Today, the Financial Times convenes in Lagos a Nigeria Summit under the theme “Dispelling Uncertainty and Building Resilience.”
This summit comes two days after the third anniversary of the current federal government and offers an important opportunity to reflect on economic management in the past three years and to draw appropriate lessons for the future.
Economic management has long followed a predictable pattern in Nigeria.
Each successive administration, especially since the return to civil rule, proclaims its desire to improve the economy with focus on increasing power supply, revitalising agriculture, enhancing the industrial sector and, above all, diversifying the economy from high dependence on oil.
These promises are usually articulated in a plan of action. Since 1999, Nigeria has had a National Economic Empowerment Development Strategy; Vision 20 in 2020; the Nigeria Transformation Agenda; and now, the Economic Recovery and Growth Plan.
The current Federal Government has sought to distinguish itself from its predecessors by emphasising the link between combating corruption and improvement in economic performance; creating a social investment programme dedicated to reducing youth unemployment; significantly increasing power supply; and providing enhanced support for agricultural production with the twin objectives of reducing the food import bill and achieving self-sufficiency in certain crops.
The high hopes generated by these measures have, however, been tempered by concerns in other policy areas, in particular increased external borrowing, resulting in growing debt service, which IMF now estimates as using up 63 per cent of government revenue; policy somersaults in foreign exchange management; and the opacity of the oil subsidy programme administered by NNPC rather than through the regular budget process.
Yet it would be wrong to attribute some of the persisting economic difficulties to the current Federal Government.
There are structural economic legacy issues, where successive governments have made little or no progress.
Nigeria grew at an average annual growth of over 7.0 per cent from 2001-2014, making it among the top 10 performing economies in Africa during that period; but it was one of eight countries where there was no progress in poverty reduction.
Though the share of oil in gross domestic product is now less than 10 per cent, nonetheless, it still accounts for over 90 per cent of foreign exchange earnings. Economic growth has not translated into high tax revenue; indeed Nigeria’s tax revenue to GDP ratio of 6 per cent is well below the African average of 17 per cent.
There is a growing evidence of financial insolvency of most states, reflected in very low ratio of internally generated revenue to the individual states’ budget and to allocations from the Federation Account.
The cost of domestic borrowing remains prohibitive, thus limiting the growth of the productive sectors of the economy.
Sound economic management consists of evidence-based economic policy making, effective implementation of agreed policies, incorporating political dimensions into economic decision making, and anticipating and responding to long-term challenges and threats.
Viewed from this perspective, there are five major pathways to a resilient Nigerian economy. First, national political cohesion is a key prerequisite of economic resilience.
This requires that the national political process is able to anticipate and act on serious political problems.
Yet the political response to two major political problems – Boko Haram terrorist insurgency and herdsmen-farmers conflict –was characterised by initial leadership indifference to their emergence, tardiness in response, and insufficient political commitment to act thoughtfully.
This has led to insecurities, generating considerable economic uncertainty in the country, especially for the affected populations.
Today, the areas worst impacted by these two conflicts have become humanitarian disaster zones rather than investment destination beacons.
Second, while political stability, anchored on the rule of law, guarantees individual personal safety and security; inclusive economic policies enable all citizens to benefit from the dividends of economic growth that sustains their economic and social security.
This calls for pro-poor policies in three main areas, namely health, education and housing. Nigeria’s dismal record in these areas is reflected in relatively low life expectancy, high maternal mortality rate, high number of children out-of-school, and huge unmet housing needs.
Bill Gates urged senior policy makers to scale up public interventions in these areas in his address to the National Economic Council in March 2018.
Third, overcoming the paradox of jobless growth that marked the first decade and half of the century requires innovative measures to create job, especially for the youth which has a high unemployment rate.
While the Social Investment Programme (SIP) has committed significant amount for funding the N-Power scheme, a new orientation is required that doubles funding for the SIP and splits the funding into two programmes: a Social Intervention Fund that augments financial assistance for health, education and housing; and a Venture Capital Fund that offers loans to, and takes equity in, start-up businesses established by youth, thus imbuing the Fund with a revolving quality.
Fourth, there is need to tackle a triad of environmental threats to Nigeria, namely, increasing desertification; potential rising ocean levels in the coastal areas; and oil exploration-related environmental degradation of the Niger Delta.
While the first two threats are a manifestation of climate change, the tardiness in undertaking a robust clean-up in Niger Delta means that the confluence of these environmental-related challenges could create major political and economic crises in the future.
Fifth, science and technology development should be made the centrepiece of economic transformation, as it holds the key to the much vaunted efforts at diversification.
• Otobo is a non-resident senior expert in Peacebuilding and Global Economic Policy at the Global Governance Institute, Brussels, Belgium.
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