• Friday, March 29, 2024
businessday logo

BusinessDay

The Myths and Realities of the Nigerian Economy

Nigerian economy

Ask a cross-section of Nigerians if Nigeria is a rich country, and the more probable response would be in the affirmative. Not only does the typical Nigerian citizen hold the impression that Nigeria is a rich country, but several eminent Nigerians and policymakers also hold this belief.

Here is a shocker however– Nigeria is not a rich country and does not qualify as a rich country by most acceptable measures. The “Nigeria is a rich country” myth is one of several myths, which have pervaded the psyche of Nigerians. Like other myths, it is one that needs to debunked.

Myths are generally not uncommon in Nigeria. Millions of Nigerians have been regaled with the tale of a football match between Nigeria and India, which ended 100-1 in favour of India. Although the game never took place, it has remained widely popular over decades. It is therefore unsurprising that economic myths, chief of which is the “Nigeria is a rich country” myth, are also popular in Nigeria.

According to the 2018 World Bank Country Classifications by Income Level report, a country needs to attain the Gross National Income per capita (GNI per capita) threshold of at least $3,896 to qualify as an upper middle-income country, whereas a GNI per capita of at least $12,055 is required to be classified as a high-income country. Nigeria’s GNI per capita currently stands at $1,968, a figure which places the country firmly in the lower middle-income category, in cohort with the likes of Djibouti, Myanmar and Sri Lanka. Thus, by the commonest of globally acceptable indicators, Nigeria does not qualify as a rich country.

An argument often put forward by proponents of the “Nigeria is a rich country” myth is that the country possesses vast reserves and deposits of crude oil and natural gas. However, the presence of natural resources within the borders of a nation does not automatically confer a wealthy status on such nation. Rather, such endowment indicates that a nation could potentially be wealthy if the available resources are judiciously managed. For instance, based on the fallacious premise that endowment with natural resources automatically translates into wealth, it could be argued that DR Congo is the richest country on the African continent due to the vast natural resource wealth it possesses, yet this far from reality. Therefore, while it is incontrovertible that Nigeria is resource rich, poor leadership and mismanagement of these resources have conspired to ensure that the nation remains a poor underachiever. To state the obvious, when majority of a nation’s citizens survive on less than $2 daily, and that same nation has recently been adjudged the poverty capital of the world, such nation can in no circumstance be regarded as rich.

Another popular myth engrained in the psyche of Nigerians is that “Nigeria is an import dependent nation”. Several Nigerians, including President Muhammadu Buhari have alluded to this. Yet, nothing could be farther from the truth. The reality is that Nigeria has one of the lowest import to GDP ratios in the world at 13 per cent, even behind countries like Pakistan (18 per cent), and Ethiopia (19 per cent). In fact, the total value of goods imported into Nigeria in 2018 was $36.5 billion, which translates into about $200 for every Nigerian citizen. Nevertheless, this mythical belief that Nigeria is import dependent has been the bedrock of several official government policies, including the CBN’s exchange rate policy, as well the incessant bans on importation of various products.

A consequence of accepting myths as reality is that official policies tend to be built around them, and such policies often exacerbate the problems they were created to resolve. For instance, in order to correct Nigeria’s inexistent import dependence, the government often places bans on imported products. However, over the years in Nigeria, importation bans have not had the desired effect of stimulating demand for local products. Instead, these bans in Nigeria tend to result in hikes in the prices of basic products, which further entrench poverty, as well as smuggling, which results in loss of government income in the form of custom duties. Basically, while economic myths might seem harmless on the surface, their consequences tend to be far-reaching and significant, particularly if they lead to wrongly formulated government policies.

Nigerians also tend to believe that public goods such as stable electricity and quality education can be provided free or obtained cheaply. Unfortunately, this is also inherently false as there is no such thing as a free lunch. The consequences of our belief in the myth that public goods can be provided for all free of charge are evident for all to see in the forms of the nation’s dilapidated infrastructure, substandard education system, and general underdevelopment.

Overall, mythical beliefs held to be true by millions of Nigerians about the economy, and the policies often formulated based on them might seem harmless on the surface but tend to have dire consequences for the nation’s economy.

If Nigeria is to depart the path of underdevelopment it currently treads and attain its position in the upper echelon of nations, there is a need to disabuse Nigerians of the various economic myths peddled around. In particular, there is a need to educate Nigerian policymakers on the effects of formulating official policies on hearsay, wishful thinking and bogus statistics.

Otherwise, we will continue to wallow in underdevelopment brought about by self-deceit.

 

LANRE RUFAI