If we ask each of you to write the most important interventions to make the industry competitive, I can almost imagine a long laundry list that includes: transport infrastructure, electricity, security, law and order, interest rate, exchange rate, inflation, tariffs (some of you may even suggest banning of some imports), export incentives, tax concessions, investment in R&D, government patronage in procurement of drugs, addressing shortage of critical skills through competitive educational system, speedy resolution of disputes and enforcement of contracts, elimination of corruption and bureaucratic red-tape, fixing government finance, etc. This is the ‘usual’ list.
If you review the various national development plans (from 1962-68; till the 1981- 85), you will be surprised to see that literally everything people bandy around have since been proposed for diversifying and transforming’ Nigerian economy.
As I reviewed the first to third national development plans, I counted 71 references to ‘diversification of the economy’ and 48 references to ‘transformation of the economy’. I will therefore not waste time on repeating the obvious.
I believe that your association, together with the NESG, can constitute an important lobby for the private sector. To broaden your capacity for productive engagement with policymakers, let me draw attention to four broad issues that you may wish to reflect upon. I raise the issues without necessarily providing, the final answers: we need to debate them as a country.
(a) Firms cannot become globally competitive if the system within which they operate is not competitive.
*Nigeria cannot benefit from the flying geese model in the pharmaceutical industry.
All global indicators of competitiveness and governance, especially the World Bank’s Doing Business
Report, the World Economic Forum’s Global Competitiveness Indicators, Mo Ibrahim’s Africa governance index, Transparency, International’s corruption perception in the UN’s human development index, etc rank Nigeria badly.
The logical expectation is that a highly uncompetitive environment will stall economic progress. Yet, the economy is reported to be ‘growing fast’. Is there a growth paradox in Nigeria?
Not necessarily! For sure, Nigeiia has. huge growth reserves that make it potentially one of the richest countries in the world (large hydrocarbons and solid minerals; abundant but fallow arable land; big, resourceful and youthful population; large Diaspora population; vast coastal land, etc). Vast, idle resources make growth easier to attain than otherwise.
The production structure is such that about 70% is natural resources and agriculture — two sectors that are currently largely de-coupled from, or bypassed by, the competitiveness story. I am not very happy to report that Nigeria’s growth story is largely the oil price story.
Nigeria’s growth is cyclical and somewhat opportunistically tied to the swings in oil prices. When oil price booms, domestic aggregate demand — largely consumption — spurs the rest of the economy. A collapse in oil prices also translates into catastrophic effects on the macro economy. We experienced the same ‘growth boom’ during the first and second oil booms of mid 1970s, and 1979 – 81.
Bear in mind that Nigeria is currently at about half of its per capita income of US$2,300 in 1980. Of course, some things have changed since then. One example is the shift from a command economy to a more liberalized one. But by and large, it is still dominantly the oil story.
A rigorous growth accounting reveals some interesting but disturbing dynamics. Nigeria is not anywhere near its potential growth trajectory.
On the demand side, consumption rather than investment is the key driver. No country in modern times has pulled itself through the prosperity ladder by being a consumer nation. On the supply side, Nigeria has all the trappings of a post-conflict economy where ‘growth’ is dominated by capacity utilization especially in the oil and gas and agricultural sectors (which account for