Concerns raised recently by the Central Bank of Nigeria about the direction of the economy remind us that we need to fundamentally restructure the way we run our country. Unemployment, income inequality and poverty were rightly identified as unsavoury features of the economy despite otherwise favourable developments. To effect a positive change, the fiscal and monetary authorities should work in tandem to deliver jobs-led growth.
Rising from its regular meeting, the CBN’s Monetary Policy Committee deplored the high level of unemployment, poverty and income inequality in the country. On its own, each of these inhibits real growth, but taken together, they are explosive. Add to this inflation that hovers around 8 – 9 per cent, low foreign reserves and declining Foreign Direct Investment, and the outlook for inclusive growth is dim indeed. Godwin Emefiele, Governor of the CBN, was satisfied with the relative macroeconomic stability, accompanied by modest growth rates; but he was worried by its failure to impact on the dire unemployment situation.
Nigeria’s unemployment rate is a tinder box that the government continues to stoke by its incompetence and corruption. Although the National Bureau of Statistics said 1.4 million jobs were created in the economy in 2013, employers say many were seasonal jobs. Besides, the CBN said that 80 per cent of our youths are jobless, compared to the 54 per cent in 2012 estimated by the NBS. With over one-third of the population of youths at ages 14 to 25, according to United Nations Population Fund, and another 10 per cent at ages 26 to 35, the reality of a seething mass of frustrated youths should concentrate the mind. Not only are so many millions of people unemployed or under-employed, about 3.5 million persons are said to enter the job market each year, making official preening at drops in this ocean look rather precipitate.
Unemployment entrenches poverty that the rebasing of the economy in April that boosted our Gross Domestic Product to Africa’s highest at $510 billion has not redressed. Analysts believe Agriculture and Rural Development Minister Akinwunmi Adesina’s recent assertion that poverty has fallen to 32 per cent to be unduly optimistic. Speaking in April at the World Bank/IMF spring meetings in Washington, Jim Yong Kim, the World Bank President, identified Nigeria as one of the world’s top five countries with the largest number of poor persons. Nigeria actually accounts for 7 per cent of the world’s poor, placing it at number three after India (33 per cent); and China (13 per cent); but just ahead of Bangladesh (6 per cent), and Democratic Republic of Congo (5 per cent).
Like all rent-driven economies, poverty and unemployment are accompanied by wide income inequality – the gap between the rich and poor – that adds to social tensions and market distortions. An Organisation of Economic Co-operation and Development study in 2011 reported that income disparity – where assets, wealth or income are distributed unequally among individuals in a society – had negative impact on development efforts. However, this is a rising global problem, according to an International Labour Organisation report that found that one per cent of the world’s 7 billion people own 46 per cent of its wealth.
Consistently modest GDP growth, West Africa’s highest share of FDI and privatised power assets have failed to deliver inclusive growth. This is largely because the government has poor policies and is also irredeemably corrupt and wasteful. The reserves that rose from $37 billion in May to $40 billion by June ought to have risen to well over $100 billion if we had husbanded our oil and gas revenues more prudentially like some other oil producing countries and developed agriculture and mining.
To stimulate rapid growth, President Goodluck Jonathan should revisit the poorly-handled, corruption-driven electricity power privatisation that has put power utilities in the hands of cronies who have since been unable to attract the expected massive investments and create the predicted hundreds of thousands of jobs. Without adequate power, industry cannot thrive. By July, total power output for Nigeria’s 170 million people stood at 3,240 megawatts, not much more than the 3,000MW of 1999 and after billions of US dollars had been spent, while demand is put at 15,000MW. Malaysia, with 29.5 million people, a GDP of $498.5 billion and a peak demand of 16,588MW, generates 21,500MW. No wonder it attracted FDI of $10.1 billion in 2013 and has an inflation rate of only 1.7 per cent.
To stimulate job creation, reduce poverty and close the income gap, robust fiscal and monetary policies are needed to diversify the economy away from over-dependence on oil and gas. In its 2012 budget, when Nigeria earned N9.4 trillion or $61 billion into the Federation Account, its share of oil and gas revenues from the $67 billion oil sales accounted for the bulk; value added tax and corporate taxes brought in less than 20 per cent. In contrast to this rent economy, the bulk –$82 billion –of the South African government’s revenues of $101 billion to fund its March 2011-February 2012 national budget came from non-rent seeking taxes though it is a global leader in mineral exports.
We endorse Emefiele’s decision to retain monetary tightening policies on interest rates, Cash Reserve Ratio and foreign exchange stability. The Federal Government should back these measures up by cutting waste, privatising its downstream oil and gas assets, especially the refineries, depots and retail outlets; steel companies, operations of airports and seaports and the 11 river basin development authorities.
We restate our belief that liberalising the railways and solid minerals sector and attracting investors from Europe, the United States, Canada, Japan, South Korea, Australia and New Zealand will open the floodgates of FDI, stimulate manufacturing, exports and millions of jobs.
