Building Nigeria of Our Dreams
The Nigerian Economic Summit Group
culled from THIS DAY, January 20,
We are now at the threshold in the history of our country, not only because the
coming elections will be the first change of baton from one elected government
to another in twenty years, but also because, more than ever before, the
management of the economy requires deft and purposeful leadership. The Nigerian
Economic Summit Group has been in the vanguard of policy advocacy and economic
research since incorporation in 1996, and we have decided to make this statement
in the interest of our fatherland. For too long we have sought to persuade our
leaders to act in the interest of the Nigerian people. In the recent past we saw
the damage done to the economy by the prolonged face-off between the Executive
branch and the Legislature, while the important task for which they were elected
receded to the back burner. Civil society will compel the next government to
stay the path of the straight and narrow.
For four decades we have grappled with the desire to find the path to true
economic greatness and the dawn of better quality of life for the Nigerian
people, and for four decades we have muddled through and earned considerable
reproach. The thirty years of military governance drove our country through
unprecedented experiences of wholesale destruction of institutions, economic
degradation, animosity between ethnic and religious groups and deprivation
suffered by majority of the people.
If the last four years were accepted as the period to break from the military
misadventure in governance, and to set the new political class on their learning
curve, we must now also accept that the party is over. It is time we started the
serious task of building the nation of our dreams, and do so with passion and
commitment. It is time we galvanise the energy of the Nigerian people into one
common endeavour to build, and to reverse the decline in their quality of life.
For too long we have run our government on the basis of patronage alone, and the
last four years have demonstrated the huge task of dislodging rent seekers and
the mediocre who find themselves in high office or close to it without a track
record of tangible achievement.
It is clear that most of the problems we face have their roots in the poor
performance of the economy, and in the distorted incentive arrangements on which
we have run our society. Those who seek to benefit from the crisis generated
have exploited issues of ethnicity and religion to perpetuate status quo.
Nigerians are a peace-loving people, but they deserve a decent standard of life.
If our youths are gainfully employed, they will not be available for the street
marches and communal disturbances for which their masters currently pay them the
value of a meal.
As we now embark on our most testy transition ever, this is a wake up call to
all who seek political office and indeed to all Nigerians. High public of fice
must be left to people who have the faculty, and the genuine desire to serve the
country. Above all we need only God-fearing men and women to take on the mantle
from this point on - leaders who have a vision and a passion, leaders with a
mission and a heart, leaders who understand the times in which we live.
Our world has changed dramatically, and the advances in other lands have
continued to widen the gap between them and us. 50 years ago, it was safe to say
that a nation had full control over its sovereignty, and therefore its
political, environmental and economic systems. No nation, even the most
powerful, has that kind of control any more. We have seen a demographic
explosion, and the world population has doubled in just over forty years.
Nigeria today has a population of 125 million, we think, and boasts every fifth
African. If the current growth rate continues, there will be 250 million
Nigerians by 2015. Recent UNDP projections also suggest that Lagos will be home
to 24 million people by 2015, and will be the third largest city in the world
after Tokyo and Mumbai.
We can no longer afford the marginal growth that has characterised our economy
over the years. Shortly after independence in 1960, Nigeria was, by all economic
indices ahead of South Korea, Malaysia, Taiwan, Singapore and Indonesia. The GDP
per capita of Nigeria and Indonesia were indeed comparable in 1970. However,
whereas the GDP of Nigeria has stagnated around $300 (N37,800), that of
Indonesia has grown fourfold in the three decades. Indeed, Nigerians were better
off in the 1970s than they are today, even though the country has earned $300
billion from oil alone in that period.
Globalisation has become the new world system, powered by the twin forces of
liberalisation and technology, and laggards will find it increasingly difficult
in the emerging world scenario.
Overview of the economy
Nigeria's economy has experienced varying cycles of growth, stagnation, and some
development in the last forty years. The management of the economy has, however,
not been backed by a sustained long- term strategy. Rather it has been
Central planning, which led to big government and a distorted incentive
structure thus crowding out the private sector, which became weak, lacking in
self-confidence, and on a steep corporate governance learning curve. Public
sector contribution to GDP doubled to 44 per cent in the four years to 1979.
Low growth and a crippling debt burden - $30b external and N1.3 trillion
internal - that has grown from 3.4 per cent of GDP in 1970 to 86 per cent of GDP
in 2002. When the debt crisis broke in 1982, Nigeria owed foreign creditors 17.1
per cent of GDP.
Low Savings/GNP ratio. At 11 per cent, it is far too low to drive investments
Budget deficits largely financed by printing money.
A large informal economy, the size of which is unknown, providing a substrate
for corruption and speculation. This monster has become wild, and there is an
imperative to create a counter-force in the formal economy.
Dearth of the entrepreneurial class, and a beggarly middle class
The current state of the economy
We will not go through too much detailed analysis of the past and what went
wrong. These are too well known. Suffice it to say that our economic interests
will not be served by small incremental improvements over a long period of time,
because we do not have that time. We must seek avenues of leapfrog, but only by
correcting the fundamental defects that inhibit growth, and these are:
Structure of the economy. Our economy has been based solely on
exploiting natural resources, without any value added. This makes us vulnerable
because we have no control on our revenue stream. Lack of value creation also
makes us dependent on imports, and therefore we have no control on our costs
Development model. We appear to see development purely in terms of
physical infrastructure, to the utter neglect of human capital development. We
must change our strategic focus from merely building things to building people.
Visible examples are FESTAC Village and the 1004 housing estate, which became
slums in no time. We have often spoken in glowing terms about our resource
endowment, and it is true. But resources by themselves will not bring about
development. People must add value to them
Economic action agenda. There has never been a commitment to the
pursuit of a long-term vision, and therefore no clear development path or
consistent policy over an extended period.
Leadership capability and managerial competence. The obvious
dearth of managerial competence in many spheres of our national life shows
through in the inefficient way that resources have been harnessed and allocated.
We need to groom a succession of leaders who will truly place country above
In the face of these problems, it is clear that government must put the economy
first. Those who clamour for a sovereign national conference will do us a world
of good if they address their minds to our economic emancipation. More
important, however, is that leaders must not fan these calls by their
inconsistent and retrogressive actions. Our obsession with sharing resources has
made us bereft of ideas to rebuild.
The real pressing issues of our time are:
Low economic growth rate: GDP growth rate consistently lagged the rate of
increase in population.
A huge resource gap, and scarcity of investment resources, both foreign exchange
and Naira. Oil is the only real source of foreign exchange. In 1980, Nigeria
produced 2.2 million barrels of oil per day at an average price of $30/barrel.
In 2002, the country produced 1.7 mbpd at an average price of $22/barrel.
The daily revenue therefore dropped from $66m in 1980 to $37m twenty years
Between 1980 and 2002 the population has grown tremendously, the number of
university graduates has almost doubled, and the number of States and Local
Governments went from 19 and 360 to 36 and 774 in 1996 respectively in the same
period, with the attendant recurrent costs even in the face of declining
revenues. Think about this as a young 25 year-old single man who in 1980 earned
$10,000 per annum. In 2002, after marriage and three children (ages 16, 14, and
10) his salary drops to $5,600 per annum. Clearly his livelihood must be
augmented from other sources. Many people have erroneously believed that revenue
from oil alone is a lot. It is time to break that myth. At $25 per barrel and 2
mbpd, the annual per capita revenue from oil after deducting the cost of
exploration is less than $100.
A forecast indicates that by 2007, the total Federal Government revenues at
current exchange rate would be inadequate to fund recurrent expenditure,
assuming today's exchange rate, an average price of $ 18/ barrel, Nigeria's OPEC
quota remains low, and no change to the revenue profile.
Obviously foreign exchange earnings need to be increased rapidly to avoid the
risk of further devaluation. Also the shortage of investment grade Naira is
amply demonstrated by the absence of long-term money and venture capital The
longest tenor available is probably 180 days money. Hot money inhibits
Low production and low productivity. Low productivity is the natural result of
the scarcity of investment resources, a short-term orientation and a poor track
record of human capital development, and completes the vicious cycle that only
produces a downward spiral.
The way forward
We present thoughts on the way forward at two levels, namely structural and
economic. We cannot do things the way we have always done and expect different
We must start by ensuring that we elect leaders who are genuinely concerned
about the Nigerian people. A good quality life is our birthright, and it is the
responsibility of leaders to guarantee that. Elected leaders must then submit
themselves to the virtues of leadership. Our leaders must demonstrate
accountability by keeping us informed on the state of the economy and other
significant issues on a quarterly basis without fail. This update is not to be
delegated to a Minister or Commissioner who sees his job as his master's voice.
The President must do this at the national level, and Governors at the State
level. Leaders must be humble enough to listen to the views of others,
especially people who are not seeking favours or contracts.
The next government must start a quarterly accountability reporting. Such "State
of the Union" communication must be handled at the highest levels and not
delegated to a Minister or Commissioner. This practice gives the Nigerian people
the opportunity to truly understand the affairs of State and assess the
performance of their leaders. It also helps to institutionalize openness and
Downsize government. This is a touchy issue, but a situation where 82 per cent
of the federal budget goes to pay less than 2 per cent of the population is not
tenable. The result in 2002 was that Government was forced to borrow from the
CBN, and to devalue the Naira to raise cash for capital projects. Government can
probably do with 30 per cent of the current size, and the remainder should be
separated on a just and fair basis. The Federal Government and its agencies own
hundreds of prime real estate properties in Lagos and other cities, which can be
sold off to meet the pension and golden handshake liabilities. Altematively,
part of the pension liabilities could be paid in shares in the enterprises being
privatised. The expenditure profile of the Executive and Legislature must also
be dramatically cut, and waste removed. A retinue of 10 cars per Minister is a
wanton waste of public funds.
A performance management mechanism must be installed in the public service, and
Ministers made to respond to an agreed set of key performance indices.
Productivity measurement must begin from the top.
Training and capacity building must once again become an integral part of the
management of our human resources, to create a crop of technocrats capable of
translating high level policy into focused action
Re-visit Vision 2010 plan. The best economic blueprint this nation ever had is
the Vision 2010 document. Five years after it was produced, precious little has
been done to follow the recommendations in it. The exercise provided us with a
longer planning horizon, and in revamping it, the original team could be
expanded to bring in fresh thinking, and the time frame changed to 2020. The
Vision 2020 document should then become the compass, with appropriate
modifications along the way as the circumstances dictate, but only if strictly
A complete assessment of the state of public finances and priorities for the
next four years. These priorities must be properly costed to ascertain the Naira
and Dollar needs and the resource gap required to implement the programme. This
gap may be of the order of $4 billion per annum over the 4- year period 2003 -
An economic impact assessment for all major projects. If there was an economic
impact assessment for the stadium in Abuja, maybe the decision could have been
different. The idea is to ensure that all major investment activities are
undertaken for their economic value alone for the time being.
The Government must then follow with a programme to stabilise exchange and
interest rates, further eliminate wasteful spending, deregulate the economy,
swiftly privatise government assets, and target debt reduction.
Create economic clusters. Far too much energy has been dissipated on the concept
of geo-political zoning and its consequences. In place of geopolitical zones, we
should draw economic clusters, which cut across narrow geographical definitions
or ethnic grouping. Clusters should then be supported by relevant infrastructure
including research institutes, and specific incentives provided for private
investors to build viable interconnected firms, and related industries. Typical
clusters will be based on industry segments that will propel growth, and
examples include Grain/Vegetable cluster, the Cocoa/Rubber/Oil Palm cluster,
Petrochemical, Consumer electronics and ICT clusters.
c. Human Capital Development.
The development and motivation of people must be elevated to the level of
strategy. Our development focus must change from building things to building
people and the key actions here must include:
The restoration of education standards at all levels, to which we will need to
commit 25 per cent of our budget for the construchon of classrooms, training of
teachers and redesign of curriculum. An educated populace is not only aware, but
will be economically productive.
The rebuilding of education will probably take the next ten years, and in that
period, we could consider converting the NYSC scheme into a finishing school to
compensate for the current deficiencies in the tertiary education standards.
This requires extensive logistics, but will be a major investment in our future.
The rehabilitation of health care infrastructure, and a commitment of 10% of the
budget to health.
Creation of social security apparatus as a safety net. This will include an
overhaul of pension scheme to make it contributory for everyone in employment,
revamping the public transportation systems, and housing.
There must be a clear commitment to raise the standard of infrastructure. It is
time we stop the debate about privatisation of State-owned enterprises which
have continued to be a drain on the economy. The maintenance of all the public
sector organisations in terms of direct grants, duty waivers, tax exemptions
etc, many times exceeds the federal budget. That is not to include the wastage
through corruption. Those who clamour for maintaining status quo, especially
Unions, are clearly not aware of this fact. The privatisation programme must be
accelerated, and the deregulation progress to grant the private sector access to
key economic sectors. However the process must be transparent, and supported
with the installation of active competition, and the inauguration of the
Competition and Anti- trust Commission to moderate the activities of commercial
2. Economic action
Three broad action points:
e. Ventilate the economy
Increase foreign exchange drivers. A small portfolio of arrowhead forex drivers
in areas of competitive advantage, e.g. Cocoa, Rubber, Palm Oil and Cotton. A
focused plan in each of these areas with an appropriate subsidy structure should
be designed, preferably based on deferred gratification.
The adoption of an export-led strategy for industrialisation and economic
growth, which encourages high quality production and provides the backward
linkages that helps create small-scale enterprises, and by implication generate
employment and reduce poverty
Increase supply of investment grade Naira. A Pension reform for both public and
private sectors that makes pensions contributory and mandatory, and the fund
managed by a private Pension Fund Administrators. Such reform has advantages
including promoting a savings culture, raising a pool of long-term money, and
reducing interest rates.
f. Monetary and Fiscal Policy coordination
Low inflation is the driver for reasonable interest rates and stable Naira.
Therefore the quest for low inflation must be a consuming one.
Taxation must be used as a tool not as a weapon, and we should develop the path
of real VAT, not sales tax.
A Fiscal Responsibility Pact among the three tiers of government is now urgently
required, to help moderate the expenditure profiles of the Federal, State and
g_. Redress Imbalance and drive growth.
Returning to the theme of growth, the 9th Nigerian Economic Summit identified a
set of five growth drivers, namely: Security, Sector reform, Infrastructure, Job
Creation, Investment Climate Growth will only be powered by investment, and we
must explore the investment opportunities in these five growth areas. The
Nigerian Investment Promotion Council should become more focused and accept
clear objectives and targets for FDI in these key segments.
These five drivers of growth interphase with five key advantaged tracks of:
i Agriculture. Select and drive key economic crops,
and generate seedlings for sale to farmers at cost. The full cost of seedlings
plus interest is refunded to farmers after the first harvest from the crop. This
deferred gratification ensures that the subsidy gets to the farmers, but also
ensures that the job gets done first.
ii. Crude oil. The required investment in oil fields must be
sustained, and the local content increased to a target of 40%.
iii. Gas. Nigeria has extensive Gas reserves and the articulate
development of this resource will help close the resource gap discussed earlier.
iv. Manufacturing including SME sector.The principal objective is
to achieve competitive industrialization, and a vibrant SME sector.
v. Solid Minerals
A concerted pursuit of this proposal will ensure that we turn our economy around
over a relatively short period of time. The private sector commits itself to
continue to partner with government in this endeavour, take a larger
responsibility in the area of capacity building, and institute higher standards
of corporate governance and business ethics in the conduct of its affairs.
Business is resolute in standing firm against corruption, and we require public
office holders to demonstrate good standards of leadership.
Finally let me reiterate that:
The economy is currently in stress, and a more innovative approach is urgently
needed to save it.
The problem is simply lack of growth. Development will only occur at a sustained
level of growth
Economic growth can only come through investment in the productive sector. Such
investment should be targeted and negotiated for export
Investment can only occur if the macro-economic conditions are right, and the
fiscal features adequate.
The targeted investment must be handled at the highest level and the finest
strategies in country-tocountry economic diplomacy must be employed I thank you
for your patient attention, and I will respond to a few questions.