• Sunday, February 25, 2024
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BusinessDay

Why Nigerians are Poor!!! (3)

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We have agreed that the evidence is irrefutable that Nigeria’s immense endowments have not benefited the vast majority of its people- approximately 70% of the population is poor; about 30% are unemployed; 40% of the youths have no jobs; 30% of our people remain illiterate; life expectancy is just 52years; and the country exhibits poor human development with HDI of 0.471.

I have identified six major reasons for this unhappy phenomenon. First, defective economic structure subdivided into four deficiencies with GDP structure, budget structure, public sector dominance of energy provision- oil and gas, refineries and until recently power, and deficiencies in the structure of the financial sector which renders it incapable or unwilling to lend to MSMEs and support housing and mortgages. Secondly, our prebendal government/political structure which encourages distribution rather than production and undermines rational economic competition, and the associated cost of governance and waste inherent in running an expensive presidential system of government with unwieldy and inefficient federal administration, two houses of the National Assembly, 36 States Governments and 774 Local Governments.

Thirdly low industrialization caused by a debilitating deficit in electricity supply, decrepit transport infrastructure, high interest rate and inflation, poor public services including security, water, postal, ports, immigration and customs, a high effective tax burden due to multiplicity of taxes, dues, and charges, low industry incentives, regulatory overkill and a generally poor investment climate. Forth, corruption denies us the infrastructure and services for development and transfers public resources into relatively unproductive private loot. Fifth, gross sub-optimalities in education, health and social systems constrain human capital. Sixth, significant policy and execution failures have translated into inability to leverage our resources and advantages to create a robust, diversified, equitable and prosperous economy and society.

So what are the solutions? It is obvious that our critical economic challenge is to diversify our economy away from rents from oil, into a productive economy based on manufacturing, transportation, mining, agriculture and construction, amongst others.  Nigeria is well-placed to achieve this with our large labour endowment and markets, natural location as a transportation hub, abundant solid mineral deposits and large, fertile land mass. The required investment in infrastructure and housing if made, guarantee a booming construction sector into the long term. These sectors and activities will produce domestic jobs in large numbers and redress poverty. I believe we also need to resolve the issue of downstream petroleum sector deregulation.

It is also evident that we need budgetary reforms to focus government spending on capital expenditure. I indeed advocate an amendment to the Fiscal Responsibility Act to mandate a 60:40 capital/ recurrent ratio within the next two years; and a 70:30 ratio within the next six years! This will require drastic public sector reforms (the Oronsanye Report maybe a useful input) to reduce the size of the public sector. I also support and commend the power sector reforms under the administration’s power sector roadmap and urge completion of NIPP privatization to fully liberate the electricity sector. This must be accompanied by gas sector reforms especially pricing adjustments to make investment in local gas attractive. The other supportive decision which I hope politicians, bureaucrats, and labour will allow government to take is privatisation of all the refineries. The legal and regulatory infrastructure for take-off of solid minerals is already in place- the Mines and Minerals Act 2007 and the institutions created there under. All that is missing and that should now be manifest is the political will, sector stability and global marketing to attract international investments into the sector. Mining, we must recognise, also creates jobs in large numbers.

I believe we need legal and constitutional reforms to enthrone fiscal federalism, devolution of power to sub-national entities, increase revenue allocation to States and LGs, and create a truly federal or confederal, competitive and productive economy. There are also policy actions which we have to take- investment climate reforms to improve business and economic competitiveness, focus on developing MSMEs, deepening long term savings through pensions, insurance and sovereign savings, land reform to eliminate constraints in time and cost around land transactions (including a review of the governor’s consent requirement), and actions to reduce inflation, interest rates and business operating costs. I strongly believe we also need a robust competition law and policy regime to prevent monopolies and anti-trust practices which increase prices, prevent economic efficiency and subvert the free enterprise and democratic system!In our current conditions, we require aggressive social policy- it should be clear that the primary role of government is to help the poor and vulnerable. We need public education reforms, investments in public health, and creation of sustainable financing structures for both health and education. Government must also consider the provision of unemployment support.

Finally, we must tackle corruption. I prefer structural rather than emotional responses to the malaise- privatisation to reduce the space for public sector corruption; deregulation to minimise official discretion and procurement transparency and freedom of information. But there must also be stronger enforcement. We must re-define the nation’s primary national security imperative as the abolition of corruption, which in any event, is what our constitution stipulates. Our leaders must find the political will to fight corruption.

By:  Opeyemi Agbaje