A jubilee of the Nigerian economy
Now aged 59 years, in a few months time, Nigeria will mark her diamond jubilee at 60 years. It is pertinent to examine our economic progress as a resource rich nation. In six decades it is expected Nigeria must have transformed first from an agrarian economy to an economy driven by oil our resource curse. But only two weeks ago at Abuja, Nigeria’s Country director of Oxfam International, Constant Tchona revealed that 94.48 million Nigerians live below N684 per day, that means they are living below poverty level. But only six months earlier in April 2019 when Nigeria became the poverty capital of the world, people in extreme poverty in Nigeria was only 91.51 million. It means extreme poverty is increasing in Nigeria. In the circumstance, we cannot meet our Sustainable Development Goals set by the United Nations. This also means that 25 percent of the world’s extremely poor will be living in Nigeria by 2030.
These reports cast a dismal shadow on our economic future. Even though the 2019 first quarter GDP data shows the non oil and gas sector accounts for 90.9 percent of the GDP while oil and gas accounts for 9.1 percent. The paradox is that the oil sector accounts for over 50 percent of our revenue more than 80 percent of our foreign exchange earnings. This reflects the imbalance in the economy since Independence. This also underscores the declining productivity in oil and gas for the past 60 years. It is this lack of reform, restructuring and planning that is the bane of our economic backwardness so far. It makes the Nigerian economy vulnerable to external shocks owing to our weakness in economic inclusion. The lack of political will to restructure the oil and gas sector remains a major drawback to Nigeria’s economic growth and prosperity.
However, the transformation in our telecommunications sector stands out as the most successful reform in 60 years. Many sectors of the economy have leveraged on this telecoms transformation to make significant progress in the use of information and technology in the service sector of the economy. This has enhanced service delivery although it is prone to impairment by frauds and corruption. Sadly, the corruptive influence of fraudsters in banking has made the telecoms transformation unsatisfactory. Moreover the poor quality, the high cost of doing business and multiple taxation, unrest and banditry are sources of concern to investors. Although state police has been identified as the panacea to insurgency, federal government has refused to authorize its creation.
Weak infrastructure, and weak institutions pose risks to job creation; they have adverse effects on efficiency, productivity and competitiveness in the economy. Power supply remains a major burden on businesses. This is one area that Nigeria has been in decline since independence. Power supply has consistently lagged behind the pace of economic growth, and population growth. This has impacted negatively on external financing for decades. Worse still, internal security worsened gradually to the extent that Nigeria lost control of security in the North eastern region. This is almost a quarter of Nigeria’s territorial integrity. Accompanying this insecurity are religious and ethnic conflicts from the Tiv and Jukun territorial wars, Kaduna, Benue, Plateau killings to banditry and the Boko Haram insurgency.
In other parts of the country, incessant oil theft, loss of lives, loss of billion of dollars on return on investment have plagued Nigeria’s economic relationship with the business world since independence. In the real sector, decline in productivity has grown depressively. This is because of aging infrastructure which is why high risk in industrial investment has caused capital flight to continue unabated. Sadly, unless there is effective protection of rural infrastructure, the outlook for the real sector is gloomy particularly for small and medium scale enterprises. It is impossible to have a vibrant manufacturing sector in the face of cheap imports, habitual smuggling, high productive and operating costs in the domestic economy. Some of the imports are landing at 50 percent cost owing to high energy cost, high interest rates and a multitude of regulatory agencies making corruptive demands on them.
The way forward is to address constraints to manufacturing competitiveness; perpetual protectionism cannot solve this problem. The government should streamline foreign exchange management to stabilize exchange rates. It should boost the supply of foreign exchange to the economy through the unification of various exchange rates, eliminate multiple windows in foreign exchange transactions and broaden the scope for a market driven exchange rate. Government has the urgent task of tackling the looming insolvency at every level of government. We need to deal with the escalating cost of governance, the fiscal leakages and inadequate revenue collection.
Infrastructure financing beyond the return of toll gates to express ways needs priority and planning. Without a sound infrastructure base, it is impossible to achieve our socio-economic objectives of inclusive growth, rural development and national prosperity. Solid infrastructure is a driver of economic growth. Moreover, we can no longer depend on external borrowing since our debt profile is already at an unsustainable threshold. Thus, we should find innovative ways of funding rural and urban infrastructure in Nigeria. We need to attract private sector capital to our infrastructure sector of the economy. This covers roads, railways, airports, waterways and every form of electricity supply node.
The myth that Nigeria is rich isn’t correct. We must face the reality of our poverty of intellect and materials. Nigerians confuse potential wealth with real wealth. Given our 200 million population, a budget of less than $25 billion which President Buhari presented to Parliament recently, the largest ever, is too meagre to lift one million Nigerians out of poverty in one year. Worse still it could neither result in any noticeable economic prosperity for Nigeria in 2020. This means for Nigeria to exit from being the headquarters of the abject poor in the world, we have to develop, manage and maintain real and sustainable wealth that guarantees a long lasting economic prosperity in the manner of Taiwan, South Korea and Malaysia.