Blogger for John Campbell March 7, 2014 Africa in Transition
  • China
    Was Ukraine Tapered?
    For Ukraine’s beleaguered bond market, the seminal event of 2013 was Ben Bernanke’s now-famous taper talk of May 22.  As today’s Geo-Graphic shows, it sent yields soaring to levels they never came back from. Ukraine was uniquely susceptible to taperitis, having been sporting a current account deficit of 8% of GDP—considerably worse than other big victims such as India, Brazil, Indonesia, Turkey, and South Africa.  Its current political crisis clearly has deep roots, yet it is interesting to speculate as to whether Yanukovych could have held on had it not been for the country’s spiraling debt costs—sent spiraling by the Fed last May. International Monetary Fund: Executive Board Assessment of Ukrainian Assistance Financial Times: Yanukovich and Putin Shake On It Wall Street Journal: EU, U.S. Rush to Stabilize Ukraine After Ouster The Economist: A Tale of Two Countries   Follow Benn on Twitter: @BennSteil Follow Geo-Graphics on Twitter: @CFR_GeoGraphics Read about Benn’s latest award-winning book, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, which the Financial Times has called “a triumph of economic and diplomatic history.”
    Blog Post by Benn Steil and Dinah Walker February 25, 2014 Geo-Graphics
  • China
    Is Nigeria Africa’s Largest Economy?
    Stephen Hayes, president of the Washington-based Corporate Council on Africa, has written a thoughtful column on Nigeria’s widely anticipated announcement that it has overtaken South Africa as Africa’s largest economy. Such an announcement, he observes, should be no surprise, given Nigeria’s population (nearly four times the size of South Africa’s) and that its markets are more open to new investment than South Africa’s. He notes growing Chinese and South African investment in Nigeria, as well as that from some large American companies. Such an announcement would enhance Nigerian pride and be good domestic politics for the Jonathan administration, which faces national elections as early as December 2014. Hayes goes on to analyze some of the brakes on Nigerian economic development: critically inadequate power capacity, extreme poverty, the division between a richer south and a poorer north, and the threat to stability posed by Boko Haram, a violent, radical Muslim movement based in the northeast, and other various militant movements around the country. He concludes that what matters is not which country has the largest economy in Africa, but rather how the economy benefits the whole of its citizens. He closes with the observation, “as Nigeria goes, so too will West Africa.” Amen to Hayes’ conclusions. Is Nigeria’s economy in fact bigger than South Africa’s? In his book Poor Numbers, Morten Jerven casts doubt on African national statistics repackaged by the international financial institutions that would be the basis for Nigeria’s claim. Jerven gives comparatively high marks to South African statistics, and low marks to Nigeria’s statistics. But, as Hayes has observed, the question of which is bigger really doesn’t much matter beyond bragging rights. The Corporate Council on Africa is a non-profit, membership organization that promotes business and investment between the United States and Africa. Its membership includes 160 companies, which they say together constitutes about 85 percent of total U.S. private sector investment in Africa.
    Blog Post by John Campbell December 11, 2013 Africa in Transition
  • Europe and Eurasia
    Beware of Greeks Bearing Primary Budget Surpluses
    Things are looking up in Greece – that’s what Greek ministers have been telling the world of late, pointing to the substantial and rapidly improving primary budget surplus the country is generating.  Yet the country’s creditors should beware of Greeks bearing surpluses. A primary budget surplus is a surplus of revenue over expenditure which ignores interest payments due on outstanding debt.  Its relevance is that the government can fund the country’s ongoing expenditure without needing to borrow more money; the need for borrowing arises only from the need to pay interest to holders of existing debt.  But the Greek government (as we have pointed out in previous posts) has far less incentive to pay, and far more negotiating leverage with, its creditors once it no longer needs to borrow from them to keep the country running. This makes it more likely, rather than less, that Greece will default sometime next year.  As today’s Geo-Graphic shows, countries that have been in similar positions have done precisely this – defaulted just as their primary balance turned positive. The upshot is that 2014 is shaping up to be a contentious one for Greece and its official-sector lenders, who are now Greece’s primary creditors.  If so, yields on other stressed Eurozone country bonds (Portugal, Cyprus, Spain, and Italy) will bear the brunt of the collateral damage. Financial Times: Greece Defies EU As It Begins Parliamentary Debate on 2014 Budget IMF: Default in Today’s Advanced Economies: Unnecessary, Undesirable, and Unlikely The Economist: Greece’s Bail-Out: Little Respite Wall Street Journal: EU Week Ahead   Follow Benn on Twitter: @BennSteil Follow Geo-Graphics on Twitter: @CFR_GeoGraphics Read about Benn’s latest award-winning book, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, which the Financial Times has called “a triumph of economic and diplomatic history.”
    Blog Post by Benn Steil and Dinah Walker December 4, 2013 Geo-Graphics
  • Sub-Saharan Africa
    Investing in Africa: New Opportunities and Challenges
    Play
    Experts discuss investment prospects in Africa.
    Event with Mahesh K. Kotecha November 5, 2013
  • Sub-Saharan Africa
    Investing in Africa: New Opportunities and Challenges
    Play
    Donald Gips, Jay Ireland, and Bisa Williams discuss investing in Africa.
    Event November 5, 2013
  • Capital Flows
    Emerging Market Taperitis
    “In considering whether a recalibration of the pace of its asset purchases is warranted,” Fed Chairman Ben Bernanke offered back on May 22, the Fed “will continue to assess the degree of progress made toward its objectives in light of incoming information.” The reaction to this modest and heavily hedged statement in emerging-market currency and bond markets was swift and brutal. But the pain was not shared equally. As the top figure in today’s Geo-Graphic shows, those countries whacked hardest by taper-talk were those with large current-account deficits—Turkey, India, Indonesia, and Brazil. These nations had been cruising on the QE3, comfortably financing excesses of consumption over production with dollars desperately scouring the globe for return. But the mere hint of a QE3 docking was enough to send foreign investors into paroxysms of fear over depreciation and default risk. Not surprisingly, as the bottom figure shows, their currencies were also the biggest beneficiaries of last month’s taper-interruptus—the Fed’s decision to back away from a strongly hinted-at September pullback in asset buying. The message received in emerging markets was clearly not one the U.S. Treasury had wished to send—in good times, apply a firm hand to keep your imports and currency down, and exports and reserves up. The U.S. Congress may cry “manipulation!”, but history shows that this is a small price to pay for taperitis protection. Note: No data on Brazilian 10-year government bond prices are available from Bloomberg after July 2, 2013. Financial Times: Turkey Relieved at Fed Decision to Postpone Taper Beyondbrics: Ben Bernanke and Responsible Parenting Real Time Economics: Learning to Love the Fed Taper IMF: Global Impact and Challenges of Unconventional Monetary Policies   Follow Benn on Twitter: @BennSteil Follow Geo-Graphics on Twitter: @CFR_GeoGraphics Read about Benn’s latest award-winning book, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, which the Financial Times has called “a triumph of economic and diplomatic history.”
    Blog Post by Benn Steil and Dinah Walker October 28, 2013 Geo-Graphics
  • International Organizations
    Foreign Exchange Controls: Good or Bad for South Africa?
    This is a guest post by John Causey, a private equity consultant based in South Africa, who specializes in sub-Saharan Africa transactions. In a pithy headline Richard Grant, writing for Forbes Magazine, recently remarked that “It Cost Mark Shuttleworth More To Leave South Africa Than It Did To Leave The Earth.” The attention-grabbing headline, while technically accurate, requires explanation. Mark Shuttleworth, a noted South African philanthropist and venture investor, decided in 2009 to move his remaining cash positions out of South Africa. Through powers granted under exchange controls legislation, the South African Reserve Bank (SARB) imposed a levy of 10 percent (USD 30 million at that time). The case that followed was decided in favour of the SARB, and Shuttleworth’s arguments that exchange controls were an unconstitutional taking and that the method of enforcement deprived South Africans of due process were rejected by the courts. The levy payment of USD 30 million to the SARB remained, and that payment dwarfed the USD 20 million he paid to become the first African in space in 2002, giving Mr. Grant the fodder for the aforementioned Forbes headline. Exchange controls allow for the regulation of the manner in which capital flows into and out of a country, and while common on the African continent, they are scarcely seen in more developed economies. In South Africa, exchange controls were established many years ago, and were applied forcefully during the apartheid era to combat capital flight and to ease balance of payments pressures. Though not as rigidly enforced as in the past, they remain one of the vestiges of the Afrikaner Nationalist government, which the ANC has opted to not dismantle. Proponents of exchange controls argue that smaller economies are affected too greatly by developed world monetary policies (e.g., seemingly endless rounds of quantitative easing in the U.S.), and that controlling currency flows gives these economies more stability and independence. If free flows of capital were allowed, they argue, domestic monetary policy alone would be ineffective in staving off capital account deterioration, inflation and currency devaluation. As articulated in Shuttleworth’s suit, opposing views are largely political and fairness based, and the primary financial argument deals with discouraging investment. By taking away the ability to easily repatriate funds, a form of investment irreversibility is introduced that deters investors. Additionally, there is the administrative headache which Shuttleworth cites as a prime reason for running all of his philanthropic and other international activities outside of South Africa. Large institutions and banks in South Africa avoid these layers of red tape and levies by opening shell companies in countries like Mauritius to run their international operations. Though this solution works for large corporations, it comes at a cost of lost tax revenues and jobs to South Africa. Unfortunately, opening foreign shell companies isn’t a viable option for job creating small and medium sized enterprises who aspire to transact outside of the relatively small South African marketplace. For those cheering with Shuttleworth for the swift eradication of the controls, don’t hold your breath. There is a flood of bad economic news coming out of South Africa in the form of BMW halting future investment plans, Morgan Stanley labelling the country as a “Fragile Five,” the IMF and World Bank issuing warnings to the country, business leaders vocalizing dissatisfaction with the status quo and a seeming lack of progress in NDP implementation. For these and other reasons, it’s unlikely that the effects of such a move would net a positive near-term result and thus difficult to justify by either the government or SARB.
    Blog Post by Guest Blogger for John Campbell October 18, 2013 Africa in Transition
  • Capital Flows
    Global Economics Monthly: October 2013
    Bottom Line: In the face of uncertain capital flows, an international network of swap lines would help to ensure adequate liquidity and act as a significant enhancement of the global financial safety net. Should the International Monetary Fund (IMF) and major central banks provide credit lines to countries facing sharp outflows of capital? In 2007, 2010, and 2011, the Federal Reserve's dollar-swap lines with other central banks played a critical role in stabilizing markets and ensuring an adequate supply of dollar liquidity. Now, in the context of sudden reversals of capital flows ("sudden stops"), there are proposals for new swap or credit arrangements for emerging markets and for the periphery of Europe. These proposals have their virtues, though perhaps not the ones their proponents claim. Swap Lines, the Fed, and the IMF The idea that the International Monetary Fund (IMF) should coordinate a global network of swap lines gained currency during the financial crisis, partly in response to complaints from countries excluded from the Fed's swap lines. The Fed's prudential concerns, along with a mandate to limit swaps to countries viewed as threatening global financial stability, highlighted gaps in the global safety net. In addition, the Fed's swap lines were temporary. The primary argument for a new arrangement rests on the observation that in today's financial markets—highly leveraged, complex, and interconnected—adequate liquidity is central to avoiding crisis. This suggests the need for something more comprehensive and permanent. This debate is not new. A group of Asian countries led by China launched a regional swap plan in 2010 (the Chiang Mai Initiative), and, in the run-up to the Seoul G20 Summit, the Koreans floated a proposal for a global network of swaps modeled on Chiang Mai. Around the same time, motivated in part by concern that the Asian arrangements would compete with it as a global financial authority, the IMF floated a proposal for an IMF-backed network of swaps. These proposals never gained broad support, and with the easing of the crisis the pressure for reform went away. The catalyst for renewed debate was the reversal of capital flows from emerging markets, beginning in June, based on expectations that the Fed would begin to exit from quantitative easing. The most developed proposal comes from Ted Truman, who in a recent piece calls for a global network of central bank swap lines coordinated by the IMF. Central banks would retain control over the lines, though the IMF would identify the need and decide when systemic risks warrant activation of the lines. The plan would be a significant enhancement of the global financial safety net, though the complexity of the proposal, the magnitude of the liquidity commitments it requires from central banks, and the central role it gives to the IMF are sure to raise opposition in major capitals. Emerging Markets: The Next Big Crisis? A number of emerging markets have seen a large capital outflow, precipitating sharp financial market moves and forcing a tightening of policies. Attention has focused in particular on the "fragile five"—Brazil, India, Indonesia, South Africa, and Turkey—countries with substantial financial markets, large current account deficits, and financial imbalances. But in other respects, it is hard to see these problems as the start of a systemic economic crisis. For example, in contrast to conditions at the time of the 1997 Asian financial crisis, most of these countries have substantially higher international reserves to act as a buffer against capital flow reversals. External imbalances are manageable and more of the debt is of longer maturity. Consequently, the risk of a sharp run on banks, which happened in Korea in late 1997, seems less likely. Markets have stabilized recently. Nonetheless, corporate and financial sector leverage remains high in many countries, posing an uncertain but continuing risk of runs. Precautionary and Contingent Credit Lines Still, it is hard to argue against the notion that countries should do more to get ahead of a possible crisis and prepare for contingencies. The IMF offers credit lines to countries vulnerable to global shocks but with otherwise strong policies.[1] However, the stigma associated with turning to the IMF has limited the use of those programs. In 2011, the IMF discussed the possibility of simultaneously offering credit lines to a group of countries as a way of overcoming resistance to these programs. The idea was that prequalifying countries would lessen the pain associated with having to approach the IMF for support. The problem with this idea is what to do when a country's policies worsen, or are subsequently seen as inadequate. Drawing on a credit line cannot be a substitute for necessary policy reform. Even so, I see a case for an expanded use of precautionary lines as a signal to markets and to strengthen a country's defenses against market turmoil. Progress is possible in the current discussion of how to support countries in the European periphery. Ireland and Portugal may request contingent credit lines from Europe's Economic Stabilization Mechanism (ESM) to help them exit their IMF-supported adjustment programs. In Ireland's case, a contingent line would be a transitional arrangement to signal to markets that the country continues to have European support. In Portugal's case, a new bailout is likely, though both the government and its European creditors are loath to admit it. As a consequence, European leaders appear resistant to provide a credit line to Portugal; that is a pity. Moreover, other countries in the periphery could benefit from contingent lines from the IMF. So what purpose do these credit lines serve? In practical terms the lines are the framework for the needed expansion of the safety net and for "more Europe." If this approach helps to achieve improved governance in Europe, then that would be a major step forward. More generally, a network of IMF-supported swap lines would strengthen the global safety net and provide an important buffer against future sudden stops in capital flows. Looking Ahead: Kahn's take on the news on the horizon The Cliff Is Dead, Long Live the Cliff A U.S. government shutdown is in effect with no clear exit strategy. A far more material and potentially damaging standoff on the debt limit looms. The World Bank and IMF Meet Meetings later this week between the world's two major financial institutions will reveal anxiety about growth and capital flows, but offer little agreement on what to do about it. Abenomics' Second Arrow The issue is fiscal sustainability over the medium term, without killing growth now. The decision to go ahead with the consumption tax is good on structural grounds but has renewed growth fears. Endnotes ^ The two main programs are a flexible credit line (FCL) for countries whose policies would be adequate absent global financial market volatility, and a precautionary credit line (PCL) for those countries where some policy changes would be needed.
    Report by Robert Kahn October 7, 2013
  • Sub-Saharan Africa
    Labor Unrest in South Africa
    Labor unrest is widespread in South Africa today. At present industrial action affects construction, gold mining, gas stations, car manufacturing, textile, and clothing. Greg Nicolson provides a useful overview and context for this latest wave of strikes, “South Africa, A Strike Nation,” in the Daily Maverick. He concludes that poor economic growth combined with failure to keep the promise of a transformed post-apartheid South Africa “has trapped South Africa in a continued cycle of industrial action.” He quotes a Congress of South African Trade Unions (COSATU) spokesman as saying that high levels of inequality, rising prices, and higher cost of living for the poor lead to strikes. Labor unions in South Africa are politicized and compete with each other–the 2012 strike at the Marikana platinum mine and subsequent massacre had a union rivalry dimension. Often trade union rivalry leads to unrealistic wage demands that are curtain risers for subsequent strikes. It was widely anticipated at the end of apartheid that the establishment of "non-racial" democracy would lead to high levels of foreign investment and the transformation of the South African economy, which would lift the population out of poverty. While there was foreign investment, it did not prove to be transformative. By international standards, South Africa’s growth rate has been respectable (it is now about 3 percent a year). But it has not been nearly high enough to lift millions out of poverty. Meanwhile, income inequality is probably worse than it was in the last years of apartheid. The difference between white and black incomes is greater now than it was then, notwithstanding the appearance of a few new black millionaires. In the short term, if the world economy continues to recover and commodities prices hold firm, higher wages may become possible, with fewer strikes. But, while urban poverty with low wages is highly visible in the cities, it is in the rural areas that poverty is most profound. Bringing rural dwellers into the modern economy is a major challenge for any South African government.
    Blog Post by John Campbell September 11, 2013 Africa in Transition
  • China
    Can China’s Bond Market Support a Global RMB?
    On April 24, the Australian central bank announced that it would raise the proportion of its reserves devoted to Chinese financial assets from 0% to 5%, likely among the highest such allocations among world central banks.  Will other major central banks follow suit? It has been widely argued that the Chinese financial markets are too shallow to support such a move and that prospects for rapid internationalization of China’s currency, the RMB, are therefore limited.  But let’s look at the numbers. According to the IMF, the world holds the equivalent of $10,936 billion in foreign exchange reserves, and $3,442 billion of this is held by China.  That leaves $7,494 billion in reserves for the rest of the world.  If the rest of the world were to invest 5% of its reserves in RMB-denominated assets, that would represent $375 billion worth.  This would make the RMB the world’s third leading reserve currency (well behind the euro, and just ahead of the yen and pound sterling). According to the Bank for International Settlements, China has the equivalent of $1,248 billion in domestic general government debt outstanding.  So if the rest of the world plowed $375 billion into the Chinese government bond market, foreign official institutions would own about 30% of it.  Is that a lot? Not compared to what foreign official institutions own of the U.S. government bond market, which is 36%. Note too that the Chinese government bond market has been growing rapidly; it is nearly 50% larger than it was in 2010. It remains difficult for foreigners to invest in China owing to government restrictions.  Yet if the Chinese government were to open the doors to foreign central bank investment, its markets could accommodate 5% of world reserves and still have them be less dominated by foreign official institutions than those of the United States. Beijing Symposium Papers: The Future of the International Monetary System and the Role of the Renminbi Prasad and Ye: Will the Renminbi Rule? U.S. Treasury: Major Foreign Holders of Treasury Securities BIS: Statistical Annex   Follow Benn on Twitter: @BennSteil
    Blog Post by Benn Steil and Dinah Walker May 21, 2013 Geo-Graphics
  • Global
    Investment Treaties: Winners and Losers
    Podcast
    Jose Alvarez, Herbert and Rose Rubin professor of international law at New York University School of Law, discusses the growth and distributional effects and the human rights implications of global economic governance through bilateral investment treaties, with a focus on the global south.
    Event with Jose E. Alvarez and Terra Lawson-Remer May 10, 2013
  • Capital Flows
    Krugman’s Data-Picking Downplays U.S. Debt
    Paul Krugman recently dismissed concerns about America’s large international debt.  “America’s debtor position,” he writes, “isn’t actually that deep, because of capital gains.” When Krugman talks about “America’s debtor position” he is referring to the net international investment position (NIIP), which is the difference between the value of the U.S. portfolio of foreign assets and the value of the foreign portfolio of U.S. assets.  Krugman demonstrates that the NIIP is fairly flat over the period 2002 to 2010, which presumably shows that concern over U.S. debt is uninformed or disingenuous.  Or does it? As with Krugman’s “Icelandic Miracle” posts, his conclusion is just an artifact of the starting and ending dates he chooses.  In today’s Geo-Graphic above, note what happens to the trend line when Krugman’s data are brought up to date – adding the data, which he had easy access to, for 2011 and 2012.  Now, the trend is decidedly downward – considerably worse than his. And what about when we back up the starting date to the mid-1980s, as we do in our graphic?  Now we can clearly see the effect of Krugman’s chosen data period – it wipes off the steep decline in U.S. NIIP before 2002 and after 2010. Note that in 2009 the U.S. portfolio of foreign securities, which is riskier than the foreign portfolio of U.S. securities, outperformed the foreign portfolio by such a significant margin that the NIIP shrank by nearly $1 trillion – this despite the fact that foreigners continued to buy more assets in the U.S. than the U.S. bought abroad.  This is captured in Krugman’s data.  But in 2011, which Krugman leaves out, this U.S. outperformance was reversed and then some: the NIIP deteriorated by a whopping $1.6 trillion, bringing the NIIP to a record negative $4 trillion.  It continued further down to a record negative $4.4 trillion in 2012. Which all goes to show that not all graphics are as reliable as Geo-Graphics . . . Krugman: America the Debtor Wall Street Journal: For U.S., Big Foreign Investment Is a Mixed Blessing Chart Book: Foreign Ownership of U.S. Assets BEA: Quarterly and Year-End Update on U.S. Net International Investment Position
    Blog Post by Benn Steil and Dinah Walker April 16, 2013 Geo-Graphics
  • Sub-Saharan Africa
    All Aboard Nigeria Railways
    The restoration of railway services between Lagos and Kano, Nigeria’s two largest cities, is a highly positive development. This is a hopeful step toward restoring Nigeria’s entire, once nation-wide, railway system. The British colonial administration constructed the first railway line, between Lagos and Ibadan, in 1898-1902. The government of a newly independent Nigeria completed the system with the line between Kano and Maiduguri, which is now ground zero for the Islamist insurrection called Boko Haram. The railways played a crucial role in transporting not only passengers, but also Nigeria’s then important agricultural, coal, and mineral exports to world markets. Like so much of Nigeria’s infrastructure, the railways suffered from under investment and corruption, and agricultural and mining exports declined during the era of the oil boom. Expansion of civil aviation provided a much faster alternative means of travel for the well-to-do. Modernization of the rail system was further delayed by debate over whether the narrow-gauge system should be replaced with standard gauge. The current restoration of the Lagos to Kano line has been carried out by Chinese and other companies, retaining the narrow-gauge, which is cheaper to build and operate yet slower and less functional in capacity. The railways will make use of engines manufactured by General Electric, and the Nigerian Railway Corporation anticipates refurbishing six hundred coaches and two hundred wagons. The restored passenger service is popular, according to media reports. The service is slow, thirty hours to cover the seven hundred miles between Lagos and Kano. Track conditions limit speeds to about twenty miles per hour. But, it is relatively inexpensive and safer than bus transportation. There are three classes of service: air-conditioned sleeping cars, air-conditioned first-class “seater” cars, and second class cars that lack air conditioning. The restored railway is the type of infrastructure project that can help tie the country together in the face of ongoing challenges to national unity. In 1988, I was part of a group that chartered the only air-conditioned sleeping car on Nigeria railways for the journey from Lagos to Minna, then the station closest to the new capital in Abuja. The journey to Minna took more than thirty hours and the train rarely achieved a speed of twenty miles per hour. The train did, however, provide an unparalleled view of the beautiful countryside and villages. Then, as now, the train was crowded with passengers excited to be taking a trip.
    Blog Post by John Campbell April 9, 2013 Africa in Transition
  • Capital Flows
    Business and Human Rights
    Podcast
    Mark P. Lagon, CFR's adjunct senior fellow for human rights, leads a conversation on the role of business in international relations and upholding human rights obligations, as part of CFR's Academic Conference Call Series. Learn more about CFR's resources for the classroom at Educators Home.
    Event with Mark P. Lagon March 6, 2013