Home Agriculture Nigeria, World’s Next Economic Giant, how feasible?

Nigeria, World’s Next Economic Giant, how feasible?

by Business News Report

By Omoh Gabriel

Quote: Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes. Peter Drucker
Peter Drucker the management expert in his book the practice of management wrote that “Innovation is the specific instrument of entrepreneurship, the act that endows resources with a new capacity to create wealth. Management must always, in every decision and action, put economic performance first. It can only justify its existence and its authority by the economic results it produces. There may be great non-economic results: the happiness of the members of the enterprise, the contribution to the welfare or culture of the community, etc. Yet management has failed if it fails to produce economic results. It has failed if it does not supply goods and services desired by the consumer at a price the consumer is willing to pay. It has failed if it does not improve or at least maintain the wealth-producing capacity of the economic resources entrusted to it. Apply this principle to the Nigeria nation; many have asserted that Nigeria is a failed state.

They are quick to point out that available statistics showed that Nigeria nominal Gross Domestic Products in dollar terms was $48.2 billion in 2000, $51.2billion in 2001, $49.163billion in 2002, $56.04billion in 2003, $64.73billion in2004 and estimated to record $73.148billion in 2005. The real GDP growth was 2.8 per cent in 2000, 4.4 per cent in 2001, 3.3 per cent in 2002, 5.5 per cent in 2003, and 6.1 per cent in 2004 and estimated at 3.9 for 2005. The GDP per capita has a record of $420 in 2000, $435 in 2001, $407 in 2002, $452 in 2003, $510 in 2004 and estimated at $562 in 2005.

In the opinion of the World Bank between 1965 to 1987, Nigeria=s Gross Domestic Savings decreased from 17 percent to 10 percent and lower in 2000. In comparing 12 countries growth rate, it was discovered that during the two decades from 1965 to 1987 and now the World Bank found that Korea, with a population of 42 million in 1987, joined the rank of middle income countries by increasing its per capita income from US$650 to US$2,400. During this same period Malaysia and Brazil accomplished the same while Nigeria=s per capita income managed to record $510 in 2004 from the $440 in 1965 with a high population of 127 million in 2004. What this means is that Nigeria=s per capita rose by $60 in 40 years. In 2001 it rose to $432, $407 in 2002, $452 in 2003 and is estimated to rise further to $510 this year. This implies that in 2004 Nigerians welfare is not anywhere nears what Indonesia, Malaysia and Brazil have attained.
In the same period the World Bank observed that Korea=s industrial share in GNP increased from 25 to 42 per cent; in Indonesia from 13 to 32 per cent and in Argentina about 42 per cent of GNP. By World Bank calculation, the most potent factor in economic growth is gross domestic savings. From 1965 to 1986 Korea=s savings rate increased from eight to 35 per cent; for Indonesia from eight per cent to 24 per cent; for India from 16 per cent to 21 per cent. For Nigeria, it decreased from 17 percent to 10 percent and for Japan it was maintained at 32 per cent. The situation in Nigeria remains largely the same as savings has not improved beyond what it was in the 1980s if not worse off.

Going by World Bank reckoning, while Korea achieved about 94 per cent level of secondary school and tertiary enrolment, Nigeria, during the same period (1965-1986) achieved 29 per cent and ha now declined to 24 per cent. The implication is that while these other countries have reached a self sustaining growth, Nigeria was trapped in debt, $35 billion in 2004 for which it’s official were jumping from one country to another begging for debt forgiveness, and population explosion 127 million in 2004 and 167 million in 2011. The effect is that the living standard of the populace has declined and dragged more Nigerians into the poverty line. In fact, a recent study showed that more than 70 per cent of Nigerians live below one dollar a day though government figure has contradicted this. The situation has not changed much by the reckoning of the average citizen
They also have argued that for purpose of unity, ethnic arithmetic has been accepted as a way of life. As an entity, job rationing is done on state basis in order to reflect the federal character and to satisfy the multi-ethnic groups that make up the country, Nigeria.

Nigeria=s socio-economic problems over these years comprise a complex set of both internal and external factors the internal factors being most disturbing.
Painfully basic social overhead capital is still very lacking in Nigeria. Services such as power supply, transportation, storage, communication etc that are indispensable to modern industry and agriculture are grossly inadequate and not available on regular basis. What is more, power supply is erratic, transportation chaotic. The lack of this capital is a bottleneck to Nigeria=s economic development. Yet, the problems are not being adequately tackled by subsequent government.

Inadequate transportation and communication block the exploitation of rural resources in Nigeria. As a result poverty has taken over the land. The rich resources of the country are inaccessible and most part of the country that could have been the food basket of the country. A lot of food produced rots and wastes away in the villages and yet in the 21st century one of Nigeria=s problems is how to feed her over 167 million people that had led to mass importation of various products that has drained the nation’s foreign reserves.
The unfortunate thing is that Nigerian leaders seem not to understand the very important nature and role of transportation and power supply in economic development. Nigeria according to available statistics loses one third of its agricultural output because of its lack of storage facilities to protect against spoilage, rodents and other wastages. Infrequent power supply from NEPA and the very lack of it in some parts of the country’ thwart the growth of industries dependent on it.

Educational facilities are vital elements of social overhead capital. The majority of the Nigeria population is illiterate, lacking the basic skills and training necessary for industrial production or modern agriculture. As at today, the few trained graduates, school leavers are wasting away and basking in unemployment heart-wave. Education of course has become expensive and only few, the rich, can afford it over the last few years.
Lacking private entrepreneurs, the governments of Nigeria had to take the lead in formulating and implementing national development plans in the past. Unfortunately, another problem arises – the shortage of dedicated government administrators. The result is often incompetence, worsened by endemic bribery, corruption and favouritism. More so, the ineffective systems of taxation over these years fail to mobilize financial resources for capital formation. Bad as this situation is, it is worsened by investment allocation. Nigeria in her bid to foster unity in diversity set up and allocated investment in ways that do not promote economic growth. What is more, these public enterprises are operated at a loss, draining off scarce capital rather than creating it. The government realising that it can not do well in business has made attempt to privatise these enterprises that has been a source of economic rent to bureaucrats

If Nigeria=s economy is to achieve a self sustaining growth, Nigeria work force must develop the motivation and discipline essential to industrial production. Nigerian farmers must become commercial farmers, open to technological innovation in agriculture as against the subsistence farming and the use of old implements that is of today.
The past and present poor motivation, high industrial employee turnover, absenteeism and a general sloppy performance that characterised the Nigeria workers would have to stop and give way to new and result-oriented industrial attitude.
As much as these are facts steering the nation on its face, Nigeria is a land of ample opportunity and immense possibility. In a fast changing and evolving world, where weaklings of yester years have become economic giants and the strong of yesterday are fading in economic glory and becoming weaklings, Nigeria has a chance to make a difference. That the United States is the leader today, economically and socially, does not mean it will remain so for ever. Twenty years ago no economist would have accepted any theory that postulates the emergence of China, India and Brazil as economic power houses.

Today China is the second largest economy in the world beating United Kingdom, Japan, France, Germany and Italy. According to the United Nations economic data the global economy Gross Domestic Product as at 2010 was $62.6 trillion. Of this the United States of America account for $14.447 trillion as the largest economy in the world. It is followed by China with a GDP of $5.739 trillion making it the second largest economy.

Japan the third largest has $5.458 trillion GDP. Germany which is fourth has a GDP of $3.280 trillion while France the fifth has $2.559 trillion GDP. Britain which dominated the world for decade as the economy to beat is now a distant 6th economy in the committee of nations. Nigeria is occupying 47th position with a GDP of $238.920 billion. This shows that from the peak there is only one easy way to go: downwards. It always requires twice as much effort and skill to stay up as it did to climb up. In other words, there is real danger today that in retrospect the United States of 1950 will come to look like the Great Britain of 1880–doomed to decline for lack of vision and lack of effort.
Going by the current trend and projection by 2020 there will be a major shift in the global balance of economic power compared to 2010. Emerging economies will rise in importance and China will have overtaken the USA to lead the list of the world’s top ten largest economies by GDP measured in Purchasing Power Parity terms (PPP). Consumer markets in emerging economies will present enormous opportunities but their rapid growth poses a challenge to the global environment. Early this year Japan confirmed that China’s economy surpassed its own as the world’s second largest in 2010. In the nominal GDP method, it can be seen that the developed world leads the pack, but that China has already broken into this exclusive club, and is now the second largest economy in the world by both measures.

Come 2014, the geographical expression called Nigeria will be one hundred years old. The Northern and Southern protectorates were amalgamated by Lord Luggard in 1914. In 2014 Nigeria will be celebrating 100 years of existence. The land mass in which Nigeria is located is a land flowing with milk and honey. Many have looked at the progress made in desperation and have written off the country.

But many out there are seeing the Nigeria experiment as a land of great opportunity. The United States of America recently described Nigeria as the next economic success story. Apart from its natural resources, Nigeria has a young and dynamic population made up of upwardly mobile middle class. It is this middle class that serves as attraction to the international business community because of the huge market it represents. The experience of the telecom operators in Nigeria bears this out clearly. It is for Nigeria to put its act together and get it right. Nigeria’s economy has been growing at 6-7 per cent in the last few years without regular supply of power, when eventually the country gets the power equation right, the economy will frog leap.

President Barack Obama of the United States himself declared Nigeria as the world’s next economic success story, stressing that this was one of the major reasons why his government was committed to helping the country build strong democratic institutions and remove constraints to trade and investment through the African Growth and Opportunity Act. Making this declaration at the US-Nigeria Trade and Investment Forum, an event organised by the Nigerians in Diaspora Organisation (NIDOA) in Washington DC, Obama said that his country expanded opportunities for Nigeria to effectively access markets and diversify its economy beyond a narrow reliance on natural resources. “As we support these efforts, the Diaspora can play an important role in contributing to a strong, vibrant and economically prosperous Nigeria” he noted.

In his own view US Department of State Director of West African Affairs, Ambassador Eunice Reddick, in a keynote address to Nigerians in Diaspora Organisation of the America conference revealed that Nigeria’s bilateral trade with the U S in 2011 stood at $38.5 billion up by nearly 12 per cent from 2010.US exports to Nigeria, primarily wheat, vehicles and refined petroleum products valued at 4.8 billion dollars in 2011, an 18 per cent increase from 2010 figure.

She declared that America believes that Nigeria can be the world’s next major economic success story, “that is why according to her, the United States is committed to helping Nigeria build institutions, remove constraints to trade and investment through the African Growth and Opportunity Act, expand opportunities for Nigeria to effectively access its neighbour’s markets and diversify its economy beyond a narrow reliance on natural resources. “We are also working to strengthen Nigeria’s agricultural sector, which employs nearly 70per cent of the country’s population by encouraging improvements to infrastructure that would facilitate agricultural growth, liberalising trade policies to foster regional trade reforming the customs system to bring it in line with global best practices and encouraging policy reforms to enable private investment in agriculture.”

It is not only the US government that is seeing the great possibilities in Nigeria. In 2004, Goldman Sach said that Nigeria will emerge one of the 20 largest economies of the world in 2025. This was the basis of Nigeria’s vision 20-2020 by the then President Olusegun Obasanjo, He said 2025 was too far and could be fast tracked to 20:2020. So Nigerians accepted the Vision 20:2020.

In a recent presentation on Nigeria’s Debt Capital Markets, Richard Fox, Fitch Rating’s Head of Africa/Middle East sovereigns, had compared Nigeria’s current sovereign debt metrics to those of Emerging Markets (EMs) that have recently made the transition to investment grade (IG) and came to the conclusion that Nigeria is on the path of success. Are you taken aback? Just wait and hear him. He said: “Since 2004, seven EMs have moved up the rating scale from Nigeria’s current ‘BB-’ level to the lowest investment grade ‘BBB-’ rating. The most recent was Indonesia in 2011; the others are Azerbaijan (2010), Brazil (2008) and Bulgaria, Kazakhstan, Romania and Russia (2004). Of the seven, four are oil producers to varying degrees. The three notch upward movement has typically taken between six and eight years, which makes it a plausible ambition for Nigeria in the context of its Vision 2020.

“Among the key indicators that Fitch uses to assess sovereign creditworthiness, three stand out as being well outside the range of experience of recent newly IG EMs: per capita GDP, reserve cover and governance (the latter measured by the World Bank’s governance indicators). These areas represent Nigeria’s biggest challenge to improving its “Nigeria’s stable and robust GDP growth of more than 7 per cent since 2009 compares well with the record of newly IG sovereigns and is even more creditable given its reliance on the non-oil sector.

However, structural reforms planned in the electricity, oil and agriculture sectors, will be crucial if growth is to be diversified and sustained closer to double digits, in order to close the large gap in per capita income. Even with a likely substantial increase in nominal GDP this year due to the rebasing of the national accounts, Nigeria’s per capita GDP will still be outside the range enjoyed by the newly IG countries when they became IG.
“Nigeria’s inflation rate is also still on the high side – in low double digits- compared to an average of 7.5 per cent for newly IG sovereigns and a range of five per cent to 12 per cent. By contrast, Nigeria scores much better on the government debt ratio which, despite creeping up, at a little under 20 per cent of GDP, is lower than the 26 per cent average for newly IG sovereigns. Nigeria’s ability to finance itself domestically, in its relatively well developed domestic capital market, is also a major strength compared to many newly IG sovereigns.”

This is a prompting to the international community to look beyond what is happening now in Nigeria to massively invest in the opportunities available in the country. Already China accused of only interested in Africa’s natural resources is taking the lead. It is investing in Nigeria. But beyond the construction and buying of crude Nigeria should engage China to invest in manufacturing here just as many companies in Europe, Asia and America cited their plants in China and today China is an economic success story.

If the goals of this administration’s transformation agenda are to have strong, inclusive non-inflationary growth, to generate employment and alleviate poverty and to achieve value reorientation, Nigeria must begin to take advantage of this positive disposition. Nigeria must look beyond contract of road construction and encourage partnership with China to develop agriculture away from the traditional model. Today the global climate change is having adverse effect on the economy. The north which was regarded as arid zone has experienced heavy down pour this year while area like Lagos have seen scanty rainfall. Climate change will need to be handled with new methods and differently. Appropriate policy and strategy developed to handle the ever changing environment.

The focus areas are on good governance, infrastructure and human capital development with the expected outcome of the jobs creation, better resource management, elimination of corruption and sustained economic development. The World Bank’s Doing Business Index of 2012 ranked Nigeria as 133th out of 183 countries on the basis of the constraints encountered in starting a business, dealing with construction permits and registration of property and enforcement of contracts. It also identified differences in state regulations and in the enforcement of national regulations that can enhance or constrain local business activity.

Nigeria was on the path of greatness at independence. It evolved development plans which saw major development in the country at the early stages of the nation’s development. The first, second and third plans were executed but the fourth was abandoned and since then Nigeria has had no development plan or short term development strategy. Nigeria needs to return very quickly to development planning if it is to tap into the vision many are seeing for it.
If the fourth development plan that was jettisoned was religiously implemented, Nigeria would be singing songs of freedom today. In that plan, the framers said “Since the fourth national development plan is only one in the series of medium term plans intended to transform the Nigeria economy and society over time, its basic objectives are naturally broadly similar to those of its immediate predecessors. What ever changes there are would be no more than a reflection of the lessons of experience derived in the implementation of the preceding plans”.

The over riding aim of any development is an improvement in the living conditions of the people using the resources, human and material, with which the country is endowed. It is around this principal goal that the specific objectives of Nigeria’s development efforts should be woven.
The nations set objectives in the 3rd National development plan were what the country is clamouring for today. It envisaged increase in real income of the average Nigerian; more even distribution of income among individuals and social economic groups in the country; reduction in the level of unemployment; increase in the supply of high level man power; reduction of the dependence of the economy on a narrow range of activities; balanced development – the achievement of better balance in the development of the different sectors of the economy and various geographical areas of the country; increased participation by Nigerians in the ownership and management of the productive enterprises; greater self reliance that is increased dependence on internal resources in seeking to achieve the various objective of society.

This implies increased efforts to achieve optimum utilisation of Nigeria’s human and material resources; development of technology; reduction in rural urban migration; the promotion of a new national orientation conducive to greater discipline, better attitude to work and cleaner environment. The main trust of Nigeria’s strategy during this period was in the direction of increased self reliance and considerable reduction of its dependence on the external sector in general and the petroleum sector in particular. If these objectives were rigorously pursued Nigeria would not be playing a catch up game in the global economy. Nigeria needs to return to its roots, plan, strategise and push to become relevant in the eyes of other nations.

This will require greater sacrifices especially in terms of established consumptions habits if resources are to be freed for pressing development needs. There will be no room for subsidy. It must free resources for development. This strategy will demand a greater spirit of innovations, hard work, and greater utilisation of domestic resources and in particular, the involvement of the masses especially at the local level in the development process. A conscious effort must be made to mobilize the Nigeria masses—the entire Nigeria population for the implementation of the new Nigeria vision. If China could successfully Mobilise its populace to achieve the second largest economy position out of obscurity, yes, Nigeria can. Nigeria and China have certain things in common, a growing population, an emerging middle class that constitute a huge market for industrial products, a huge land mass. Yes, Nigeria can move into the league of top economies of the world. All that Nigeria needs is an effective leadership. Like Peter Drucker said “Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes. Will President Goodluck Jonathan take Nigeria there?

Related Posts

Leave a Comment