Of bigger economy and leaner citizens

Nigeria Naira Notes

Fifty-four years after independence, the majority of the citizens are not better off despite a huge leap in the size of the economy, EVEREST AMAEFULE writes:

It was a Sunday. There was an important gathering in the nation’s capital. It was not a Christian worship service, but those who manage the economy had gathered to break a cheering piece of news. That Statistician-General of the Federation, Dr. Yemi Kale, had an important announcement to make to the world.

Specifically, on April 6, 2014, Kale announced to the world the result of the rebasing of the country’s Gross Domestic Product; a process that was carried out by independent consultants with support from the World Bank.

He announced that the nation’s GDP stood at $510bn (later adjusted to $522bn). By that statistical exercise, Nigeria became the largest economy in Africa. The nearest economy by size was South Africa’s, which stood at $350.6bn.

On the global scale, Nigeria drew nearer to achieving its dream of becoming one of the 20 largest economies in the world by the year 2020. The rebasing exercise acknowledged the country as the 26th largest economy in the world. It only needs to overtake six countries in the next six years to take the 20th spot.

By statistics, therefore, it can be said that Nigeria has made a lot of progress in the management of the economy since the country gained independence in 1960. Indeed, giant leaps have been taken over the past 54 years.

Experts, however, are of the opinion that the fortunes of the nation could have been better if the economy had been better managed, and some are actually of the opinion that in comparative terms, the economy had deteriorated.

Those that are of this opinion point to the fact that at independence, the country was able to feed its population. There was no need for food importation as healthy agricultural practices in the regions that made up Nigeria ensured that there was food for everybody.

In fact, given the nation’s weak industrial base at independence; foreign exchange was earned by exporting cash crops and raw materials.

Peasant farmers produced enough to feed the entire population. Online.com reported that various marketing boards generated much revenue, the surplus of which was used by the government to develop the basic infrastructure needed for long term development. The main thrust of the policy at that time was to maximise the benefits of the export-led development strategy.

The National Bureau of Statistics noted that in the 1960s, the agricultural sector was the most important in terms of contributions to domestic production, employment and foreign exchange earnings.

The bureau stated, “The sector remained stagnant during the oil boom decade of the 1970s, and this accounted largely for the declining share of its contributions. The trend in the share of agriculture in the GDP shows a substantial variation and long-term decline from 60 per cent in the early 1960s through 48.8 per cent in the 1970s and 22.2 per cent in the 1980s.

“Unstable and often inappropriate economic policies (of pricing, trade and exchange rate), the relative neglect of the sector and the negative impact of oil boom were also important factors responsible for the decline in its contributions.

“On its diversity, Nigerian agriculture features tree and food crops, forestry, livestock and fisheries. In 1993 at 1984 constant factor cost, crops (the major source of food) accounted for about 30 per cent of the Gross Domestic Product; livestock, about five per cent; forestry and wildlife, about 1.3 per cent; and fisheries accounted 1.2 per cent.”

As oil and gas took the place of agriculture as the mainstay of the nation’s economy, the floodgate of food importation was opened and many more Nigerians that hitherto had engaged in productive ventures now depended on rents.

With oil, especially in the days of boom in the 1970s, the economy continued growing. Actually, the problem of Nigeria has never been growth but what economists have captured as the paradox of growth. This is growth without development.

The economy was said to have steadily grown in the decade following independence at three per cent. In the decade of the oil boom, the growth rate jumped to more than six per cent per annum. It was between 1988 and 1997 that the economy witnessed a decline in the growth rate. In more than 10 years now, the economy has been growing at about six per cent.

However, in the midst of the high growth rate, poverty has increased; just like unemployment. Similarly, the gap between the rich and the poor has also attained a new height. The per capita consumption of electricity is one of the least in the world; much lower than was enjoyed at independence in 1960.

Apart from corruption, experts have blamed this paradox on the structure of the economy. The economy is mono-cultural, depending mainly on oil. When agriculture was its mainstay, many citizens could participate in the good fortunes of the nation as access was liberalised.

However, when oil took the centre stage; fewer people have access and only a limited number of people can be employed in the sector. The result is that those that have access to oil resources become richer as the government only pays lip service to diversification of the economy.

The World Bank captured this scenario in its Nigeria Country Partnership Strategy 2014 – 2017, which was released recently.

The bank said, “So far, with rapid population, Nigeria has made slow progress in reducing poverty. With a medium age of 14 and population growth at close to three per cent, Nigeria faces the challenge of providing jobs for its teeming youth population.

“Despite the robust growth over the last decade, rapid population growth combined with increasing inequality hampered faster poverty reduction. The poverty (consumption per capita) declined from 48 per cent in 2004 to 46 per cent in 2010, using the adult equivalent methodology.

“The percentage of Nigerians living in extreme poverty ($1.25 per capita per day, purchasing power parity adjusted) declined from 64 to 63 per cent. Given population growth, this implies that the number of extreme poor increased from 86 million to 100 million in 2010.”

It added, “The key challenge facing Nigeria is therefore how to leverage its oil resources to promote sustained inclusive growth, reduce poverty, inequality and unemployment. Nigeria is highly dependent on oil, which makes the country vulnerable to commodity price volatility.

“Nigeria needs to diversify its economy to achieve sustainable inclusive growth and accelerate the creation of jobs. Nigeria has been growing at six and eight per cent annually over the past decade but will need to achieve even higher growth rates to make a dent on poverty.

“This will require effective macroeconomic management, socio-political stability, the provision of key infrastructure, structural reforms to reduce impediments to diversified growth, and more effective efforts to achieve social inclusion.”

The African Development Bank Resident Representative in Nigeria, Dr. Usman Dore, had earlier expressed a similar opinion.

He also said that several problems could be blamed for the paradox of growth without development. The paradox highlights the irony of growth in the nation’s GDP when poverty level and unemployment are on the increase.

Apart from structural imbalance, Dore said another factor that could be held responsible for the paradox was the fact that growth could be occurring in sectors that had low job content.

For instance, he said while the telecommunications sector had been witnessing significant growth in Nigeria for some time, it had not led to the creation of a corresponding number of jobs.

He added that there was a need to focus on sectors such as agriculture that had the capacity to create jobs for the increasing unemployed youths, who could be assets if they were properly managed.

It is because of the basic structure of the economy, the welfare of the populace and policies that the Chief Economist at the World Bank, Africa Region, Mr. Francisco Ferreira, told South Africans not to lose sleep that Nigeria’s economy had been rebased.

Answering questions posed by Nigerian and South African journalists on the import of Nigeria’s rebased economy for foreign investment in both countries, Ferreira said South Africa did not have to worry about losing the topmost position to Nigeria as investors had other things to consider rather than the size of the GDP.

He said, “Really, what matters in the end is per capita income. What matters is individual’s living standard. It is just great we now have a better sense of how large that economy (Nigerian) is. It is also the most populous country in the region. It is fantastic that we know that, but going forward, what matters is living standard for everyone and the productivity that generates those living standards.

“For South Africa, I don’t think investors sitting in New York, London, Beijing or Tokyo are looking at GDP statistics necessarily. They are looking at how profitable investments they can make in that country are. The fact that Nigeria has a larger economy is not something I would predict we would worry about if I were South African.”

Although the nation has the 26th largest economy in the world, it occupies the 177th position in terms of Purchasing Power Parity; just below Djibouti and above Papua New Guinea. Purchasing Power Parity is used in measuring the income level across the nations of the world.

At 54, Nigeria has the largest economy in Africa. That is as far as it gets. It has always been a big nation that has not find how to convert its potential to the benefit of the majority of its huge population, the largest in Africa.