Nigeria’s development: the challenge of inequality

The National Bureau of statistics (NBS) has once again released final rebasing figures of Nigeria’s GDP, using the expenditure approach which has put the figures at about $6 billion (About N1 trillion). The Nigerian economy is now valued at N81.009 trillion. In the NBS report, the final consumption of Household Items Expenditure accounted for largest chunk of the rebased GDP profile; standing at about N58.138 trillion in 2013, up from the N42.115 trillion in the 2012. We must commend the leadership of the NBS for taking their time to validate our GDP figures.

It is vital we all understand that the results are statistically the same i.e. income, expenditure or output techniques are simply a matter of analysis. Majority of Nigerians have criticized the rebased figures on a number of reasons, one of which is how come we are the largest economy in Africa and still faced with the challenge of inequality, poverty and unemployment. The rational question to be asked would be; what are the comparative advantages of a growing economy like Nigeria to its citizens? The figures have once again justified the fact that inequality is still a major problem in Nigeria.

Dr Kingsley Chiedu Moghalu, Deputy Governor of the Central Bank of Nigeria (CBN), in his recent book, “Emerging Africa: How the Global Economy’s ‘Last Frontier’ Can Prosper and Matter,” Identified globalization as a major challenge to the development of African countries.

A French economist named Prof. Thomas Picketty in his recent block buster book ‘Capital in the 21st Century’ have also raised a lot of fears about the rate of growth of the capitalist wealth in the world and how it poses a major challenge to solving the problem of inequality in the world. As the global economy enjoys a more equal society, the Nigerian story is less rosy: inequality has worsened. The Gini index is one measure of inequality, based on a score between zero (0) and one (1). It’s important we know that a Gini index of one (1) means a country’s entire income goes to one person; a score of zero means the wealth are equitably distributed. Nigeria with a Gini coefficient of 48.8, urban unemployment of 30% and misery index (unemployment + inflation) of 38% gives a vivid picture of our current economic challenges.

Economists have been forced to ask if our strong economic base in terms of GDP size has any comparative advantage to the individual development of the citizens. In the light of this, the former president Olusegun obasanjo (GCFR) was quoted to have said that the Nigeria’s middle class have gone extinct and the standards of living have worsened in present day compared to the days of the Late Abacha’s regime. Economists are puzzled because the growth path of the Nigerian economy contradicts the predictions of the founding fathers of the discipline.

Take America and Bangladesh now. In America the ratio of highly skilled to low-skilled workers is high. In Bangladesh it is low. This is so because America focuses on products requiring highly skilled labour, such as financial services and software. Bangladesh focuses on down market products such as garments. Comparative advantage predicts that when a poor country starts to trade globally, demand for low-skilled workers will rise disproportionately.

That, in turn, should boost their wages relative to those of higher-skilled locals, and so push down income inequality within that country. The growing trend in the Nigerian economy does not boost wages for all. The growing inequality is one of the biggest social, economic and political challenges of our time.

The important question to be asked would be: is the focus of our policy makers aimed towards solving this demographic bombshell? Going through the transformation agenda policy document, we can summarize the policy targets as thus: Ensuring greater harmony between fiscal and monetary policy, Pursuit of sound macroeconomic policies, greater clarity of budgetary roles, Institutionalizing the culture of development planning and review of revenue allocation amongst others. It is also clear that government’s policies are majorly targeted at improving foreign direct investment, foreign investment, global integration, reducing inflation etc.

These bring us to the fact that we need strategic policy instruments in order to ameliorate the challenge of inequality in Nigeria. We have not seen any deliberate attempt to address the fundamental problem of inequality in Nigeria. The minister of finance was once quoted to have said that less than 20% of Nigerians enjoy the comparative advantage of our celebrated economic growth. It’s a fact that our large economic base is only skewed towards the few capitalist class in the economy. It is high time government addresses inequality as a fundamental problem to the individual progress of its citizens.

SANNI MUHAMMED OZOVEHE