Nigerian Economy: A Self-Imposed Calamity
We are going through the worst period in our history as a nation as far as the economy is concerned. Virtually everything is at a standstill. It started with the rumours of increased petrol price which soon became a reality that was swiftly accepted by Nigerians. However, the situation got worse when the scarcity of foreign exchange made importation of essential and non-essential goods difficult. The few goods that get imported or smuggled into the country are too expensive for an average Nigerian to purchase. The dwindling revenue inflow to the state governments meant that some states have been unable to fulfil their statutory obligations, including payment of salary. The disastrous chain reaction and consequences are there for all to see.
So many reasons have been adduced for why we are where we are today. Prominent among them are: low price of crude oil in the international market; low oil production output, due to militancy in the Niger Delta region; official corruption; mismanagement or misapplication of resources, etc.
The discordant tunes from our economists and financial experts have done little to help matters. Critics of the administration are having a field day. They remind us of how they had warned us against voting for Buhari and his party, APC. Unfortunately, the rolling out of statistics by the experts and the recriminations by the critics have done nothing to change the story. People are hungry and they will prefer that we work together to bring back tranquillity into the system.
I will not join the bandwagon of those who are blaming President Mohammadu Buhari for the current economic woes; neither will I stand by those who think the government is helpless about the situation. I think this time calls for a bipartisan approach, with the sole aim of putting smiles on the faces of hapless Nigerians. I think our elites, who got us into this the trouble in the first instance, should get together and fashion out the most effective way out of it.
Learning from the past
While we are hoping and looking for the best in the nearest future, it is important that we remind ourselves about some errors of judgement committed by the managers of our economy in the recent past. Following the April 2014 statistical ‘rebasing’ of the GDP, Nigeria became Africa’s largest economy with 2013 GDP estimated at $502billion. The economy was growing at about 6-8 per cent, per annum, largely driven by growth in Agriculture, Telecommunications and Services.
With the 2013 GDP estimate, Nigeria was 31st on the country comparison to the world scale. This is the good part of the story about the Nigerian economy, the part that our leaders would like to tell with much relish. However, if we take a deeper look at the core statistics, we will see that our current travail is a self-inflicted wound. Using the same 2013 figures, the component parts of the country’s data (which can be assumed here as the norm in the past years) really show that we have been bad managers of the economy and we deserve what we are getting now.
The composition of the GDP by end use shows that household and government consumption took the lion share of 63 per cent, while a paltry 9.8 per cent was spent on fixed capital investment. As this had been the practice over the years, it is crystal clear that the infrastructural decay evident by the dilapidated state of our roads, airports, power & steel facilities, public buildings, etc., were a direct result of the choices we made. We chose to consume rather than invest. We chose to care about our thirst and hunger of today rather than take a long look at the future and plan for it from today.
In terms of the sector of origin, the Industry contributed about 43 per cent of the GDP while Agriculture and Services made up the balance of 57 per cent. The Industry referred to here is all encompassing: crude oil, coal, textiles, cement and other construction materials, food products, chemicals, steel, etc. The industrial production growth rate was 0.9 per cent, which made us number 153 in the world.
The industrial growth rate couldn’t have been better with low investment in capital projects, unfavourable government policies (e.g. multiple taxation) and the high cost of operation. We also had a labour force of 52 million people (number 12 in the world). 70 per cent of the workforce was engaged in Agriculture and only 10 per cent in the Industry. Despite this glaring advantage, we failed to see the opportunity to develop the Agriculture sector when we had the resources to do so. We were too comfortable with billions of dollars coming from crude oil export to care for the other potentially viable sectors. Unfortunately, we lost out to the destructive politics of the international oil market and, without any fall-back alternative, our economy easily fell into recession.
The unemployment rate in Nigeria is one of the highest in the world. With about 24 per cent unemployment rate (about 41 million people jobless), Nigeria’s is number 172 in the world. We do not fare any better in the poverty index or inflation rate. About 70 per cent of the population (or 119 million) are living below poverty line. We are number four in the world and behind celebrated troubled countries like Haiti, Liberia and Sierra Leone.
The inflation rate as at 2013 was 8.7 per cent, number 201 in the world, then. With inflation hovering around 16 per cent now, the situation has deteriorated significantly. In Taiwan, a country whose product labels we derisively call “faked in Nigeria”, only 1.5 per cent of the population or about 360,000 people are living below poverty line.
With all these facts available to our economic managers, it is difficult to pontificate on why they failed to take the right decisions to stimulate the economy and provide employment. The alarming social crisis in the country now is a direct result of the negligence, indecision, bad decisions and outright sabotage by government officials. There is widespread kidnapping and brazen robbery cases all over the country. Government is deploying huge resources to contain the insecurity, a resource which should have been used to provide for the jobless before they become criminals.
Taxes and other related revenues contributed a marginal 4.8 per cent of GDP in 2013 and we were number 212 in the world. This is not about the tax rate but more about the efficiency of tax administration. The rich and the powerful hardly pay tax and the tax officials are more efficient in collecting bribes than they are in generating revenue for the government. There is a large informal sector in Nigeria and an efficient tax administration should have devised a means of getting this sector to pay taxes in addition to engaging more in the formal sector to comply with the relevant tax laws.
The commercial bank lending rate of about 16-32 per cent has done much to stifle development of the industrial sector. This is the reason why we depend so much on imports from other countries. We have not done much to stimulate the development of the SMEs which would have served as the engine of growth for the economy.
As at 2013, our export revenue was about $94billion while we spent $56billion on imports. About 95 per cent of the export revenue was from petroleum and petroleum products; while we import virtually everything. The inherent and imminent danger in these figures escaped the scrutiny of our economic managers and when the oil revenue declined significantly, we are no longer able to pay for our imports.
On the health sector, Nigeria has one of the worst health indices in the world and we carry 10 per cent of the world disease burden. Despite the availability of these figures, our health institutions and especially hospital remain grossly mismanaged and underfunded. The strikes and shut down in the sector occur more frequently than any other sector in the past 10 years.
There appears to be no solution in sight. Nigerians spend about $500million on medical tourism every year and 47 per cent of this huge amount goes to India. The National Health Insurance Scheme (NHIS) has been largely moribund – providing succour to the managers of the scheme while the citizens labour daily to pay for drugs and services in the hospitals.
I have always asked myself: what is the function of the government? What purpose is governance expected to achieve? Why is our case so bad in Nigeria? Why have we carried so much burden of management inefficiency? I think the solution lies in the attitude and actions of the people who are in the position of authority in the country. The time has come for you to work for the country and not yourself anymore. This is the CHANGE that we urgently need and right now.