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Declining Economic Growth: Who is minding the store?

“Economy shrank by 0.82% in 2012 – NBS”. PUNCH, February 19, 2013, p 27.

The National Bureau of Statistics, NBS, one of the most efficient and least appreciated parastatals, in the country today, recently disclosed that “overall growth in real GDP in 2012 was 6.61 per cent, which is a decline from the 7.43 per cent recorded in 2011”. There are several inferences to be drawn from that statement alone. But, only two will be addressed here.

First, we all know that the population keeps growing at approximately 3% per annum. So, we added about 5.1 million more mouths to feed during the same period the economic growth rate was decelerating.  Another 5.23 million mouths will join us, this year, asking to be fed.

We also know that the economy grew, on the average, 7.5% in the previous three years. Yet, the percentage of people living in poverty remains relatively unchanged; unemployment remained high and prices continued to soar. Even, inflation dropping to 9% which would, ordinarily, have been good news elsewhere, contains within it a mixture of sweet and sour tastes in the mouth.

The good news is that while prices go up at a slower rate; they continue to rise all the same. The bad news is, the drop in inflation rate has been purchased by a sharp drop in purchasing power – an increasing number of Nigerians simply have less money to spend. And, governments, Federal, States and Local Governments are the prime culprits for the drop in aggregate personal income and the decline in purchasing power. How?

Governments, all over Nigeria, are destroying the means of livelihood of millions of Nigerians everyday with demolitions and the ban on the means of transport from which most low income earners make their money. Motor cyclists (aka Okada drivers), were the first to come under attack.

Their operations were banned or severely curtailed in many states – even in states like Lagos where the state government itself helped some of the drivers before the 20II elections to secure loans for the business. Today, the machines cannot be operated; the loans cannot be repaid and the guys have no obvious work.

Unfortunately, for government and the people, having no obvious work, does not mean being idle. The devil, which always, is the happy employer of idle hands, has been handed more recruits for the satanic jobs available – kidnapping, fuel bunkering, yahoo and robberies. Politicians will soon create some jobs – for “party stalwarts” (read thugs, murderers and arsonists).

Second, it is well-established, that 7.5% growth, in the past, failed to result in creating jobs in Nigeria; as it was supposed to do according to classical economics. Instead of more jobs, Nigeria had experienced more joblessness. If, miraculously, the economy of the USA or Britain, or Germany, or Greece were to grow at 7.5%, virtually all the people in search of jobs in those countries will be employed.

In fact, labour scarcity will occur.  By contrast, our economy grows at those outstanding rates, yet, most of the graduates of our tertiary institutions, last year, the year before and this year will remain unemployed next year. Why?

Numerous reasons account for the decline last year. Some are largely within the control of the governments of Nigeria; some are partially under our control; while some are totally out of our control. Let us start with those beyond our control which affected our performance because they might be also be partly responsible for the forecast of 6.75% growth in the current year – which still represents a decline from the 2011 figures.

The Nigerian economy is still largely external variables dependent. We basically export crude oil and rely on foreign direct investment, loans and grants, to finance our development both in the public and private sectors. The bulk of the investment had gone into two sectors — crude oil/gas exploration and communications. Another sector which had experienced significant investment is cement.

Apart from those three, there had been little or no investment in other sectors. Several states in the north are actually experiencing divestment – investors are leaving. Since only new investments create jobs, the need for continuous investment is obvious.

For more than thirty years, Nigerians had recognized the need to diversify the economy; to develop other natural resources; to create new products; to industrialise and to curb our growing appetite for imports. Every administration from Shehu Shagari’s to Jonathan’s had made the same observation.

None had succeeded in making it work. Unfortunately, the foreign investors who provided the funds in the past have problems at home. Europe needs help itself and its import of crude oil from Nigeria is declining. It is unlikely that the situation will change any time soon – and it may get worse before it gets better.

Partly under our control is the volume of crude we produce and export legally. In a situation where the Federal Government does not know how much crude oil is produced and sold legally, it is difficult to determine how much the nation is losing to fraudsters selling stolen crude oil abroad.

Even one billion dollars worth of stolen crude, if recovered and invested in capital projects, using manual labour, annually, will, over time, add significantly to our infrastructure and propel more growth. But, we don’t know more today, than we knew ten years ago, the amount being stolen via crude oil theft.

Totally under our control is the issue of distribution of income. Former American President Clinton, in his lecture at the THISDAY annual awards, in Abeokuta, last week, linked poverty with wide disparity in income among Nigerians. He also implied that this disparity is partly responsible for low productivity.

The reasons are clear to economists everywhere. The middle class, that broad group of working men and women, who consume the greatest percentage of a country’s output and also produce most of it, is shrinking in Nigeria. The retrenchment of a bank worker, for example, not only immediately removes the individual from the ranks of the middle class, it resonates in several places.

He can no longer afford to purchase a lot of things he used to (traders sell less); he provides less support to the extended family (uncles, aunties, cousins, brothers get less); and he no longer pays taxes. Multiply that number by 250,000 and the picture becomes clearer, regarding how the continuous shrinking of the middle class is also creating a drag on the economy. Consumption remains the sole purpose of production; when consumption declines, production declines.

Simultaneously, by allowing the rich and wealthy to grab more of the national wealth, through means fair and foul – but, usually foul – we are allocating more income to people far fewer in number; who import most of their needs (food, toiletries, clothing, certainly cars, drinks and who undertake those medical pilgrimages costing Nigeria an estimated N450 billion a year) and export the jobs associated with them and the income the service providers collect. One example of discrimination against the poor and class favouritism will serve as proxy for the rest.

Under President Obasanjo, a total of about N450 billion was given out as Duty Waivers. Among the largest recipients were the Dangote Group and the Redeemed Church – no poor fela there. Not a naira was given to the proprietor of any small scale enterprise; not a kobo went to any micro entrepreneur.

The transfer of wealth involved, in Duty Waiver, is nothing more than robbing the mostly poor Nigerians to pay the few rich and wealthy amongst us. Yet, the Jonathan administration continues the policy of Duty Waiver till today.

Redistribution of income is totally within our control. Though governments at all levels have failed to undertake the challenge, legally, unemployed youths have taken the initiative through self-help and self empowerment nationwide. The rich no longer sleep peacefully because the poor are awake; the poor are awake because they are hungry. So, the hungry get up and organize to kidnap people.

The most urgent question is: who is in charge? The fiction that Dr Ngozi Okonjo-Iweala, the Coordinating Minister for the Economy, is in charge is deceptive and the poor woman might end up being the sacrificial lamb for the failure that might occur. No one Minister can be responsible for correcting the structural deficiencies in this economy.

Certainly, we need more growth; but, more importantly, we need more diversity and more social justice in the distribution of wealth – even with 5% growth. National policies to re-distribute income are not for Ministers to undertake; they call for legislative action, spearheaded by Presidents and the Legislature. They calls for an active President; not a surrogate. Unfortunately, Jonathan is too pre-occupied with the 2015 elections to take charge.

 

Dele Sobowale

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Omojuwa

In the beginning...Let there be Light http://en.wikipedia.org/wiki/Japheth_J._Omojuwa

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