• Friday, March 29, 2024
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BusinessDay

In new decade, Nigeria must focus on economy, population control

Economy

What is the economic advantage of a huge population? Big market size, high economic growth, huge tax base and better domestic capital mobilisation. Nigeria has none of those but keeps growing at a rate that would see the country overtake the United States as the third most populous country globally before 2050.

With a population of around 200 million currently growing annually at around 2.6 percent, Nigeria is Africa’s most populous country and is expected by UN’s population division to add a little more than 200 million in the next three decades. This would see Nigeria surpass US population which would be under 400 million then.

For now, Nigeria doesn’t boast of a huge population alone. It is Africa’s biggest economy (around $420bn in 2018 based on 306/$). But the country is poverty capital of the world and could become home to a quarter of the world’s poorest by the end of the new decade, the World Bank recently warned.

Ironic as it might seem, Nigeria’s conflicting titles are not unrelated.

Big for nothing

Nigerians are poor, and a 200 million population is not a big deal if they have a low purchasing power.

Nigeria’s market size is just under 37 percent of the population, according to a 2019 survey by Lagos-based SBM Intel.

“Nigeria’s true market size is really the number of people who are able to spend discretionarily once they get past spending on the essential commodities,” said SBM Intel in the 2019 report where 63 percent of respondents revealed that after taking care of food, they had nothing left to spend.

Another report by Coronation Merchant Bank established that Nigerians are price-sensitive and prefer cheaper, less-known brands to the more popular ones (quoted on the stock exchange). This is because Nigerians simply don’t have money.

Nigeria has 94 million people living below $1.9 per day, according to World Poverty Clock, and unemployment at an all-time high of 23 percent.

Nigeria’s per capita income last year was $2,028.182 which was an improvement from 2017. However, Nigeria still had one of the lowest per capita incomes in Africa underperforming the likes of Egypt, South Africa, Angola, Algeria, among others, and many global peers.

The low income per head is due to the slow pace of growth compared to the increase in population size.

Bismarck Rewane-led Financial Derivatives Company (FDC) expects the economy to expand 2.2 percent this year compared to 1.9 percent last year. This would be an improvement but leaves Nigerians worse off because income per head (which does not even measure wealth dispersion) will continue to decline.

This means with an average fertility rate of 5.457 compared to a 2.432 global average doesn’t play well in Nigeria’s favour. An increase in household size leads to a less proportionate increase in household demand since income is not increasing. Families must, therefore, resort to sharing meals. This has an adverse effect on capital formation which leads to a poverty cycle or trap.

Domestic liquidity is low. Broad Money (M2) as a percentage of GDP last year was 23.5 percent, lower than Ghana (27.4 percent), Angola (30.3 percent), Kenya (37.5 percent), South Africa (73.1 percent), Algeria (79.1 percent), Egypt (81.8 percent), and Morocco (118.7 percent), according to data compiled by Lagos-based Economic Associates.

This shows the financial depth is low in Nigeria as banks can only fund around a fifth of the economy which is not good for the MSMEs.

Gross domestic savings in Nigeria is around 17.82 percent and underperform sub-Saharan Africa average of 18.1 percent, according to the World Bank.

Academic research shows that labour productivity is low in economies where there is a population surge if capital and technology do not match up. Unfortunately, required capital investment in Nigeria is still very low.

A poor population also has implications for the government which plans on increasing tax revenues. Aside from issues of tax evasion, a poor population cannot yield much tax revenue to the government. Nigeria’s tax-to-GDP ratio is under 10 percent and one of the lowest in the world.

All current projections show the possibility of increasing in population up to at least 700 million by 2100. Economic growth remains a potential and the grim statistics may get worse in the coming years if the population is not checked.

Economy or population?

There is an on-going debate whether Nigeria’s focus should be on population control or boosting the economy. Some arguments have been that population size has not stopped India, US and China, among others, from realising the potential of their economy.

Interestingly, these countries with bigger economies, faster growth rate, per capita income and prevailing technologies have lower population growth than Nigeria.

India’s Prime Minister Narendra Modi in August 2019 mulled introducing population control policies in the country. There’s little need discussing US and China’s efforts on population control. Notwithstanding, there cannot be any proper economic planning without discussing population.

Zainab Ahmed, Nigeria’s finance minister, at the 24th Nigerian Economic Summit in Abuja in 2018 admitted that Nigeria’s population was a constraint to the Economic Recovery and Growth Plan (ERGP).

In the absence of a long-overdue population census, the last one having been conducted in 2006, Nigeria’s exact population is not known and this affects national planning. The National Population Commission (NPC) earlier this year disagreed with the United Nation’s estimation of Nigeria’s population.

Notwithstanding, the population size is in fact so huge that the government reportedly said a policy to limit the number of children a mother can have in Nigeria was in the offing. China’s struggle with an ageing workforce is a clear warning against coercive population control.

But left for “positive” checks, Nigeria may be faced with a worse level of insecurity and insurgency than it has seen in the last few years. However, the country can rely on education and sensitisation programmes as preventive checks to tame population surge, while policymakers try to get the economy back on track.

While awareness programmes alone are not incentivising enough to discourage population growth, experts have argued that investing in education especially of the girl-child can help increase planned parenting, reduce early marriages and even delay child-bearing.

At the end of the new decade, Nigeria could see the number of extremely poor increase by more than 30 million. The government must double efforts on its population control programmes as well as embark on necessary reforms to unlock growth.

 

SEGUN ADAMS