Every country in this globalised world is looking for competitive ways to remain an export engine or an outpost of global trade. The BRIC (Brazil, India, China and Russia) are using internal fiscal and trade policies to empower their people and tapping into their demographic strength to produce competitively. The oil rich emirates (Bahrain, Qatar, UAE and Oman) are carving a liberal niche, building the biggest structures and developing strategies to make themselves an avenue of global trade and tourism.
A look at the top twenty economies shows traits of a booming service sector or low cost industrial base that maximizes human capital. Though many are blessed with natural resources, they are maximally using it to power new sources of growth through innovation and industrial growth. The Top twenty own the biggest industries of the world, best sets of education, attractive financial industry and most importantly they tap into the creative energies of their people. They have diverse leadership ideologies but they guard their interests to remain competitive through job and value creation.
By competitiveness, Nigeria is classified as factor driven economy where growth is primarily determined by primary production factors especially land unskilled labour and capital. Factor driven economies like ours are mostly sensitive to world economic cycles, fluctuations in exchange rate, commodity prices and are mostly resource based economies. Ours is oil and this clearly shows why oil provides 95% of our foreign receipts and the sole determinant of our budget procedure is the benchmark price of oil.
Nigeria according to Goldman Sachs has identified in next 11 economies with potential to bloom after the BRIC. Nigeria is also among the most populous African countries known as Africa11 with huge demand potential and spending pattern. According to Goldman Sachs report, by 2050 Nigeria and other populous African peers will aggregate to a G7 economy size. Potential can always be static if we don’t take a look at the critical solutions of the Nigeria economy. Recurrent expenditure with gross inefficiency are piling up amidst a few available jobs in a surging youth bracket.
I have taken account in how we want to create jobs and this involves more than doling out money at low rates or empowerment schemes that hire graduates as traffic wardens or tree gardeners.. Nigeria has got natural resources but according to an IBM analysis, Nigeria with its other Africa peers doesn’t explore their natural resource to last end of value chain where lies the critical mass of profits and jobs. We are either producing oil to refine elsewhere or with acres of arable lands import rice or have solid minerals with a moribund steel industry.
We are in a dividing-the-pie syndrome with monthly allocation handed to states when there should be the right policies to activate private sector growth. The pertinent question is how does Nigeria accelerate its enormous potential to possibilities? How will Nigeria take the leap from factor driven indices to build massive creative distractions from diminishing oil- its present sustenance? Nigeria has a young population with 65% of the population under 40 which stands a risk as well as an opportunity. It also owns diversified natural resources especially proven gas reserves that can last for 110 years. To transit the Nigerian economy to an efficient driven will require consideration of the outlined metrics:
- Convergence of Public and Private Policies: Public policy has to clearly defined with opportunities for private sector interests that values competition, value chain development, societal development and profit maximization. There has to be continuous robust discussion between both sides to develop a common purpose of creating shared wealth and expansion of the middle class.
- Competitive Federation Structure: Nigeria at present has not devolved powers to its states as the federal governments takes over 56% of current allocations. It is also of note that most states are run with poor macroeconomic and debt management. Nigerian states have to wean themselves from oil based revenue and pursue expanding-the-pie solutions to develop its own people. This requires granting more autonomy to states to explore its strengths and find opportunities to collaborate for efficiency. States can develop an agricultural, industrial, green economy, resource based, service sector or technologically based approach and this requires sound leadership currently few in numbers.
- Political Stability, Budget Discipline and Transparency: Nigeria has a poor budget performance with an average of 50% in Nigeria over the last five years and more worse in most states. The budget has a rising level of 69% recurrent expenditure in the last three years and such does not free up funds for capital projects which are engines of growth. The recurrent expenditure need to be restructured to prune unnecessary growing expenditure mostly especially in government overheard expenses, personnel cost and cost of subsidies. A transparent government that forgoes the import/export patronage system of few cronies to find the right policies that values competition and expand the economy is of urgent need.
- Bridging the Unbanked gap: Access to finance is a critical issue in Nigeria as 65% of its population who are presently unbanked. The banks have to be properly regulated with stable policy mechanisms and this is through sound corporate governance and risks mechanisms. Reaching the unbanked has to pursued with microfinance banks. Such banks need to ride on accessible technological support, innovative products backed to deliver efficient services to the rural and low income population.
- Infrastructure Development: Nigeria’s infrastructure deficit stands at $100bn and as such will need massive scale of finance to plug the gaps. This requires FDI flows through Infrastructure financing and development of private and public partnership. Power is especially the net contributor to the huge deficit with a 3,500 megawatts which clearly explains why the manufacturing sector of a populous country contributes 4% to its GDP. Competitiveness will hugely improve if clear policy direction, private sector support and enabling environment is provided with the power sector reform. Railways, roads, agricultural assets access to market, enhanced distribution network and water supply needs to managed efficiently to scale the infrastructure hurdle.
- Human capital Development: Nigeria presently has a competitive advantage in terms of an active labour force with represents over 70% of the population. This is also a possible risk as unemployed youth population will scale up vices such as militancy, kidnapping, cybercrime and son that present threats to competitiveness. A quick surgery needs to be done the curricula, educational infrastructure, getting trained personnel to develop next set of national champions. There has to be a development of industrial or technical based training that transfer our natural resources in finished products based right on our own soil. Nigeria needs to replicate global structures of education with a sectoral revamp and allow more import of scientific knowledge based increased exchange interaction and ploughing back skilled Diaspora into the economy.
- Sound Trade policies: China and India in terms of GDP per capita and most of Asian countries dubbed workshops of the world are low cost economies with growing influence in the Nigerian economy. Nigeria needs to reinvent its local SME industry and improve its infrastructure to reduce direct competition with low-cost imports from these countries. A clear trade policy that refine the Nigeria economic sector to tap into its uncultivated arable space, mining potentials, petrochemical and crippling agro-allied industry needs to be formulated. Nigeria needs to acquire massive know how, infrastructure development, promote incentives for home grown industries and accept imports of goods in places of scarcity in the Nigeria’s economy. This will support growth of jobs internally and reduce capital flight that puts our currency at a peril.
Nigeria has enormous potential to expand its middle class and become an efficiency-based category of competitiveness. This will gradually lead to develop of research-based institutions, innovation development, flow of capital, high end technology, increasing wages and reduced inequality. All these are traits of a country that seeks relevance in 21st century global economy. Politicians can make a hell of promises on their plans for the economy but with now strict management of excess crude account, over blown recurrent expenditure, Nigeria has to set quick priorities (not political projects like 36 airports) hinged on right competitive parameters. It all depends on the right and upright leadership that can use the right policy based on equity and social justice to take the best out of our multiple resources – the human and natural.