Responsibility of becoming Africa’s biggest economy

The rebasing of Nigeria’s GDP to reflect current economic realities was long overdue. While countries are expected to rebase their GDP every three to five years, the last time Nigeria embarked on such venture was 25 years ago.

The implication is that before now, the country was planning with outdated figures that did not factor in new sectors and the changes that have occurred in our economy in the intervening years.

The large input of the services sector for instance was a surprise to many. We have also now found out that even though Oil and Gas remain our major foreign exchange earner, the industry is not the largest contributor to our GDP. Agriculture too, no longer contribute over 50 percent as we always wrongly thought.

With the current GDP at $509.9 billion from $286 billion, puts Nigeria unarguably, as the largest economy in Africa, beating South Africa to second place. This new position highlights the most probable risk to the country – poverty. Despite its strides in expanding the economy, the level of poverty also grew in inverse proportion, occupying the unenviable third position of the world’s extreme poor.

The sad reality is that the disparity between the rich and the poor in Nigeria is among the highest in the world. 7 percent of the world’s extreme poor population resides in Nigeria, according to World Bank published statistics. This is due largely to corruption in all facets of our national life, weak institutions and the disconnection that exist in our economy.

For instance, we are the seventh largest crude oil producer and yet we import fuel. Now, over 6000 items are made from petroleum waste by-products alone, but these are lost along the value chain. We are yet to see the kind of impact that oil exploration has made in countries like Norway where it has propelled them into one of the countries with the highest standards of living in the world. The much talked about Oil and Gas hub for West Africa is daily slipping away while Angola forges ahead and may soon take over as the largest oil producer in this region, and consequently become the hub.

Nigeria is the world’s largest producer of cassava and yet we cannot utilise this for bio-fuels and other derivables that would create wealth along the value chain and the attendant loss of large employment possibilities that could have been created along the way.

Nigeria is the third largest producer of cocoa and yet we do not have a world-class chocolate factory that will make us an exporter of chocolate with value addition that can earn much needed foreign exchange, after all these years of cocoa production.

Nigeria is among the top producers of oil palm and yet we do not derive the full benefit of that wonder crop.

We have lost out in cotton and groundnut. So, being number one is not new to us. The question is what have we done with it?

Our infrastructure is among the worst for a country of this size. Our power infrastructure is weak, generating less than 4,000mw when we require over 40,000mw. Transportation system is below our ranking because we have failed to put policy in place to ensure growth in public transportation and stop the nonsense of various governments at all levels trying to become transporters. Many forget that the level of development seen in our telecom industry did not cost the government one kobo. All the Federal Government did was put proper policy in place and the private sector saw a clear process that was transparent and decided to participate.

Lagos State government, the most progressive government in place in Nigeria today, is already attempting this, while some of its counterparts in other states are still wasting resources buying buses and cars that have nothing to do with public transportation. The real deal is the contract of buying buses and nothing else. These and other disconnections in the economy mean that we have yet to derive the maximum benefit of our large economy.

So, yes, we are the 26^th largest economy in the world, but due to the asymmetry in the system, many Nigerians are poor. And so we need not confuse the enlarged economy with the level of development in the country. Simply put, growth does not necessarily translate to development; in fact, after growth, comes development.

Perhaps, the major obstacle to positively reaching higher levels remains corruption, which is accelerated by the level of poverty in the system. In fact, the challenge of poverty found berth in corruption and its spiralling effect. The rot in the civil service, and indeed the private sector is as a result of social insecurity. There is therefore the need to pursue the prosperous ideals of an egalitarian society in order to eliminate corruption.

To reap the real benefit of a large economy we must be able to take advantage of the numerous advantages, which our status gives us. Largest economy, largest population in Africa, abundant natural resources and a strong position in terms of demographics, with over 50 percent of the population within the productive age bracket.

Failure to derive the optimum from our endowments over the years has translated to the security challenges we now face. For one, we must tackle security at baseline level. In fact, tackling security headlong is at the heart of solving the unemployment conundrum. Engaging thousands of youths in community policing and security enforcement will take many youths out of the unemployment market and involve them in safeguarding our neighbourhoods.

Also, we need to recommit to genuine reforms that will usher in just and egalitarian society. We must adopt sensible and enforceable laws that will promote social harmony and create a sense of belonging for all citizens. We must fight corruption from a neutral position by discarding policies and systems that allow corruption to thrive.

A fundamental step towards tackling corruption is by plugging loopholes that allow public servants unfettered access to public funds. The idea of letting all government agencies become revenue collectors, while also spending the revenues they collect directly from their own bank accounts is a bad idea. It is time for a unified treasury system whereby all government resources, inflows and outflows occur in a single account. By ensuring that all ministries, departments and agencies of government at the federal, state and local government levels each open a single account with the Central Bank of Nigeria through which all receipts and payments are done. This does not mean everyone going to the CBN to bank, commercial banks will continue to take receipts and make payments but all such accounts will be tied to the unified account domiciled at the CBN.

All such funds should be non interest earning and will go straight to the CBN dedicated account and payments made from it will be by warrants only. The idea of making payments by government with commercial bank cheques is absurd. All government agency payments must be by warrants which will clear in any commercial bank like drafts. They should just be guaranteed pass through instruments. All auditor generals at various government ministries, departments and agencies (MDAs) will be empowered to closely monitor these warrant payments.

Since no MDAs will have power to keep funds and make payments unless through these warrants subject to final clearance, frivolous payments will come under better scrutiny. The type of arrangements that allowed the aviation ministry to spend N225 million to buy bullet proof cars using First Bank would have been questioned by the auditor-general and trigger documentation that would reveal what the money was been spent for.

Making government funds no longer interest bearing will mean government money flowing through the financial system frictionless and sterilised, and not available to cause distortions in the financial system. All government payments made by warrants will clear in five days for purpose of audit. The clearing period will allow for verifications and to track the funds movement.

The auditor-general of the various levels of government will be empowered to flag these accounts periodically to ensure transparency and accountability. Such single treasury presupposes that the funds will not earn interest and so the incentive to place it in interest bearing accounts, which is at the bottom of delayed contract execution and the tardy procurement and execution pattern we currently see, will be eliminated.

Since banks will have access to the money within the payment period, it translates to interest free money, and so, not capable of causing any distortion in interest rates. This will lower the cost of funds eventually (central to reviving the real sector), keep inflation rate low thus improving the purchasing power of the citizens.

As the largest economy on the continent, a big responsibility is thrust on Nigeria to ensure that the level of poverty in the country is brought within acceptable standards. The country must accelerate current growth rate to leap to new heights. We must leverage our size to lift more people out of poverty by reducing rate of unemployment and more inclusion in the system. That is the only way the large size of our economy will make sense to many Nigerians. Until then, there is little to celebrate.

Victor Ogiemwonyi is CEO of Partnership Investment Company plc, Lagos