It has been said that “Brazil has a future and always will”. The quip cannot be made about Nigeria. It has a future and it is working towards it without the mind-boggling mistakes that have been made in recent years in Brazil.
Nigeria’s economy, the largest in Africa, has grown eleven fold since 2000, according to Goldman Sachs. Since democracy was restored in 2010 the national income has almost trebled. According to a Citigroup report published in 2010 Nigeria will have the highest GDP growth in the world between 2010 and 2050. Already its GDP per capita is 3,900 US dollars per person.
Nigeria goes to the polls on Saturday to vote in what is going to be a closely fought election. It’s probably fair to say that right now poorer voters don’t feel they are on the lift going up. Growth has not trickled down to them as much as it should, at least in terms of incomes although their access to clean water, medical help and education may have improved. Economists say they won’t get a real leg up until Nigeria approaches double digit growth.
The rapidly expanding middle class has its own worries. Since the price of oil collapsed a few months ago government revenues have fallen sharply. To make up the government have increased taxes on better off people and delayed capital expenditures. Projected annual economic growth is coming down from over 7% to under 5%. Nevertheless, it is very far from hitting rock bottom as it has in Brazil.
Although oil and gas provide 70% of government revenues they account for only about 8% of the national income. As the World Bank reports, “Though the petroleum sector is important it remains in fact a small part of the country’s overall vibrant and diversified economy”. Thus there is little chance that momentum, although slowed, will be seriously affected in the long run.
The manufacturing sector has been improving steadily. It makes up 15% of national income. Services, including the booming telecom sector and the film industry (Nollywood), make up 30%. Agriculture makes up 40%. It is in this sector that most of the poor people live. But growth has been slow.
33% of the population live below the poverty line. In the rural areas it is around 45% and in the urban areas 12.5%. Lagos, the power house of Nigeria, continues to steadily lift its population out of poverty. Its economy, according to Renaissance Capital, the investment bank, is worth one-and-a-half times Kenya’s total output.
When democracy returned in 1999 President Olusegun Obasanjo made a great range of economic reforms. Aided by Mrs Ngozi Okonjo-Iweala and Mrs Nedani Usman, his successive finance ministers, Nigeria repaid Nigeria’s enormous debt, re-organized the banks, introduced an IMF-backed exchange-rate regime, built up a large sovereign reserve fund and initiated a string of liberalizing reforms.
Infrastructure reforms initiated by Obasanjo have come to fruition during the tenure of his successor, Goodluck Jonathan. The moribund railway system has been given a new life with renovated lines, including the 1126 kilometer long link between Lagos in the south and Kano in the north. The electricity system has been privatized.
Jonathan has his own achievements to boast: A revamping of the agriculture sector with young people now trying to get into agriculture. The housing sector is being unleashed and unfettered. The aim is to see housing as a source of growth, as it is in the developed countries. The pension system, once a nest for corruption, has been totally revamped. The system is being digitized and people given biometric cards. The oil subsidy system, another nest of corruption, has been cleaned up and this has reduced the amount of money disappearing. Foreign investors are coming into the power sector. The government has used the money it raised last year from a one billion dollar Eurobond issue to ramp up investment in power supply. Many big companies are investing in the country. There has been a good start in building a cash-transfer system whereby poor families are given a subsidy – Brazil and Mexico style – if they put their girls into school.
One can talk at length about economics but the fight against the Islamist extremist Boko Haram movement will be a big consideration for voters. According to Obasanjo, “Many things with the army went wrong, training went wrong, morale went down, motivation was not there, corruption was deeply ingrained, welfare was bad”.
Jonathan’s rival for re-election, Muhammadu Buhari, a Muslim from the North, seems, as an ex-Major-General, to have better credentials for dealing with the crisis. He is also known for his personal austerity. Voters appear to be contrasting this with the corruption that has flourished largely unpunished under Jonathan’s government.
The election seems up for grabs. But whoever wins will have solid economic foundations on which to build. Nigeria is not Brazil.
Copyright: Jonathan Power