• Monday, July 15, 2024
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BusinessDay

The pie is too small – So bake a bigger one

Impact investing key to bridging Nigeria’s infrastructure deficit

Let’s carry out a little thought experiment. Picture in your mind the total amount of money that has been illegally siphoned from Nigeria’s government since independence in 1960. Now think of Nigeria’s total infrastructure deficit, that is the total monetary value of the schools, roads, hospitals, railways, water systems, ports, research institutes, power stations and dams that it would take for Nigeria to provide an acceptable standard of living to its 180 million people. Which of these two figures is bigger?

If you believe the stolen funds are greater, raise your left index finger. If you believe the infrastructure deficit is greater, raise your right index finger. Now let’s look at the facts. According to a Chatham House report published in 2019, the total estimated value of illegal financial outflows from Nigeria since independence stands at $582bn. That is a lot of money. According to the African Development Bank, however, Nigeria’s current infrastructure deficit stands at roughly $100bn annually, which means that if not quickly addressed, Nigeria could have an infrastructure deficit of $3trn by 2044.

“There is money” – A foundational misconception

Clearly, if you put your left index finger up, you are mistaken. That little experiment is one way of capturing the basic misconception at the heart of how successive Nigerian governments formulate economic policy, and why Nigerians consistently make the political decisions that they do. In a previous column, I wrote about Nigeria’s economic “Wakanda Complex” and its preference for leaders whose skill is fighting enemies instead of nation building. Both of these issues boil down to the basic assumption that the existing oil revenue pie is – or can be – enough to sustain 180 million people. Instead of trying to grow our objectively small economy and make it big enough for everyone to participate satisfactorily, we rather end up fighting an eternal war for our “share” of the allegedly gigantic crude oil pie.

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Instead of choosing leaders who have plans to grow the economy by encouraging innovation and enhanced private participation which leads to broad-based accumulation of wealth, we choose demagogues who promise to “fight corruption”, as though Nigeria’s $20bn annual government budget can realistically make even a dent in Nigeria’s economic problem. For reference, Egypt’s 2020 budget stands at $106.2bn for its 98 million people, this averages out at over $1,000 per Egyptian. Our equivalent figure is $111.11 per Nigerian.

For the sake of argument, if you could press a button to “end corruption” and at the same time raise oil prices to $150/barrel while maintaining peak production with zero leakages for one year, Nigeria would make about $175bn. Remove 50% for the JV partner, and that leaves us with $87.6bn for 180 million people, which comes to about $486 per Nigerian per year – still less than half of Egypt’s per capita budget.

Is the point clear enough?

Nigeria is, and has always been a miserably poor country. Even at the peak of the 70s oil boom, Nigeria’s per capita GDP stood at $556, which is $2577 in today’s money. Our current PCGDP stands at $2081, so clearly not much has changed except the number of people now competing for a share of the same limited pie. Our economic problem is poverty – the economy is too small and we need more income, which can only come through privately-driven production and innovation.

The political solution to this economic problem is to amend the constitution to make it investment friendly, and vote for candidates who will grow the economy instead of the state. The solution is not to give our mandate to those whose only stock in trade is to give us bedtime stories and Nollywood morality tales about “corruption”.

After 60 years of fairy tales, it is time for us to grow up.