The 2010s were meant to be the decade of promise for Nigeria, or so it was thought.
In December 2005, leading global investment bank Goldman Sachs named some 11 countries it expected would become the world’s largest economies in the 21st century.
They were Mexico, Indonesia, Nigeria, Turkey, Bangladesh, Egypt, Iran, Pakistan, Philippines, South Korea and Vietnam.
These countries, selected based on their enormous economic potential, were mooted as successors to the BRICS nations (Brazil, Russia, India, China and South Africa) and were expected to eventually rival the world’s economic heavyweights also referred to as the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States).
At the end of the 2000s, it was Nigeria that had the fastest growing economy of the Next 11 countries, posting an average growth of 7.68 percent between the years 2000 and 2009, according to World Bank data.
Vietnam (6.65 percent) and Bangladesh (5.5 percent) were in second and third place, respectively.
Behind them were Indonesia (5.11 percent), Egypt (4.98 percent), South Korea (4.68 percent) and Pakistan (4.49 percent).
The economies of Iran and the Philippines were tied, having expanded 4.46 percent in the period under review.
Turkey and Mexico rounded up the list with economic growth of 3.97 percent and 1.48 percent, respectively.
Enter the next decade, 2010-2019, and Nigeria’s promise completely vanished.
The economy fell from top spot to rank eighth out of the Next 11.
A decade of 7.68 percent growth was followed by another of 3.81 percent growth.
Full-year growth numbers for 2019 are yet to be published but expectations are for a 2.2 percent growth, which still leaves the economy wallowing at below 4 percent, about half of the growth recorded in the decade before.
The new look Next 11 now has Bangladesh (6.61 percent), Turkey (6.40 percent), the Philippines (6.34 percent) and Vietnam (6.23 percent) in top four.
Nigeria only betters Egypt (3.61 percent), Mexico (3 percent) and Iran (2.65 percent).
While Nigeria, Egypt and Iran all fared worse in the most recent decade, Mexico made some progress from the decade of the 2000s when the economy expanded by 1.48 percent.
It should come as no surprise that the last decade was a lost one for Africa’s largest economy with all its promise and potential.
Early into 2019, a report by the Brookings Institution said without reforms to reduce its oil addiction, Nigeria risks “a lost decade” of flat economic growth. With hindsight, that is exactly what happened.
Goldman Sachs did warn of a possibility of failed potential for the Next 11 countries that were commodity-dependent.
The caveat for Goldman Sachs was that shifts in global commodity prices would affect the Next 11 producers of the commodities.
For Nigeria, its heavy reliance on crude oil proved its economic undoing.
Despite data by Statista, a global data provider, showing that crude oil prices were higher on average between 2010 and 2019 than in the 2000s, the five years between 2015 and 2019 did the damage that marred a decade of promise.
In the 2000s, prices averaged $47.5 per barrel. That figure increased by 62 percent within 2010-2019 to $77 per barrel.
In the last five years, however, oil prices averaged $55 per barrel, about half the average price of $104 per barrel in the four years (2011-2014) preceding that period.
It was also within the last five years, 2016 specifically, that oil production fell to a decade low of 1.2 million barrels after a wave of militant attacks on oil installations.
Lower oil prices and oil production caused a sharp drop in economic growth that plunged Nigeria into its first recession in 25 years. The economy contracted 1.6 percent in 2016.
Nigeria is not the only net commodity exporter of the Next 11 countries, but the other countries had better buffers in place to resist an oil price shock. Nigeria didn’t.
The government introduced a raft of capital controls that irked investors and forced them to flee, thereby exacerbating what was already one of the lowest points of the Nigerian economy in three decades.
The economy would later exit recession in 2017 but economic growth of 0.8 percent was too little to make impact in an economy with the population of Russia and Canada put together.
Nigeria has a fast growing population. Annually, the population grows at a rate of 2.6 percent.
Economic growth below 2.6 percent means the economy is not able to absorb its growing population and there aren’t enough job opportunities for new graduates.
This has been the trend since 2016 with economic growth yet to match population growth of 2.6 percent. In 2018, the economy expanded 1.9 percent and probably grew 2 percent in 2019. Median forecasts for 2020 point to a growth of 2.2 percent while the government is targeting 3.5 percent.
The International Monetary Fund expects the country’s negative per capita GDP to persist for another five years.
Weak economic growth, though the single largest indication of Nigeria’s lost decade, is not the only one that captures the country’s fumbling.
After the excitement that came with the debt relief negotiated by the then President Olusegun Obasanjo that trimmed the country’s debt burden, it’s on the rise again.
Nigeria’s public debt to revenue ratio could rise to an alarming 400 percent in 2020, says international ratings agency, Fitch, while government debt may exceed 30 percent of GDP.
At the start of the decade, public debt to GDP was 9.6 percent. In 2018, it jumped to as high as 16 percent.
While public debt has increased to compensate for lower oil revenues, the government may not have been efficient in deploying the debt.
Economic growth has remained tepid, something that would have been different had the government spent the borrowed money on infrastructure development.
Several governments have failed to keep the lights on in Nigeria which continues to generate about a tenth of the power its economy requires.
Several roads have remained in deplorable state, notably the Lagos-Ibadan Expressway.
The GDP rebasing which presented an outsized economy that initially drew the world’s attention to the most populous black country has been short-lived and foreign direct investment has disappointed.
Rather than end the decade with the promise of being one of the richest countries and fastest growing economies in the world as Goldman Sachs had forecast, Nigeria ended the decade with the unviable badge of the poverty capital of the world.
Nigeria’s success in the new decade will depend on whether the government opens up the economy for an influx of private capital. Other emerging countries have used private capital to grow and create ample opportunities for their citizens.
The need to open up new sectors to private capital as a way of boosting economic growth is hardly new counsel in Nigeria, but that advice has not been heeded.
What’s worse from a Nigerian perspective is that other African countries are recognising the role of private capital in growing the economy and are providing good competition for capital.
Take Ethiopia, Africa’s second most populous nation.
Ethiopia plans to sell a minority stake in state-owned monopoly Ethiopian Telecommunication Corp to foreign investors in 2020, as well as two new licences to drive competition in the space, as Prime Minister Abiy Ahmed opens up the economy to foreign ownership for the first time in decades.
Ahmed’s ambitious privatisation plans don’t end there. Six sugar plants will also be sold to foreign investors while sectors including international aviation, where state-owned Ethiopian Airlines dominates, as well as power and postal services, will be open for private sector partnership with the government.
Ethiopia is not alone. Ghana and Egypt are also putting incentives in place to attract capital while Nigeria slumbers.
Turning the tide around in Nigeria in the next decade would also need purposeful and deliberate leadership.
LOLADE AKINMURELE
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
