How Nigeria gloats on falsehood
By Bayo Ogunmupe
LIKE other emerging economies, Nigeria currently enjoys a strong Gross Domestic Product (GDP) growth. But we believe much of this growth is predicated on false data. However, this illusory growth could be detrimental to our economic development in the long term.
In its latest Global Economic Report, the World Bank projected that the Nigerian economy would sustain its growth trend this year, with our GDP of 6.6 per cent, from 7.3 per cent last year. The World Bank believes fresh foreign investments are to be pivot of this growth.
According to the report, increased investment will be the driving force of the Nigerian economy over the medium term, pointing out that since 2000, investments have increased steadily from 15.9 per cent
to 22.9 per cent for the ECOWAS sub region.
It is expected that with these economies tapping into the global capital markets, it will help redress the constraints expected to sustain the pattern of growth in this region. This report avow that foreign direct investment is expected to remain in this New Year.
These investments are expected to increase to new levels each year, reaching a peak of $55.59 billion in 2015. Foreign Domestic Investment inflows to the mining sector, particularly oil and gas and solid minerals as well as agriculture would be supported by spiraling commodity prices over the next two years.
The report said further that prices of crude oil in the world market will rise from $102.1 per barrel by 2015. In addition to increasing sources of finance, domestic investment is expected to double through financial sector deepening in developing countries.
The World Bank said that over the last decade, bank deposits have increased by eight percentage points, supporting a 10 percentage point increase in private sector credit.
Also, widespread cuts in policy rates in 2012, is expected to stimulate economic growth up till 2014. However, the report identified the risks that could derail our region’s growth prospects. Such risks border on the downward slide of the global economy, shown by weaker growth of the Chinese economy, the ongoing fiscal consolidation in the wake of the debt crisis in Europe and the weakening U.S. economy.
Other risks border on domestic concerns, such as political instability, industrial disputes and adverse weather conditions. For their advice, we are told to focus on growing our economy while strengthening buffers to deal with risks.
Overall, the report said the risks are now less skewed to the downside than it has been in recent years. Global growth will come at a relatively weak percentage, gradually strengthening as the years roll by. It observed that GDP growth in developing economies during 2012 was among the slowest in 10 years.
But these positive ratings notwithstanding, economists aver that a growing economy that fails to impact on the standard of living of the people is an economy in recession. In his book, Gross Domestic Problem, Professor Lorenzo Fioramonti of the Department of Political Science, University of Pretoria, South Africa argues that far from being a sign of progress, growth measured by GDP comes at a cost often accompanied by resource depletion and income inequality.
Indeed, Fioramonti argued that fixation with GDP growth compels policymakers to design policies that promote import inducing consumerism that attracts short-term investments. And with the declining economies of the West, economic gains are likely to be slim.
Moreover, the don said further, Africans do not have the statistical resources to measure GDP. So our statistically induced growth being based on fake figures will result in false hopes. He said further that GDP led economies attract investors looking for short-term gains rather than those interested in a nation’s long-term stability.
In alignment with that position, World Bank Vice President for Africa, Dr. Mukhtar Diop, while in Abuja recently, expressed concern over the high level of poverty in Nigeria. Like Fioramonti, Diop argued that even when Nigeria’s GDP growth rate promised great potential, its current trend is inadequate to tackle the high level of poverty in the country. Diop said the most critical obstacle to growth is power, which affects big companies and manufacturers.
Indeed, economists believe that Nigeria’s economy is the greatest paradox of the modern age. Despite statistical growth, poverty has continued to rise geometrically with more than 100 million people living on less than one dollar a day. Unemployment among youth is 37.7 per cent, the highest in sub-Saharan Africa.
The greatest blame is placed on power outage, with improvement in power, cost of doing business will come down. Currently, it is too high as compared with other developing countries. Paradoxically, Nigeria’s ranking has not translated into development. The increase in GDP has not reduced unemployment, while the state of the infrastructure, remains parlous, fuelling increased poverty and insecurity.
As the economy is hooked to oil revenues, achieving food self-sufficiency will be no mean feat. The latest from the Food and Agriculture Organisation shows Nigeria to be the second largest importer of rice in the world, importing about two million tonnes a year up till 2010 – costing us one billion dollars yearly.
Even so, we spend more importing wheat and palm oil. As for exports, the only commodity which Nigeria has any presence at all, is cocoa, for which is the fourth largest exporter in the world in 2010. This is fair, but well behind our neighbours: Ghana and Ivory Coast.
While agriculture accounts for 40 per cent of our GDP, this is not likely to fall soon. But one of the problems preventing rapid growth is lack of credit. Agriculture is negligible in terms of bank lending. It barely features, it does not have any significant representation in the equities market. USAID said that 70 per cent of Nigeria’s small-scale farmers lack access to financing. All of that is hardly helped by decaying infrastructure and unpredictable afflictions such as floods which destroyed two million hectares of farmland in 2012.
Last year, government tried to help farmers by imposing tariffs on cereal imports by stipulating that breadmakers must use more cassava, of which Nigeria is the world’s largest producer. However, land tenure remains a barrier for farmers seeking to expand their operations.
The government provides some credit as part of its flagship Agricultural Transformation Agenda which has plans to set up Crop Processing Zones. Government claimed that private investment in agriculture in 2012 was $8 billion. And earlier in 2012, CBN governor, Lamido Sanusi signed a memorandum of understanding with USAID for scheme to finance it with $3 billion. If that will help, the government will have to start putting its money where its mouth is by spending more on agriculture which now makes up of only 1.7 per cent of federal spending in our 2013 budget. That portends no change from the outlay of 2012. Thus, if we are to grow and develop we need new leaders.