There is a template as to how nations grow their foreign reserves. The model may defer but the mechanisms are often similar.
Economists and policy experts agree that reserves are to nations what bank savings are to individual citizens. Without savings, individuals will go bankrupt and begging for crumbs at some point in the future. Some are held as foreign currencies (Dollars, Euros and Pounds) while others are in the form of bonds, treasury bills, and other government securities.
Most reserves are held in US Dollar because it is the most traded currency in the world and provides buffers in situations of market shocks or currency devaluations. Economists point to Vietnam, a Southeast Asian country, as an example of how nations can grow their reserves and guard themselves against recurring global economic crises. It may well be reasonable to recommend studying the Vietnamese economic model to present and future Nigerian political office aspirants.
Like Nigeria, Vietnam is largely agrarian. Like Nigeria too, it fought a war, but theirs was longer. The 20-year-old war brought the country to its knees, and, according to the World Economic Forum’s Peter Vanham, “per capita GDP was stuck between $200 and $300.” However, there was a determination to change the fortunes of the country after the introduction of ‘Doi Moi’ renewal campaign which transitioned the nation from a centrally planned economy to market socialism. The latter politico-economic philosophy combined central planning with free market incentives and opened a previously closed economy to international participation.
Based on the analyses by World Bank and Brookings Institute’s economists, there were three decisions taken by Vietnam that made it a shining example for emerging markets.
Vanham of the World Economic Forum identified these three steps. “First, it has embraced trade liberalisation with gusto. Second, it has complemented external liberalisation with domestic reforms through deregulation and lowering the cost of doing business. Finally, Viet Nam has invested heavily in human and physical capital, predominantly through public investments.”
The Doi Moi economic model opened up for foreign direct investment, providing incentives for companies willing to invest in the country. Raw materials were available, taxes were low, tariffs were designed to favour local investments and tax holidays were also provided. It was easier to get licences and laws were made to punish officials demanding bribes to provide basic infrastructures for investors. Also, basic infrastructures were provided and investors perceived the country as low-risk. More importantly, factories met skilled manpower as the citizens were also learned
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