The World Bank has handed the federal government something that sounded more like a directive than a casual warning. In its 2019 Nigeria Economic Update Report the bank stressed that if government fails to reform Nigeria’s economy to accelerate growth, the economy could slide back into recession, worsen unemployment and push millions more below poverty line.
The World Bank projection is that Nigeria’s economy is struggling as population growth outpaces economic growth. There are fears that if oil price drops below $50 per barrel, Nigeria’s economy would slip into recession again.
The economy lumbered out of recession in the second quarter of 2017 not because the federal government executed economic reforms that boosted the country’s revenue and created more jobs but because the oil price war tacticians in Saudi Arabia dumped their clumsy way of fighting glut-induced oil price slide with glut and opted to cut supplies. The supply cuts boosted oil prices and pushed Nigeria’s economy out of recession. Nigeria depends on oil for 90 per cent of its foreign exchange earnings and 70 per cent of revenue. Developments in the oil market determine the direction of the economy.
Nigeria’s economy is struggling against a booming population growth rate and sluggish economic growth. Even when the economy slipped into recession in 2016, the population was surging along at an average growth rate of 2.6 per cent.
The federal government has two options for stemming the dooms day predicted by the World Bank. It must either raise economic growth or defuse the brewing population explosion. From all indications government has run out of ideas on how to diversify the economy and put it on the path of rapid growth that would outpace the menacing population growth. The option therefore is to slam the breaks on population growth and take it below economic growth rate.
That too is another Herculean task. It could trigger dangerous street riots in some parts of the country.
However, the federal government must take a firm decision on population control since it cannot reform the economy and create jobs.
The World Bank has warned that the population of poor Nigerians would rise by 30 million by 2030 and that 80 per cent of Nigeria’s poor households live in the northern part of the country. Ironically, the poverty in northern Nigeria is man-made. The region has no business being Nigeria’s headquarters of poverty. It has the potential to feed the whole of Africa if mechanized farming is deployed in its vast arable land.
Right now, food is cheaper in northern Nigeria than in the south which the World Bank describes as the only region recording economic growth in Nigeria. Adamawa state is a classic example of northern Nigeria as the country’s food basket.
Last week I was in Yola, Adamawa state and I saw food items at unimaginable prices. I bought almost half a bag of local rice at N2, 000. I bought the same quantity of high quality local beans for N2, 000. The tomatoes I bought for N2, 000 is worth N8, 000 in Lagos. A goat that sells for N20, 000 in Lagos is sold for N6, 000 in Yola. However, the cheap food produced in Adamawa state cannot reach the market in Lagos because Nigeria has a comatose rail system and the roads are deplorable. That explains why, Adamawa state is one of the poorest states in the federation despite its bumper harvests. Millions of its indigenes are involved in agriculture but the state remains poor because most of the farms produce rot away and cannot reach the market where it would attract reasonable price. Adamawa rice is more delicious, nutritious and hygienic than any one from India and Thailand.
The gruesome mismatch between a jumbo cabinet and pocket-size budget is Nigeria’s major problem. The 43-member cabinet and a National Assembly with rapacious appetite for luxury inflict unacceptably high cost of governance that leaves only 24 per cent of the nation’s annual budget for rehabilitation of dilapidated roads, a comatose rail system, an archaic healthcare delivery system and an education system that schemes 13.5 million children of school age out of classrooms.
The World Bank’s red alert on the economy is more of a clarion call on government to tame the unbridled corruption in the land, block leakages and re-route funds for investment in critical infrastructure. Petrol subsidy is one of those wastages.
If the N450 billion allocated to petrol subsidy in the 2020 Appropriation Bill is invested in mechanized farming, jobs would certainly be created and the poverty level in the land reduced drastically.
Petrol subsidy is a senseless way of subsidizing consumption. But attempts to remove it would meet a stiff resistance because the poor regard it as their own share of what is left of the looted national wealth.
Government is a bad business man. Its leprous hand on fuel price mechanism and supply chain is responsible for the rot in the downstream sector of the oil industry that keeps Nigeria inextricably tied to refined petroleum products imports. Government should sell its four refineries and restrict its role in the sector to that of a regulator.
Federal government’s tenacious cling to solid minerals ownership in various states of the federation is responsible for the control of the industry in states by illegal miners who employ bandits to protect their illegality through criminality. If solid mineral is handed over to states, they would enlist the services of foreign investors who would exploit the minerals and pay adequate tax that would boost the nation’s revenue.
Nigeria’s alarmingly low revenue has stampeded the federal government into adopting tax reforms that would choke up the few corporate bodies and individuals in the nation’s porous tax net. The nation’s tax revenue at 6.5 per cent of gross domestic product (GDP) is atrociously low. Government could earn more from tax by widening the tax net to capture thousands of millionaires and billionaires currently outside the tax net.
