… as LCCI, Chukwu, others bemoan the economy
UGO AMADI,BUSINESS EDITOR
Since 1960, Nigeria and Nigerian all over the world have always revered October 1, the purpose is not incredible. It was the day Nigeria had its independence from Britain. Remarkably, it has become a blueprint for subsequent independence celebrations.
A casual glimpse at the nation’s 59 years voyage shows both perfidies of opportunities of greatness and the irony of the nation. Even with the profusion of human and material resources, Nigeria remains an embryonic country with clearly more than half of its population living below the poverty line. It is also overwhelmed by myriads of challenges that continue to undermine its potentials.
Interestingly, in the 1960s, Nigeria’s economy boomed. This was accredited to the earnings from agriculture. The agricultural sector was the focus of interest, with food self-sufficiency as the goal.
However, in 1958, oil was discovered in Olobiri in the Niger Delta. That was the beginning of another era of boom until prices came crashing. Undoubtedly, oil plays a vital role in Nigeria’s economy as energy resources gotten from it include oil, gas, coal, and water.
Meanwhile, with its discovery, it has dominated the economy since the early 1970s and today, Nigeria is the largest oil producer in sub-Saharan Africa and since 1971 a member of OPEC, with an estimated production volume of 2.413 million barrel/day (2005). This makes it the world’s sixth-largest producer. Since 1960, Nigeria has reaped an estimated US$600 billion and more in oil revenue.
The first quarter GDP data in 2019 shows that the non-oil sector accounts for 90.9% of the GDP while the oil sector accounts for 9.1%. The paradox is that the oil sector accounts for over 50% of the nation’s revenue, and over 80% of the foreign exchange earnings.
But, regardless of the era of the boom, exactly 59 years later, this question reverberates; is there anything to celebrate about this nation? Blessed with plenty of resources, her future looked so positive and promising. Her early years were so eventful. Everyone worked diligently and industriously to secure her fortune. Fascinatingly, she was named the giant of Africa.
Nonetheless, In recent years the Nigerian government has found itself in unchartered waters with the collapse of crude oil prices in 2018, which triggered unpleasant memories of the 2014 and 2015 crash in the world oil prices,
It continues to struggle to revive the economy amidst dwindling oil revenues compounded by unemployment, poverty, insurgency, insecurity, kidnapping for ransom, mass murders, suicide bombings, militancy, killer herdsmen, armed robbery, car snatching, terrorism, abduction of school kids, piracy, pipeline vandalism, etc.
Nigeria has one of the world’s highest economic growth rates, averaging 7.4% according to the Nigeria economic report released on July 2019 by the World Bank. Poverty still remains significant at 33.1% in Africa’s biggest economy.
Global poverty projections released by The Brookings Institute in 2018, based on data from the World Poverty Clock, shows that Nigeria has overtaken India as home to the largest population of people living in extreme poverty, with 87 million citizens living on less than $1.90 a day compared to India’s 73 million
Based on the recent world poverty projections, the signs of Nigeria’s leadership failures are now even more glaring as nearly one hundred million Nigerians are in danger of falling into extreme poverty by 2022. This startling revelation implies that despite being the largest oil producer in Africa, Nigeria is unable to translate its oil wealth into rising living standards for its growing population.
The situation seems compounded by the fact that Nigeria’s 8.6 trillion budget was based on a conservative estimate of the world oil price using a $60 per barrel benchmark at a time the price of oil, the international market was $75 per barrel.
Arguably, the growth in the non-oil sector has not translated to improvements in the living standard of Nigerians due to high unemployment rates. For example, data from the National Bureau of Statistics show that the total number of Nigerians classified as unemployed, meaning they have no job at all or worked less than 20 hours a week.
However, looking at how the nation has performed so far being an oil-dependent economy, an economic expert and Managing Director of Asset Management Limited, Mr. Johnson Chukwu in an exclusive interview with Daily Champion stated that the economy has not done quite well, and that the country has not just developed like the ones that got independent with her
According to him ‘’ the Southeast Asia countries have done much better than Nigeria today. Even some African countries like Ghana, Rwanda, and Batswana, those much smaller than Nigeria has done better than us, it looks like Nigeria is suffering from what we call ‘Arrested development” in the sense that Nigeria continued to developed up till the early 1970s and the development was stalled and since then we seem to be retrogressing virtually in all facets of human lives.
Chukwu indicated that for the nation to build a vibrant real sector, it is necessary to have good infrastructure in place to support the real sector and economic activities.
‘’As today we have the paucity of infrastructure supply that effective production is not taken place here. Even those who are striving or struggling to produce are doing so at a high cost of production level that they cannot compete effectively. You can barely produce any finished product here and export it to other countries because the cost of production in Nigeria is pretty high than what is obtainable elsewhere. That is also why we are basically dependent on oil for our foreign exchange earnings. Our production sector is so inefficient in terms of quality and cost and our similar products cannot compete in the international market.’’ He stated
He also said that the second factor that can catalyze the economy is the development of the entire value chain of the oil and gas sector such that our earnings will not be dependent on the export of crude oil.
‘’ Take for instance, the fact that we have insisted on continuing subsidizing refined petroleum products have denied us of the benefit of having local refineries and the benefits petrochemical industry. The petrochemical industry would have provided feedstock to several industries including the pharmaceutical industries, plastic industries and the rest. But we are not doing that. And again the domestication of the entire value chain of the oil and gas sector would have also allowed us to export refined petroleum products and therefore broaden our foreign exchange earnings. So failure to do these things has constrained us from diversifying the foreign exchange earnings of the economy.
‘’If we build the right infrastructures, liberalize the downstream sector of the oil and gas and remove the subsidy, we are going to see a broader economic base and we are going to see an economy that has the capacity to produce some products that can be exported beyond the export of crude oil or what you may call basic food and impute materials.
Chukwu noted that the major or minimal infrastructures that are needed for us to compete are one power and energy infrastructure, which is electricity supply. The supply of electricity should be efficient and come at a reasonable cost. The second aspect is the transport infrastructure. We have a very weak transport system that one can hardly move raw materials and finished goods at an efficient cost.
He said that the key drivers of investment to the economy are on the performance of the economy; investors are looking at the economy that has strong capacity of yielding good returns on investment. So, if the economy is growing sluggishly as we are witnessing, like the economy is just grown by 1.9 percent in the second quarter of 2019, investors are not going to be well-positioned to such economies. The second factor is the policy environment, policies that relate to the legal system and framework, the tax system, tax rates, policies that relate to sectors where there are incentives and liberalization of FX regime, that investors can easily convert their proceeds into dollar and take it out when needed. Where there are restrictions on FX it scares away investors.
Also, in an email chat with Daily Champion, Muda Yusuf, Director General, Lagos Chamber Of Commerce and Industry [LCCI] said there is need for urgent reforms in the oil and gas sector to reduce the bleeding effect of the current state of the sector on the economy. Such reforms , according to him would also boost investment in the sector, increase revenue and create many more quality jobs in the economy.
According to him ‘’ Nigeria must streamline the foreign exchange management to reduce the cost of stabilizing the exchange rate, boost supply of the forex into the economy, prioritize the unification of the multiple exchange rates, eliminate multiple windows in the forex market and broaden the scope for a market driven exchange rate. All of these are essential to reduce the systemic distortions and disruptions resulting from the current model of foreign exchange management. It is important as well to deemphasize demand management and scale up strategies to support the supply side of the forex make.’’
He noted the urgent need for strategic responses to the looming fiscal viability and solvency crisis at all levels of governments, stressing that acute revenue challenges are becoming an increasingly disturbing scenario at all levels of government. ‘’We need to urgently deal with the escalating cost of governance, fiscal leakages and revenue optimization issues.’
‘’ Absolutely, there is need to reduce the emphasis of attracting and retaining portfolio inflows with high interest rate to the detriment of domestic investment. We should prioritize attraction of foreign direct investments by addressing the key investment environment issues to inspire investors’ confidence. FDIs have much bigger potential impact on job creation, poverty reduction and economic inclusion.’’ The DG stated
He said that LCCI commends the decision to set up an Economic Advisory Council made up of economists of repute. This would surely facilitate the bridging of the skill gaps in economic management and foster the development of a sustainable framework for the acceleration of economic growth and development.
Also, he said that infrastructure financing is a big issue that needs very deep reflection as we mark 59th independent anniversary. Without a sound infrastructure base, it will be difficult to achieve the various socio-economic objectives of government at all levels. Infrastructure investment is a key driver of economic growth and development. Budgetary allocations have proved to be grossly inadequate for effective funding of infrastructure in Nigeria. Neither can we continually depend on debt financing as debt profile is already at an unsustainable threshold. It is thus imperative to seek innovative ways of effectively funding infrastructure in Nigeria. We need to develop new strategies to attract private sector capital to the infrastructure space. This should cover the broad spectrum of infrastructure provision – roads, railways, airports, water ways, electricity and other forms of energy.
Also in an interview with a management expert and the Managing Director of the Scribe Limited , Ven Adelowo Adesina, he affirmed that the nation has done extremely poorly, stressing that the nation has the opportunity to have used the resources from oil for her social-economic development, but the opportunity was totally wasted and mismanaged.
‘’We could have developed far better than these, if we had been intentional, purposeful, and resourceful in using that which God endowed the nation with. But unfortunately, we have misused that opportunity in every facet of our lives. Both human capital development and the educational system are in shambles. We virtually do not have a health sector; infrastructures have totally collapsed, so how can we say we have done well with what the resources God has blessed us with. The oil economy which should have been a blessing to us rather has been a curse.’’ He stated
Looking forward, Adesina pointed out that it is no longer an oil economy all over the world. ‘’As today, most nations and companies are looking at alternative sources of energy, maybe it is time we go into the drawing board and fashion out a national development plan and work out the strategies, processes, and systems for implementing the plan. It is not that there is no plan but implementations have been the problem. Human greed, crass materialism had also had a very negative effect on the nation. Evidently, we are missing it because our moral values are being totally destroyed and corroded, one social malady is that we are becoming a gambling nation. If you see how millions of Nigerians, both young and old are playing the lottery; It is an alarming development. The lotto industry is a multi-billion naira sector today and it is this sense of wanting something from of nothing. Honestly, it doesn’t work out that way. No nation thrives with a gambling mentality. ‘’
He said that what we need is to craft a vision for the nation and have a common purpose for the nation. Then we must invest in human capital development. It is this human that will craft the vision and work out the processes for the development that will ultimately be beneficial to the people and the nation. So, it not even about the economy now but is about getting it right in investing in the surplus human capital that God has given us.
He said the sectors that have the capacity to grow the economy are one Agriculture, which will help in ensuring food security and self-sufficiency. If we, generate much in agriculture, we can begin to look into manufacturing. But we must not shine away from the recent revolution in the industry which if artificial intelligence, computer, data, and robotics. So these sectors can only be driven when the human capital is fully developed.
Obasesam Okoi, scholar and Coordinator of Africa Working Group Consortium at the University of Manitoba in Canada indicated that Nigeria is facing severe governance challenges and there is a need to ensure sound corporate governance.
He explained that Nigeria challenges have altered the social fabric but the nation can break from oil dependency and emerge as a progressive society through innovation in governance.
He affirmed that one recommendation for addressing the resource curse is agricultural modernization. ‘’In many rural communities, agriculture is still traditional. This challenge thrives due to the lack of modern technologies, access to information on crops, weather conditions, credit facilities, and market opportunities as well as poor education. Innovation in the agricultural sector should serve to empower farmers by making technology, information, and credit accessible.
He also said there need to develop the Tourism Industry and promote entrepreneurship.’’ for me transforming the resource curse requires the government to redefine its role in economic transformation and its strategic relationship with the business sector. Using entrepreneurship to drive economic diversification would require education reform. Education must be enterprise-oriented, such that it inspires creativity and innovation. The government, in collaboration with the private sector, should create incentives for students to turn creative ideas into inventions that have an enterprise value. Such reform would encourage young Nigerians to harness their entrepreneurial spirits and compete based on the power of their ideas rather than the monopoly of violence.’’
Mr. Gbadebo Olusegun Odularu from the Department of Economics and Development Studies, College of Business and Social Sciences, Covenant University, said that capital, labour force and oil production can surely lead to economic growth.
He said that the Nigerian National petroleum corporation (NNPC) should diversify its export baskets through downstream production; this will enhance the refined petroleum for exports; the government should encourage more private company participation. So that better equipped refineries can be built and the cost of refining crude oil will
As many of us who want to see Nigeria thrive again, our aspirations are quite simple- provision of basic amenities, infrastructure, and security. The emphasis on security is because there is a correlation between it and economic growth. A nation that battles with insecurity will certainly have its fortunes declined as it’s practically a turn-off for would-be investors.
For a better society