Why is Nigeria poor? Nigeria is poor because she champions all the indices of underdevelopment. Poverty pervades the land because there is nothing to show for decades of revenue from oil; with the attendant lack of modern infrastructure in critical sectors like transportation, communication, sewage, water, and power, and strong institutions. Nigeria tops the chart in high birth rates, low per capita income, low life expectancy, low wages, no technological know-how, disparate distribution of wealth, burgeoning urban population, insignificant industrial development, and low rates of capital investment.
For Nigeria to get out of these economic doldrums, it is critical to have an institutional framework that allows its financial systems to work. Nigeria will never develop if the financial systems are not revamped and regulations governing transactions enforced. Finance is important to the nation’s economic health and growth because money must be channeled to productive investments for the economy to grow. In like manner, there must be protection for property rights, and a strong legal system that allows for the enforcement of contracts. Capital cannot be willed to work in a financial system that does not function properly, that is predatory and cannot enforce contracts and without a credible credit system.
Nigeria’s financial institutions, like everything Nigerian, are addicted to cheap funds. The commercial banks are hardly imaginative and thoroughly lazy. With their lazy mindset they are only interested in deposits with no long range plan to fund businesses except those owned by cronies or the fly-by-day loan for imports with a life span of no longer than three months. We all are witnesses to varying degrees of round tripping, non-compliance and outright sabotage that has led to the suspension of many banks from the Forex market. Nigeria has no option but to embrace financial globalisation as a way of helping its financial systems develop. This can be done by guaranteeing access to lower costing foreign capital, which makes it easier to invest.
Right now, there is blood on the streets. It compounds an already hazardous situation in which Nigeria accounts for 25 percent of childhood mortality in Africa and low life expectancy. Nigerians are hungry and groaning under heavy economic burden. President Muhammadu Buhari has to commit to a new pact with citizens. The tax take must be expanded because it is too small in relation to the size of the economy. Heavy tariffs must be placed on luxury items and the government should use proceeds from taxes and seizures to fund basic services, such as health, education and nutrition.
Without key development in transport infrastructure, the much touted diversification will be a mirage. Agriculture and mining cannot be fully scaled without good transportation, given the bulk it yields. There can be no meaningful development when Nigeria exports raw materials with most of the work done in the primary sector. Exporting commodities without adding value to the chain only to import back the finished product creates an import dependent country, exposed to massive price fluctuations, which can only lead to difficulty in long-term planning.
Urgent Steps To Be Taken
1. The first precondition for the hard work at hand is for the Buhari administration to improve governance. The focus should be on maximum governance and minimum government. There is no point making Nigerians go through so much pain unless it leads to effective government;
2. Fix primary and secondary education. With only 64 percent of school age children under the age of 10 enrolled in schools, there is work to be done. The problem with physical structures, facilities, good teachers and renumeration must be addressed sincerely with a renewed sense of commitment;
3. Nigeria should start improving technical colleges, polytechnics and universities as fundamental to its official goals. The country has no ranking among excellent academic institutions even within Africa. Its share in the ranking of top universities in the world should be proportional to its share of global gross domestic product;
4. Invest in modern infrastructure in critical sectors like transportation, communication, sewage, water and power;
5. Build strong institutions. A government that is corrupt or too bureaucratic often impoverishes its citizens. The government should provide essential services that promote economic activities. Other institutions that shape the economy are labour unions, civic organisations and schools. We also need to revive the “invisible institutions” of morals, customs and social norms;
6. Nigeria is in dire need of domestic and foreign capital and a robust capital market to grow and become a great country. To achieve this, it has to liberalise her financial markets;
7. The macroeconomic framework should adopt an inflation target;
8. Enough of the recent policy somersaults from the Central Bank. Nigeria must adopt a medium to long term fiscal policy of deficit spending of no more than three percent the Gross Domestic Product (GDP) and a debt profile of less than 60 percent of GDP;
9. Increase trade within the Economic Community of West African States (ECOWAS);
10. If agriculture must bail Nigeria out of its crude oil dependency, the country must encourage and fund innovation in farming practices to improve productivity;
11. Encourage manufacturing by ensuring adequate power. No country has jumped from agrarian to service economy without having a strong manufacturing base to fuel consumption;
12. Nigeria cannot grow modestly unless it takes steps to safeguard environmental quality and use energy and other resources more efficiently. Protect the environment by encouraging the private sector to invest in sustainable technologies that can boost growth.
Bámidélé Adémólá-Olátéjú, a farmer, youth advocate and political analyst writes this weekly column – “Bamidele Upfront” for the Premium Times. Follow me on Twitter @olufunmilayo