Economies like Nigeria are said to have enormous potential. We hear that a lot. We hear it so often we’ve taken it for granted? Remaining in potency to catch up, failing to converge, as emerging economies have with developed economies, is to be condemned to perpetual backwardness. There are advantages to backwardness i.e. sufficient room to catch up or converge. For instance, China was once backward but the adoption and adaption of technology and economic policies have enabled it to achieve unprecedented growth.
The economy of Nigeria has grown, in fits and starts. And whatever progress there has been few have felt it. What will it take for a bigger portion of Nigeria to move forward, further and faster? Can we catch up? It depends.
It depends on our ability to absorb ideas and knowledge and map out how we intend to catch up. It depends on building capabilities to adopt and adapt technologies to gradually bridge the distance to the frontier. To be sure, slow growth in developed economies will not cause frontier and emerging economies to leapfrog developed economies. Why?
Because developed economies continue to innovate, to attract the best talent in the world, through their immigration policies, and thus renew themselves. In short, as Dani Rodrik, an economist, succinctly puts it “convergence is anything but automatic”.
Take the US and the invention of hydraulic fracturing (fracking), the technology used to fracture shale rocks to release the oil and gas trapped within. The story of George Mitchell, the man who invented fracking, is the typical American Dream. Mitchell was the son of immigrant parents. His relentless resilience, entrepreneurialism and gamblers’ instinct made him successful in a country with institutions that provide enablers and support enterprise.
The shale revolution is remapping global oil trade and geopolitics. The quality of Nigeria’s growth, the economy’s performance, still depends on how much crude oil can be extracted and sold, subject to conditions that aren’t within the country’s control. Shale has eroded demand for crude oil. Out of Nigeria, human and financial capital are being flown or shipped abroad, willingly and illicitly.
What you trade to catch up, whether goods or services, matters. So do policy, institutions and macroeconomic stability. To go beyond macroeconomic stability, to diversify and restructure the economy and to increase productivity Nigeria has to capture the gains from “automatic-convergence” industries.
Our largely informal economy must be formalised, agriculture industrialised, and electricity fixed to make leather shoes, plastics, pharmaceuticals and fertilizers.
These domestic job-generators require economic policies some of which the CBN has pioneered – development finance institutions (DFIs), for say, Micro, Small and Medium Enterprises (MSME), intervention funds, Nigerian Incentive-based Risk Sharing System for Agricultural Lending (Nirsal) etc. But these policies are not easy to manage, for informational and political reasons. How does CBN know where to intervene, how does the apex bank stop rent-seekers from capturing the benefits of its interventions?
Oil, a commodity that Nigeria is overly dependent on, makes it hard to allocate resources into more productive sectors. Though it has spurred growth, poor economic management from this highly profitable sector has retarded productive employment. Unemployment and poverty are evidence that there are no genuine growth generators.
If they were, entrepreneurs, capital and job seekers would be moving into these sectors. To be fair, policies targeted at agro-allied sectors e.g., rice milling, poultry and fast-moving consumer goods (FMCGs) like noodles, pasta, sugar, cement, and beverages are generating benefits.
Even so, few people see these prospects because job-generating sectors need a functioning market. Nigeria’s massive and stubbornly difficult to measure informal sector further masks the prospects.
