What can Buhari do today that will produce sufficient dividend to turn around this economic mess within 5 years?
Last week, I threw out a serious warning couched as a joke in the sense that the title of the posting was, “Frog in a pot of water—Bunsen Burner On”.
People pretty much glazed over it, but reality will hit sooner than expected. Nigeria’s economy is decelerating at an unprecedented rate–what bugs me immensely and I’m very objective in issues like this, is that I don’t see a way out immediately or in their near future.
My thought revolves around this point–what can Nigeria do today, I mean start right now, that will produce sufficient dividend to turn around this economic mess within 5 years? I see nothing, do you?
The nation needs to have a very serious conversation about what’s is in the offing regarding its economy.
People can run around and look for who to praise or who to blame but this is a very serious existential issue, and I hope everyone wakes up to this inevitable reality.
“…what can Nigeria do today, I mean start right now, that will produce sufficient dividend to turn around this economic mess within 5 years? I see nothing, do you?”
You ask a very valid question that should actually be the major focus of our discussions —but we prefer to discuss politics. Who is to blame? Who is not to blame? etc.
There are MANY things Nigeria can do to turn the economy around over the next 5 years.
1. PROPER PROBLEM DEFINITION
We can never solve our economic problems without properly defining its root cause.
I am going to say something that is counter-intuitive and will probably bring the bile out of some.
Our economic problems are NOT caused by corruption or fall in oil prices.
Corruption and fall in oil prices have compounded our problems and helped drive us into recession but fundamentally our economy is in trouble because investors have no confidence in our economy and its managers.
We must and should fight corruption and limit its pervasiveness in the polity. However elimination of corruption is NOT a necessary ingredient for economic growth. Brazil, Russia, India and China are the so called BRIC nations –the next emerging economic powers — and they are all corrupt countries.
Indians brought corruption to Nigeria when we were naive. In Russia the Government would take your property, hand it over their friends and put you in prison.
The Brazilian president just got impeached for corruption. All these countries would have done better with less corruption in their system but their economy is still far better than many other countries who rank higher than them in the Transparency International’s corruption perception Index ( http://www.transparency.org/cpi2015 )
The other fallacy is that the fall in oil prices and therefore Government revenues is the root of economic our problems. Nigeria’s Government spending as a percentage of GDP is less than 15% ( http://www.theglobaleconomy.com/Nigeria/Government_size/ )
The oil industry as a percentage of Nigeria’s GDP is less than 15%. When you take a hit to 30% of your GDP you will feel the impact but a proper understanding ( and management) of the real levers that drive your economy will still give your a 70% chance of righting your economic ship.
Since OBJ’s privatisation exercise Government has ceased from owning and running the ‘commanding heights’ of the Nigerian economy.
THE POSSIBLE SOLUTIONS
1. We have to understand that we need HUGE amounts of private sector (both local and foreign) investments to grow our economy. The total Federal Government (padded and unfunded) budget for 2016 is circa $20 billion. There are estimates that to grow Nigeria’s power generated/ transmitted/ distributed to 45,000MW will require investments in the region of US$60 billion. Without private sector investment, the Federal Government will have to spend ALL of the next 3 years’ budget at current levels solving our power problem. No education, no security, no civil servants’ salaries etc.
The moral of the above is that we need to focus our energies in understanding and implementing a game plan for attracting private sector ( local and foreign) investments into Nigeria.
What do investors want?
1. Sound Economic policies –that are transparent and market driven.
2. Consistency in the application of #1 above
3. A competent team implementing #2.
Sounds simplistic but it is actually very difficult to implement. #3 being the foundational starting point. Without a sound team of seasoned folks with an understanding of how a modern economy functions you may have well meaning folks who flip flop their way from one trial and error policy to another. The flip flopping creates a problem of inconsistency and inconsistency adds a layer of risk that may be unacceptable for investors. That is the root of our problems over the past 15 months.
The priority #1 therefor is the team. They must not just be competent but must be seen to be competent. Remember you are playing the ‘confidence in the economy’ game. The other players must perceive your team as competent.
That is why if I had PMB’s ear and a chance to give just one advice I will say search and find a Nigerian operating in the capitals of global finance with the clout and name recognition of the Okonjo Iwealas and Segun Agangas of this world.
They are not indispensable or necessarily ‘better’ than your current crew but you need someone who has been a ‘priest’ in the temples of capitalism, someone with the ‘rolodex’ to make personal calls at the highest echelons where the decisions to invest or not invest are made, someone who can sit at the table with MDs of IMF and World Bank and speak and socialize with them as equals. Find that one person and make him or her the face of your economic management team ( and I am then hoping that person will build out a competent team) that will deliver #1-1 above.
————— Joe Attueyi
I have summarized the above positions in my previous articles, now other Nigerians are buying into the idea.