ECONOMY - 20 JUN 2019

Nigeria is underperforming despite its growing population

Nigeria is underperforming despite its growing population
Street trading monitoring bodies could be set up at local and state government level, allowing street traders and hawkers to obtain licenses and permits for selling their products. Source Ground Media

Nigeria's $400 billion economy is the biggest economy in Africa. Yet, gross income inequality and poor distribution of wealth ensure that many Nigerians do not benefit from this wealth, with about 100 million living in poverty.

Meanwhile, Nigeria’s population of 200 million makes it not only the most populous country in Africa but the 7th most populous in the world. Furthermore, 53% of the population is between the ages of 16 and 64. Once you put Nigeria’s economy in the context of its population, it is clear that the country is underachieving. For example, Nigeria ranks at 28 in GDP terms, but the country ranks 142 in GDP per capita terms.

How does Nigeria fare against other countries with similar-sized populations? Of the top eight most populous nations, only Pakistan ($305 billion) and Bangladesh ($250 billion) have a lower GDP than Nigeria. Along with India, these two also have a lower GDP per capita. However, economic growth is much higher in these three countries: the International Monetary Fund (IMF) forecasts average growth of 2.7%, 7.0%, and 7.6% for Pakistan, Bangladesh, and India over the next five years. The IMF forecasts 2.5% growth for Nigeria within that same period.

So, Nigeria has a relatively low GDP per capita, and the economy is growing much slower than peer countries. Even when we consider countries with lower growth rates like Brazil and Russia, we discover that their economies are at least four times larger than Nigeria’s.



Maximising Human Resource capital

Even though under some laws, primary education is free, 13 million Nigerian children are out of school, the highest in the world. Many of these work in Nigeria’s black market—as street hawkers, domestic help, or just begging. This renders Nigeria double-disadvantaged: the present economic contribution of this group is unaccounted for, and so is the opportunity cost of the absence of skilled labour in the future.

Nigeria’s failure to harness the economic potential of its population can also be traced to a failure of tertiary education. Only two Nigerian universities are considered one of the top 1000 in the world. In response to this, Nigerians spend a fortune in countries such as the U.S., Canada, and Australia. In 2018 alone, Canada welcomed more than 11,000 Nigerian students into the country.

Now, a new wave of Nigerians is emigrating: the skilled workforce. Canada, in particular, has been a popular destination—the number of Nigerians admitted into Canada under the Express entry programme increased from 98 to 1036 between 2016 and 2017. Furthermore, Canadian census data showed that while just 42,000 Canadian immigrants are of Nigerian descent (7% of the African total and 5th in Africa), 17,000 recent immigrants are of Nigerian origin (11% of the total), making Nigeria the highest African country. The current socio-economic uncertainties and instabilities in Nigeria suggest that this trend will increase in the coming years.


How can our population growth become more useful?     

The first step is to remove legislative and administrative bottlenecks. Economic policies for job creation are an essential aspect of boosting economic growth. The unemployment rate currently stands at 23.1%, the 10th highest in the world.

One area that could be fertile ground is the informal economy, through what can be described as ‘activity regulation’ rather than prescription. For instance, instead of banning practices such as street trading or hawking, the economic practice should be regulated in a way that ensures individuals of working age can engage in the activity as a real source of income, duly taxed by the government.

Street trading monitoring bodies could be set up at local and state government level, allowing street traders and hawkers to obtain licenses and permits for selling their products, subject to conformity with standards set by agencies such as the National Agency for Food and Drug Administration Control (NAFDAC).

Services by domestic workers should also be regulated with income duly taxed by the government. The Labour Act of 2015 already recognises domestic service as an employment category in Nigeria. Subsidiary organisations can be established at different levels of government responsible for regulating the recruitment of domestic labour and the nature of work undertaken in such capacity.

While effective monitoring and regulation of these sectors is undoubtedly challenging, setting up such bodies at the very least provides some form of government supervision and offers an opportunity for the collation of useful data relating to the informal economy.

 

The importance of infrastructure

It is an issue that has been covered extensively, but no economic growth policy can be truly successful without upgrading our infrastructure. Nigeria currently has power generation capacity of 12,000MW, which is insufficient for its future needs. Of this, it barely generates 4,000MW, leaving more than half of its population in perpetual darkness.

The power situation has many consequences: high operating costs due to a reliance on imported diesel, reduced productivity (particularly in rural areas), and so on. Without ignoring the potential of renewable energy solutions like solar panels in a country so close to the equator, medium-term economic and demographic realities cry out for a more centralised solution to power supply.

 

Selling to the world

Notwithstanding grandiose talk by previous governments with respect to diversification of the economy, oil and gas still constitute 90% of Nigeria’s exports. Moreover, Nigeria still has to rely heavily on oil imports because domestic refineries are operating well below capacity.  Export strategies centred on diversification will take some pressure off the oil and gas sector to generate export revenues.

There is some talk of increased focus on agriculture as an alternate means of economic growth outside oil production. However, critical infrastructural development is still needed to maximise any potential in this respect. The sector currently faces different challenges, including an outdated land tenure system, high cost of farm inputs and poor access to credit with Nigeria reportedly losing over $10 billion annually due to decline in production.

These problems cannot be solved in one day, but government policies can be directed towards providing interest-free loans, subsidising the purchase of irrigation development materials and improving land tenure security for farmers. Providing farmers, especially those in rural areas with functional transport networks that ensure greater access to markets would also help production and increase output.  

More significantly, little economic production will take place in an atmosphere of insecurity, as is evidenced by the low internally generated revenue in Northern states. Securing an end to the conflict in North-East Nigeria and other volatile areas must be treated as a matter of urgency, particularly to relieve the economic burden on the more prosperous states which are fast becoming overpopulated.

Nigeria may have Africa’s largest economy, but in truth, it is still underachieving bearing in mind its expansive human resource base. Its problems in relation to human resource maximisation have persisted over different administrations, and until concrete steps are taken towards addressing these issues, human resource maximisation will remain a mirage.

Fifehan is a research specialist and legal consultant

Fifehan Ogunde

Fifehan Ogunde

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