BusinessDay
Nigeria's leading finance and market intelligence news report.

Nigeria’s wealth paradox

“Poverty in a sea of wealth” seems to be the best suited theme for the Nigerian economy as it constantly battles overlapping complexities and inequalities which seem to have become its new norm in recent times.

Nigeria’s rapid population growth is out-pacing attempts to eradicate poverty, which happens to be an oxymoron as Africa’s second largest economy and oil rich nation reigns supreme in a ranking no country wants, which is a first-place position for the most people living in extreme poverty.

In Nigeria, extreme poverty rate grows by six (6) people every minute (60 seconds) which means that 87,000,000 (87 million) Nigerians or nearly 50% of the population are living below the bread-line.

The figures come from the World poverty clock and it is counting down to 2030, measuring progress on the UN’s major sustainable development goal to eradicate poverty world-wide.

Despite being the largest oil producing country in Africa, successive Nigerian governments have struggled to lift living standards.

President Muhammadu Buhari took office on May 29th, 2015 vowing to improve the lives of ordinary citizens, but the manufacturing, transportation and agriculture sectors have not recovered from the 2016 economic recession after a drop in oil prices.

The unemployment rate is at 19% while the youth rate is at 33%, a disparity which poses an imminent threat to subsequent growth and development in the Nigerian economy.

The president’s anti-corruption campaign clawed back 1.6 billion dollars in misused funds but his critiques argue that the recovered funds barely scratched the surface and although he is credited with pushing back the terror group known as “Boko-Haram” insecurity however still persists in the North-East.

At a recent National Economic Council meeting, the governor of Kaduna State, Nasir El-Rufai said Nigeria’s electricity sector is broken and the government has spent N1.7 trillion supporting the sector in the last three (3) years.

Dallas Peavey, the chief operating officer at Armese Power solutions in an interview, stated that “one of the problems of the power sector was that the distribution company’s (DisCos) and the power generation company’s (GenCos) could not meet their obligations to continue to provide the investment to improve the infrastructures that they carry”.

Power generation reached a new peak of 5,075 mw on February 3rd, but current levels of supply and the overall production capacity of around 6,427 mw remain grossly inadequate. The latest adjustment in the current MYTO (2015-2024), which took effect on February 1st, raised prices by an average of 45%.

In Lagos, Nigeria’s commercial capital, small residential power users now pay N24 (US$0.12) per kwh, and heavy domestic users pay N29 per kwh. Trade unions, anti-poverty groups and politicians have condemned the rises, saying that they are unjustified because there has been no significant improvement in services delivered by power companies’ and that new charges are unaffordable to the majority of the population who exist on low incomes.

The points made by critics reflect the grievances of consumers, both households’ and businesses, who have suffered years of incessant power outages that have blighted lives and curtailed productive activities. However, the contention that electricity companies must first improve their services before raising prices may seem morally sound but is inconsistent with how a market economy works and if this persists acrimony over the power sector is set to remain more significant than actual development in the coming years.

Several interventions have been made by the Federal government to tackle the issue of education for out-of-school children, yet the numbers keep increasing. Nigeria’s budgetary spending on education is not enough to quell the widening gap as only 7% of Nigeria’s $24 billion 2018 budget was earmarked for education and so far, there appear to be no new policies to boost education spending for out-of-school children.

UNICEF survey show that the population of out-of-school children in Nigeria has risen from 10.5 million to 16 million, and is predicted to hit 19 million by year end and 38% of this population are girls which happens to be the highest in the world.

The Life Builders Initiative (LBI), a non-Governmental Organization raised alarm, saying “it is a time bomb that could consume the country in the next few years”. The founder of the NGO, Dr Sanwo David, who raised the concern while addressing the press ahead of its stakeholders forum on education next week , warned that “if we don’t get these children back to school, in the next few years, we would have built an army worse than Boko Haram”. The LBI founder said the NGO was staging the stakeholders’ forum to discuss the best way to tackle the challenge of out-of-school children in Nigeria while also launching its model that could be used by interested Nigerians to drive the initiative.

With the terrible prognosis, how then can Nigeria get out of this challenge? Many solutions have been proffered by experts and stakeholders’ even beyond the shores of Nigeria. UNICEF’s panacea for the issue of out-of-school children is hinged on improved planning and following the provisions of the Sustainable Development Goal on Education (SDG4). The aim of UNICEF’s education programme is to support the government in achieving SDG4 by 2030 through improved planning and by addressing some of the systematic barriers that hinder the implementation of an effective education strategy.

In a nutshell, the challenges faced by the country are endless and ever evolving. However, solutions to these challenges are not far fetched but can be executed strategically and if in timely fashion, would produce adequate results.

First, the country needs to tackle its revenue problem, which could be identified as a debt problem because if we are borrowing and we are not able to service such debt then it becomes tragic. Hence, the government needs to intensify efforts at increasing the tax base, increasing the people under the tax nets, getting more corporates paying the right taxes, curb the wave of tax evasions, motivating firms to see tax as a form of social responsibility which would incentivise them to pay the right tax. If this could be achieved, governments’ revenue situation would improve and the CBN would not be pressured to devalue the exchange rates and the ripple effect would reflect on the stability of oil prices.

Second, the country requires massive infrastructural investment heavily supported by private capital in order to fill the infrastructural-gap in the economy. Social infrastructure in sectors such as Power, rail, education, roads, health etc require massive infrastructural ramp-up. The country needs to declare a state of emergency on infrastructure because it is a huge drag on productivity currently. Most important is investment in quality enhanced education and health which serves as a “future proof” for human capital in the country. Also expanding ports around the country needs to be a dire priority for the government as long-term infrastructural assets remain a very viable and attractive investment option for foreign private investors and that would help curb government borrowing. Hence, private sector spending should trump government borrowing in the country via private sector investment in infrastructure.

Thirdly, the saying “the business of business is business” cannot be over emphasised with regards the banking business in the light of the CRR funds sterilised by the CBN. Those funds cannot achieve their full potential if channelled to the various initiatives by the CBN as compared to channelling and controlling it to the general public by banks which would generate growth and profitability in the nearest future. So this CRR nonsense has to stop.

Fourthly, private sector infrastructure investment would also help plummet the unemployment digits in the country and strengthen the chain reaction between key economic and macroeconomic variables.

Lastly, with the presence of liquidity glut comes inflation crisis. The sensible implementation of importation bans through incentives makes more sense as a policy to tackle this crisis as it would foster in-house production and enable self sufficiency in the country and reduce dependence on other countries and subsequently strengthen the value of the country’s currency in the long-run.

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