There is a lot happening in Nigeria, the largest economy in Africa, and it provides us with ample material for discussion following the inauguration of Nigeria’s new president. I extend my gratitude to the Editor for providing this platform.
In this piece, I aim to emphasise the strengths of an economy led by President Bola Tinubu and shed light on the significant challenges he would encounter. Moreover, I will outline how his leadership might effectively tackle the prevailing issues in Nigeria.
I would like to introduce the term “Jagabanomics,” which pertains to the economic policies and strategies to be crafted by President Bola Tinubu. Jagabanomics encompasses a comprehensive approach aimed at stimulating economic growth, creating jobs, and prioritising Nigerian interests.
In recent weeks, the current administration has demonstrated proactive leadership, offering a refreshing departure from the longstanding issue of unfulfilled promises that has plagued our country for decades.
This renewed approach has garnered positive attention from investors who are optimistic about President Tinubu’s potential to enact reforms that can effectively address the fiscal challenges and enhance the overall strength of Africa’s largest economy.
President Bola Tinubu’s decisive actions arrive at a crucial juncture in Nigeria’s economic landscape, marking one of the most pivotal periods since its independence. In light of these noteworthy developments, I am eager to share initial observations and propositions that have emerged from my ongoing analysis.
Notes on economic upscaling
To effectively address the challenges plaguing Nigeria’s economy, it is imperative to identify key underlying causes while remaining open to additional factors that may arise through further analysis. Drawing examples from the previous administration helps illustrate this perspective, while also emphasising the significant challenges faced during that period.
Foremost among these challenges is the alarming level of unemployment prevalent in the country, surpassing one-third of the population. Recognising and acknowledging this issue is of utmost importance. Additionally, the need to enhance security measures remains a distant and yet-to-be-achieved goal.
Insights provided by the World Bank’s overview shed light on the persistent issue of inequality, both in terms of income and opportunities. This inequality has severely hampered poverty reduction efforts, as job scarcity lies at the core of elevated poverty rates, regional disparities, and social as well as political unrest.
The overview also highlights the distressing impact of high inflation on households, as price increases between 2020 and 2022 have pushed more Nigerians into poverty.
Before exploring potential solutions for these challenges, it is crucial to address other prominent issues that significantly impacted Nigeria’s economy. One such issue was the sharp depreciation of the naira, resulting in a nearly 72% loss of its value.
Additionally, the country faced the challenge of managing its growing debt burden, further exacerbating economic difficulties. By the beginning of the year, Nigeria’s debt had surged significantly, approaching NGN77 trillion. This figure encompassed the securitisation of NGN 22.7 trillion in loans obtained from the Central Bank, along with proposed borrowing projections for the fiscal year.
These financial circumstances underscore the urgent need for prudent fiscal management and strategic debt control to promote a stable and sustainable economic environment.
Resolving Nigeria’s escalating debt profile necessitates a multifaceted approach that focuses on prudent fiscal management, fostering economic growth, and ensuring debt sustainability. As far as my knowledge extends, let me now draw the next set of conclusions and propositions.
To promote prosperity and unity in Nigeria, it is imperative to take bold measures aimed at addressing regional and local disparities that hinder progress within individual states and discourage private sector investments throughout the country.
Despite being hailed as an economic powerhouse within the continent, Nigeria still grapples with significant economic imbalances. Consequently, it is imperative that we create an environment conducive to private sector investments in states and regions that have long been neglected and left behind.
Presently, it is undeniable that numerous states are teetering on the edge of financial distress. A fitting but somewhat cliché analogy would be that of a household consistently spending beyond its means, relying on borrowing to meet its financial obligations and generating insufficient income to bridge the deficit.
To dispute this notion would be to disregard the undeniable fact that over 20 states failed to attract any foreign direct investments in 2022. Likewise, it is undeniable that the escalating inflationary pressures undermine the viability of monthly revenue allocations, thereby impeding economic activity at the state level and hampering the efforts of local governments throughout the country.
My theory is straightforward: if all states, particularly the underperforming ones, begin to operate at full capacity, it is a certainty that Nigeria’s GDP will experience a remarkable acceleration this year. This is precisely where the concept of ‘Jagabanomics’ must come into play, directing its focus towards a ‘Scaling-up’ objective.
As a starting point, I propose the development of a ‘scaling-up’ mission that includes investments in research and development across the six geopolitical zones of the country. This strategy should also prioritise enhancing transport connectivity within and between cities and states.
Additionally, I believe that every community should have access to broadband internet, improved life expectancy, better educational institutions, and heightened security measures to combat crime on a national level. A key emphasis should be placed on attracting private-sector investments to support these endeavours.
Now, let’s proceed to the next stage of development and examine how it will bring about change and why it is necessary. Undoubtedly, there is substantial evidence indicating that the diminishing investments in education, health, infrastructure, and manufacturing in many states contribute to the sluggish growth of output per capita and low economic productivity.
Regarding the question of impact, it is important to recognise that scaling up efforts for all states would lead to accelerated growth, increased job creation, and higher salary increments nationwide. Placing significant emphasis on closing the productivity gap through pragmatic and effective means ultimately enhances Nigeria’s prosperity.
Considering the aforementioned factors and in isolation, the inclination to address the national agenda of “scaling up” has been widely misunderstood on a national level. The primary focus should be on fostering economic prosperity and growth in cities and states that have long been hindered.
This endeavour must transcend ethnic, religious, parochial, or political interests and instead prioritise the objective of improving the standards of living and overall quality of life for all Nigerians. It is equally justifiable to hold economists and policy makers in previous governments accountable for overlooking these concerns.
To achieve progress in these areas, I strongly advocate for the implementation of a comprehensive national strategy focused on scaling up the country.
Moreover, we have witnessed how similar efforts have effectively revitalised major cities in countries such as South Korea, the United States, and the United Kingdom through decentralisation. Given this success, it becomes imperative to not only replicate their accomplishments but also inspire proactive measures to decentralise authority to states and local governments.
Considerably, an intermediate strategy could involve the formulation of a new roadmap or timeline for decentralisation, outlining explicit steps on how this process can unfold.
I lack the space to list more than a very few of the economic indicators which should underpin the scaling-up mission. But turning back to the essence of ‘jagabanomics’, for many practical reasons there is no escape from suggesting that the essence of ‘jagabanomics’ to stimulate economic growth, generate employment opportunities, and prioritise Nigerian interests should be strengthened by enhanced data, accountability, transparency, and rigorous monitoring.
To ensure the successful implementation of the extensive recommendations for scaling up, it is imperative to secure sufficient funding. It is widely recognised that targeted investments in strategic areas are essential for fostering growth. Hence, acquiring the required financial resources becomes crucial for both the execution and sustainability of scaling up initiatives.
Rather than solely emphasising the expenses associated with external borrowing, a more constructive approach would be to establish a “scaling up prosperity fund.” This fund can be effectively utilised to enhance productivity, generate employment opportunities, elevate living standards, and stimulate overall economic growth.
To establish the scaling up prosperity fund, various measures can be undertaken. Fiscal reforms, such as streamlining tax systems, closing loopholes, combating tax evasion, and improving tax administration, can boost tax revenues.
Developing domestic capital markets and establishing a sovereign wealth fund can also contribute to financing regional development projects by utilising surplus revenues, including income from natural resources or strategic investments.
Additionally, it is essential to provide a robust support system for universities and other higher education institutions. They should be given a well-defined framework that enables them to serve as innovation catalysts and knowledge transfer hubs within their communities.
This support will enable local businesses to commercialise innovative ideas, leading to job creation, increased productivity, enhanced incomes, and a competitive advantage. Furthermore, government-funded initiatives should be implemented to empower universities to drive regional change, while ensuring accountability and monitoring performance metrics.
Undoubtedly, the principles of jagabanomics hold promise, but it is imperative to take the right steps to ensure its success. By prioritising scaling up and implementing the aforementioned measures, the impact will be felt within communities and across the nation. This should be the core mission embraced by ‘jagabanomics’ to foster inclusive and sustainable economic growth!
Let me conclude with a reflection on monetary policy and central banking independence!
The reforms implemented in Nigeria’s banking system have proven to be successful. It has been a considerable period since we last encountered banking crises. Presently, our banks demonstrate robust capitalisation, liquidity, and readiness to serve the economy effectively.
Despite the positive state of Nigeria’s banking system, it is crucial for monetary policy decisions to remain responsive to the macroeconomic implications of market dislocations. These decisions play a pivotal role in shaping the outlook for inflation and ensuring economic stability.
The effectiveness of such monetary policy decisions relies on establishing a well-defined framework of institutional regulatory structures that govern both monetary policy and financial stability.
I would like to structure my assessment around one significant challenge: the importance of preserving the independence of the Central Bank as the lender of last resort and ensuring its autonomy in making critical monetary decisions, recognising it as a key challenge that demands attention and action.
Recent events have raised eyebrows as the central bank governor has been arrested, which is an unusual occurrence. It reinforces the notion that we are witnessing negative consequences arising from questionable policy decision-making by the Central Bank.
One such consequence is the alteration of the naira design, purportedly aimed at curbing inflation or potentially utilised as a political tool. It becomes apparent that the influence and impact of the bank governor’s decisions were intertwined with political interests and external pressures.
It is of utmost importance to highlight that the effectiveness of the Central Bank’s decision-making process relies on its commitment to upholding principles, maintaining independence from political interference, and safeguarding its autonomy.
The central tenet is that autonomy is necessary for the Central Bank to fulfil its role effectively. Independence from political interference ensures that the institution can concentrate on its mandate of preserving price stability and fostering sustainable economic growth. This approach enables the bank to base its decisions on economic fundamentals rather than succumbing to short-term political considerations.
It is crucial for anyone taking on the role of the Central Bank Governor to thoroughly recognise the importance of upholding the institution’s independence. While it may be challenging to fully appreciate the concept of independence, this understanding is fundamental for the central bank’s effective operation and the successful execution of monetary policy.
For Jagabanomics, if there is a single focal point for banking regulations today, it is the preservation of price stability, which holds immense importance for sustainable economic growth and the welfare of the population.
However, it is a fact that political interference in central banking decisions can jeopardise this objective by placing short-term political considerations above long-term economic stability. Indeed, political pressures, often influenced by electoral cycles or immediate political agendas, tend to result in suboptimal monetary policy choices that prioritise immediate gains over long-term stability.
Regardless, maintaining independence empowers central banks to concentrate on upholding macroeconomic stability and addressing long-term economic challenges. By shielding central banks from political interference, they are better positioned to make decisions grounded in economic fundamentals, guided by expert analysis, and oriented towards long-term goals.
This autonomy enables them to adopt measures aimed at achieving price stability, mitigating inflationary risks, and fostering sustainable economic growth, all of which are vital for the well-being of the economy and its citizens.
History is replete with instances where banking regulations have suffered due to weak policy actions influenced by political interference, and the consequences have been far from favourable.
The credibility of the central bank plays a crucial role in achieving its primary objective of maintaining price stability. Therefore, ensuring the credibility of the central bank should be a central focus for the incoming governor.
Omeihe is president, Academy for African Studies and serves as a Senior Economic Advisor at Marcel. He holds the position of Associate Professor at the University of the West of Scotland.