Nigeria, other developing countries stuck in middle-income trap, says W’Bank

The World Bank has warned that most developing countries, including Nigeria, may be stuck in a “middle-income trap” and miss the ambitious targets of rising above the challenge.

The bank said high debt burden, aging populations and rising protectionism in advanced countries could continue to hobble developing economies. The COVID-19 crisis had heightened the tendency to protectionism, with the global economy falling into a two-track growth thereafter. The advanced countries also recoiled into protectionism.

The emergence of Donald Trump, an advocate of ‘America first’ economic philosophy could worsen the cause of self-preservation in the phase of growing economic challenges.

In its World Development Report, the World is also concerned about how drift to protectionism could affect vulnerable economies and thwart efforts to bridge the inequality gap across the globe.

The aging population, which affects productivity and growth, as well as the rising debt burden, a challenge Nigeria has been grappling with in the past decade, are other setbacks to the goals of low- and medium-income countries.

“Climbing to high-income status in today’s environment will be harder still because of high debt and aging populations in developing countries and growing protectionism in advanced economies,” the report, which also highlighted how the affected countries could avoid the middle-income trap, stated.

Since the 1990s, the report noted, only 34 middle-income economies have succeeded in climbing out of the hole to join high-income countries while the rest 108 merely revolve around a circle.

“And since 1970, the median income per capita of middle-income countries has never risen above 10 per cent of the United States’ level”, the World Bank reported.

It identified policies that prioritise investment, infusion and invocation as the surest path to breaking the jinx of the middle-income trap. Sadly, investment and innovation are taxed to death in many developing countries, including Nigeria where dozens of companies have fled for reasons relating to harsh policies, multiple taxation and sundry.

For a start, also, the bank advised that merit must be rewarded and vested interests disciplined, insisting: “The handful of countries that have made speedy transitions from middle- to high-income status have done so by disciplining vested interests, building their talent pool and modernising policies and institutions.”

On vested interests, a challenge that relates to almost all African countries, the report stressed: “Discipline vested interests. Powerful incumbents – large corporations, state-owned enterprises and powerful citizens – can add immense value, but they can just as easily reduce it. Governments must devise mechanisms to discipline incumbents through competition regimes that encourage new entrants without either coddling small- and medium-size enterprises or vilifying big corporations.”