The International Monetary Fund recently refocused attention on Nigeria’s crisis of development when it canvassed substantial investment in human and physical capital to meet the United Nations Sustainable Development Goals. Its recommendation to raise spending in critical sectors from the current miserable single digit to at least 18 per cent of Gross Domestic Product by 2030 poses a daunting challenge for a leadership that has long failed to heed past targets and is faced with a portentous recession. There is however no alternative: the country has to invest urgently and massively in people and infrastructure or face ruin.
The IMF, in its technical assistance report, restated the consensus reached by the UN, the World Bank Group, the European Union and other global development institutions that Nigeria would have to invest heavily in education, health, sanitation, roads, power and rural infrastructure to improve human development indices, productivity, job creation and income. Experts say that for the economic growth to translate into economic development and human development, there has to be a radical transformation of existing institutions, including peoples’ social attitudes and motivation to engage in lifelong learning and adapting to change.
Earlier, billionaire philanthropist, Bill Gates, had lamented the country’s low level of spending on human capital, urging a radical change. Concomitantly, the World Bank has reiterated the urgency to bridge the wide infrastructure deficit that bedevils the country, headlined by the woeful power sector, inadequate and dilapidated roads as well as substandard airports and ports. It warned that Nigeria was headed for its worst recession in four decades.
The countries that have successfully transitioned from poverty and underdevelopment to economic greatness are those that invested heavily and consistently in human capital and infrastructure. When these two go hand-in-hand to a point of equilibrium or near equilibrium, the momentum propels an economy to stardom. Human capital development – habits, knowledge, skills that people possess and enable them to add value in the global economic system – should combine with massive investment in infrastructure to lift an economy off the floor.
But Nigeria’s case is dire, made more urgent by a revenue haemorrhage, crashing oil prices, a low tax base, the COVID-19 pandemic and global contraction, declining foreign direct investment, rising debt and a governance structure where the bureaucracy drains over 70 per cent of the budget and corruption derails capital projects. Besides, with the population projected to grow by 30 per cent, adding 60 million to the current estimated 200 million by 2030, the future looks scary indeed.
Unlike Ghana, for instance, that, by 2011, was spending 30 per cent of its national budget on education, or India that spends an average of 8.3 per cent of its GDP on infrastructure, Nigeria spends less than five per cent each on health and education. Its infrastructure stock, put at less than 25 per cent of GDP by the UN, falls far below the international benchmark of 70 per cent. Public investment in infrastructure averaged 3.6 per cent of GDP, lower than the African average of 4.3 per cent, according to Stears Business. Education Minister, Adamu Adamu, estimates the number of out-of-school children at 16 million.
McKinsey, a global consultancy, reckons that infrastructure typically has a socio-economic rate of return of about 20 per cent in the long run through access to electricity, broadband connectivity and access to the global digital economy. The government’s National Integrated Infrastructure Master plan already faces a $100 billion investment gap, said the IFC, the same amount Finance and Budget Minister, Zainab Ahmed, said is required annually till 2030 for infrastructure. Out of 188 countries ranked on the UN Human Development Index 2017, the country placed 152, lower than Ghana at 139 and South Africa 119. Life expectancy at 54.49 also falls behind Ghana’s 64.17, and about 10 years below the average for low-income countries. The literacy rate of 62.02 per cent also compares poorly with Ghana’s 79 per cent and South Africa’s 87.05 per cent. Of the 1,400 universities in 92 countries ranked by the Times Higher Education World University Rankings 2020, the best the country could offer, Covenant University, Ota, came in at 401, but South Africa had two among the best 200.
Nigeria needs to move away from its unsustainable governance template and invest in infrastructure and the people. The UN estimates that South Africa enjoys 35 times as much electricity as the average Nigerian, while the density of road network here is one-ninth that of India. According to IB Consulting, “Nigeria’s problem is not one of misplaced priorities. The government has not been over-investing in physical capital at the expense of human capital; it has been under-investing in both.” That is the tragedy.
But others have been wiser with spectacular results to show: faulting the popular view of infrastructure and FDI as the main drivers of China’s ascendancy, some Indian economists said, rather, it was the massive investment in human capital that propelled the record-shattering capital formation and investment that facilitated its economic miracle. The Human Capital Index 2018 of the Word Bank, not surprisingly, featured Singapore, South Korea, Japan, Hong Kong and Finland in the top five out of 157 countries ranked where Nigeria featured at 152, sharing the bottom rung with South Sudan among other fragile states.
There is no short cut to development. This country once had leaders who as heads of regional governments understood the imperatives of a development plan with emphasis on both infrastructure and human capital. The defunct Western Region (and its five-successor states 1979-83) devoted over 50 per cent of spending to education alongside rapid infrastructure investment and industrial policies.
The federal and state governments should abandon the suicidal template of bureaucratic parasitism, which the Central Bank of Nigeria Governor, Godwin Emefiele, and his predecessor, Lamido Sanusi, recently separately warned guaranteed bankruptcy, and should align with sensible policies. McKinsey suggests bridging the infrastructure-funding gap by attracting investments from banks and institutional investors through improvements in regulation and pension rules, transparency and efficient project management.
Many countries are turning to productive knowledge to raise economic competitiveness. In raising formidable workforces, Japan, South Korea, Singapore, Taiwan and China build excellent schools at home but nevertheless send their brightest to the best colleges abroad; 369,000 Chinese students were enrolled in American universities in 2018/2019 and 120,385 in British in 2020, while India had 26,685 students in British universities.
The federal and state governments should drastically reduce costs; remove binding constraints such as corruption, mono product dependency, forex instability and bureaucratic controls. Go for low hanging fruits in privatisation, liberalisation and asset sales, agriculture and mining. Let states and LGs provide basic rural infrastructure and education while the Federal Government concentrates on health, education, sanitation, roads power and opens up the railways, ports, airports and construction sectors for private investment.