• Sunday, May 26, 2024
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BusinessDay

Addressing regional disparity in the economy

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 A recent report from emerging markets-focused investment bank Renaissance Capital exposes the regional disparity inherent in Nigeria’s booming economy. Data from the report reveal the stark differences in economic performance of different regions in the country – a thriving South with rising income, lower unemployment and better educated citizens and a much poorer, less-educated and struggling North.

All major economic indices that deal with access to finance, power supply, education and employment point to the fact that the northern states are generally worse off than the south. Seven of the 10 largest state economies are in southern Nigeria, while the populations living in southern Nigeria are more likely to have completed primary school than their counterparts in northern Nigeria, according to the report.

Lagos State has the highest net primary school completion ratio, at 70.6 percent, while less than 10 percent of the populations in Adamawa, Taraba, Yobe and Bauchi in particular have completed primary school. The same trends persist in secondary school attendance rates.

“The north-south divide in Nigeria’s school attendance rate highlights a glaring regional inequality in education attainment,” the report notes. “Northern Nigeria’s poor education indicators are a deterrent to investors seeking skilled labour. We think education levels in the South and South West are likely to spur even faster growth, as we have seen in emerging markets globally.”

The Nigerian economy expanded at an average of 7.2 percent per year for the past four years, according to International Monetary Fund (IMF) estimates. In the same period the size of the Nigerian economy has risen by 60 percent to become the second largest in Africa as nominal gross domestic product (GDP) rose to $273bn at year end 2012, from $169bn in 2009. Income per head is expected to hit $1,731 in 2013, up 7.1 percent from the 2011 level of $1,615. However, the northern states income per head of $1,414 is lower than the national average as most of the economic activity is taking place in the south.

A sign of the booming economy south of the Niger River can be seen in the fact that Nigerian borrowers with operations mostly in the south of the country have led the way in Africa’s syndicated loan market in 2013, with more than $10 billion of deals signed or in the market. Indorama Eleme took an $800 million project finance loan in mid-February to fund a $1.2 billion green field fertiliser project, and oil and exploration company Neconde Energy marked its debut in the market with a $470 million corporate deal in early April.

Meanwhile, the Dangote Group has negotiated loans of $4.25 billion from banks to build a refinery, which would be located in the southwest of Nigeria and able to process 400,000 barrels of crude a day, according to Sani Dangote, vice president of the Group, in an interview on April 17.

Most financial services institutions are concentrated in the South, according to the data, with Lagos State alone home to over a quarter of Nigeria’s financial and insurance sector workforce. “Outside Lagos State, banking penetration rates are low, especially in the northeast of the country,” said the report.

Lagos residents have the highest electricity supply per capita in the country, at 163 watts, while power supply in the northeast states is particularly dire, at less than 20 watts per capita. Borno State, which is home to the militant group Boko Haram, has the lowest per capita power supply in the country at 7 watts.

The working-age population is also concentrated in the south, according to the data. Southern states are more urbanised, with higher income households that have fewer children, and 55 percent or more of the population are of working age. In the north, it is less than 50 percent.

We believe this report should be a wakeup call for the northern governors as well as the Federal Government to begin to look into ways to address the dismal northern economic and human development indices. A ‘Marshall Plan’ for the North with the financial burden shared by the FG and states in the region may be a good way to start.