Here are some statistics that should put Nigeria’s economic managers to shame (assuming they still feel such worldly emotions).
The United States is on track to hit the Trump administration’s 3 percent growth target this year, after expanding at a 3.5 percent annualized rate in the third quarter (Q3) of 2018, following growth of 4.2 percent in Q2, and 2.2 percent in Q1, while the Chinese economy (second largest economy globally) grew around 6.6 percent in 2018.
The United States has the largest economy in the world at $20.4 trillion, according to data from the International Monetary Fund (IMF),China follows next, with $14 trillion.
An economy the size of the US, which is expanding at a 3 percent clip implies new economic output of around $612 billion being created annually, while for China (expanding at 6.6%) it means $924 billion of new economic activity/expansion (assuming exchange rates remain fairly stable in the period).
Both economies are creating on an annual basis new economic activity larger than Nigeria’s annual economic output of about $420 billion.
More worrisome though is the fact that these 2 economies (U.S and China) bumping up against the ‘law of large numbers’ (wherein if a firm, company or economy becomes bigger, high growth rates become increasingly difficult to maintain), are outperforming Nigeria which is growing from a very low base.
In the past four years Nigeria’s annual growth rate has averaged: 2015 (2.8%), 2016 (-1.5%), 2017 (0.83%), 2018 (1.9 %*).
Nigeria should manage growth of just 1.9 percent in 2018, according to World Bank estimates.
This should rise to 2.2 percent in 2019, the World Bank said last week Wednesday in its annual Global Economic Prospects.
While the 2015 growth rate of 2.8 percent was the weakest level since 1999 and down from 6.2 percent recorded in 2014, there is still no sign that growth is set to return to levels (circa 7% per annum) needed to lift millions of Nigerians out of poverty.
This is frankly unacceptable and threatens to bestow a lost decade of poverty, unemployment, misery and worsening infrastructure/ quality of life to the ever expanding population of Nigerians.
It is instructive that Nigerian economic managers do more than pay lip service to growth as social safety net programmes or dishing out of ‘free’ money by the State (in the form of intervention programmes) to the so called poor can do no more than tinker at the edges.
The Federal Government must know that there is no substitute for growth and market reforms for lifting millions of Nigerians out of poverty. It must also know that it is failing woefully in that regard right now and must duly change course.
Since initiating market reforms in 1978, China has shifted from a centrally-planned to a more market-based economy and has experienced rapid economic and social development.
China’s GDP growth has averaged nearly 10 percent a year—the fastest sustained expansion by a major economy in history—and has lifted more than 800 million people out of poverty (World Bank).
China reached all the Millennium Development Goals (MDGs) by 2015 and made a major contribution to the achievement of the MDGs globally.
India, another major global economy (GDP $2.85 trillion), has between 1990 and 2013, pulled some 170 million people (the second-most number of people in the world) out of poverty, reducing the number of its citizens living in extreme poverty by 25 percent.
During the same period, life expectancy in the country rose by more than a decade (McKinsey Global Institute, MGI).
The World Bank forecasts that India will be the world’s fastest growing major economy for the next 3 years with GDP growth numbers exceeding 7 percent annually.
Getting your economy to expand at 7 percent per annum usually entails hard work by economic managers including pro-growth government policies, attracting and keeping major global companies and manufacturers, and streamlining regulations.
McKinsey Global Institute in a recent report found that big companies are driving GDP growth in countries that are growing fast and lifting their citizens out of poverty.
MGI found that outperformers identified in the report have almost twice as many large firms (publicly listed ones with annual revenue of over $500 million) as other developing countries, adjusted for the size of the economies.
Presence of big firms also leads to clusters of innovation and increased productivity.
In Nigeria the urgent need for growth cannot be overemphasised.
The negative wealth effect from falling stock markets, poor fiscal position of the Government (Federal and State), lack of jobs/opportunity for millions of young graduates, all derive one way or another from low or anaemic GDP growth and absence of reforms.
Nigeria’s current situation is made more baffling by its infrastructure needs in all sectors.
Whether it is roads, high speed rail, subways for cities, bridges, broadband/high speed internet, hotels, food processing, car assembly, power, services, restaurants, manufacturing, food processing, healthcare, quality education, oil refining, housing, and so on, there is massive unmet demand in Nigeria.
This means Nigeria is very far from capital misallocation like being done in some parts of China and so can attract capital to make these capital investments, provide a return on investments, create jobs, boost growth sharply and provide a better quality of life for most of its citizens.
Even with its impressive economic performance Chinese policymakers are still laser like focused on growth and understand its far reaching implications for employment, income and stability.
China is targeting growth of about 6.2 percent over the next two years to meet the Communist Party’s longstanding goal of doubling gross domestic product and incomes in the decade to 2020, and to turn China into a “modestly prosperous” nation.
It is sobering that while a country like China that is light years ahead of Nigeria is still setting high growth targets, Africa’s largest and arguably most important economy seems resigned to mediocre economic performance.