By AKOMA CHINWEOKE
The Minister of information announced recently that Nigeria is the third world fastest growing economy. According to the International Monetary Fund growth in sub-Saharan Africa would pick up to 5.4 percent. It also predicted a 7.1 percent growth in Nigeria’s economy this year. As a matter of fact, the economy has been experiencing persistent growth in the last ten years.
It started with 3.5 percent between 2000- 2001, but dropped to 3 percent in 2002 to reach 7.1 percent after the re-election of President Olusegun Obasanjo and recorded 6.2 percent and 6.9percent in 2004 and 2005 respectively.
In 2006, there was another drop to 5.3 percent and for the year 2007, despite the circumstances that surrounded the election of President Musa Ya’adua, the economic atmosphere was favorable enough to maintain 6.4 percent. 2008 and 2009 was 5.3 and 5.6 percent respectively. This was due to the global financial crisis which reached another peak of 8.45 percent in 2010.
The GDP, by definition, is the sum of gross value added by Nigerians and non Nigerians residing in our country, producers of all kinds’ products in the economy plus revenue collected by the Federal Government.The question is, can this growth be sustained and transformed into a broad base economic development?
Yes it is possible to sustain growth, but not without breaking eggs to make the omelet, only if the current transformation agenda succeeds in a medium term. The process of transforming sustained growth is a complex process that requires total commitment; there is no quick fix in any developmental process.
The country export index shows that global commodity price is favourable at the moment with constant increase in oil price. Therefore, government must strengthen internal market through ongoing reforms in the agricultural sector.
However, Nigeria may not be able to sustain growth unless there is more long-term savings of oil wealth. The economy remains extremely dependent on oil-related revenue for its fiscal earnings; rising oil revenue has help
ed to mask a poor revenue performance from the rest of the sectors of the economy but it has also created the basis for ever-increasing amounts of spending, making the country more vulnerable to any future oil-related shock.
The coordinating minister of the economy raised the alarm, recently, that in the absence of high oil prices, current spending levels may be unsustainable but cutting back may be infeasible politically. Despite the establishment of a fiscal rule aimed at limiting the fiscal deficit to 3 per cent of GDP, she said there has been little long-term saving of the country’s oil wealth.
According to her, frequent disbursement from the Excess Crude Account (ECA)- an account representing the federation’s unallocated oil earnings-and the failure to make the proposed sovereign wealth fund operational, meants that the country has “very little in the way of a buffer, in the event of any shock – price or output-based – that might impact fiscal revenue.”These trends indicate unmanaged consumer spending due to the Nigerian consumption pattern, high taste of goods produce abroad which would soon have direct impact on the total revenue.
The Nigerian economy is structured in such a way that whatever surplus is registered from the increase in commodity price, i.e. crude oil , would always be consumed is the case of Excess Crude Oil Account (ECA ). In this case, there can be no savings and there can be no investment, needless to talk about social infrastructure investment which is long term investment to sustain growth and to support economic development.
There are strong indications that the economy would definitely wake up from slumber to become the African Lion, and the good news is that in contrast to the Asian tigers economies, the resources of African countries like Nigeria are largely untapped both in terms of infrastructure and effective utilization of natural resources for the benefit of the people and the global economy.
One major area that is working for the Asian Tigers economies is their internal structure, relying on productive economy as result of an early investment in social infrastructure, and continuous investment particularly on education from primary , secondary to tertiary while encouraging and supporting entrepreneurship at all sectors of the economies.
However, the real challenge for Nigeria is how to sustain the current growth. Policy makers must come out with strategies and good policy framework to start the process of sectoral change. To achieve this, we must identify areas of weakness and address them with pragmatic approach. Primarily, Nigeria lacks the culture of saving and investment.
Perhaps attention must be drawn to one major leakage in the economy which is the aspect of food production. Food for people must be based principally on what can be produced within our environment, thus Nigeria should do every thing possible to reverse the trap of reliance on food importation and seek to achieve self reliance in food production. This must involve ability to produce, procure, process and store within for the population.
The impressive growth rate of Nigeria’s economy and many emerging economies are stimulating a new economic order, thus, economic growth must crystallize into development, it must be visualized in availability of goods and service, food production and supply to the growing population, a sharp increase must be observed in the health delivery and services to the people.
And, most importantly, growth in the GDP will be meaningless with no future sustenance if much of the young population have little or no access to acquire modern and necessary skills to support growth and development of our economy.
With the population growing at 3.2 percent at an average with direct impact on the demand as well on the capacity of goods and services produced locally, coupled with the new international economic order, the emergence of BRICS, obviously, changes is going to occur in the global market economy and particularly in the African economy.
Nigeria will benefit indirectly from the emergence of the BRICS block economy which would lead to positive reactions, by taking the advantage of its numeric position; with a population of 160 million people representing a large market in the global economy.
According to the history of economic development, there is no country that was able to achieve a take-off stage without building or erecting pillars for internal growth. To sustain economic growth, there must an increase of investment in the real sector, there should be more access to the global market and innovate production, apparatus internally to improve productivity out put.
However, in the Nigerian context, we have identified two major determinant factors that could ease permanent access to the global market. They are: Political leadership committed to economic development with emphasis on social harmony and also must be pre-occupied with way and manner in which the resources are managed, and access to global market which would require high level of productivity through internal competitiveness and in turn determine how much this change would affect individual countries economic structures in Africa and Nigeria in particular. The structure of Nigeria’s economy shows that it is essentially agro –based.
There is no doubt the country remains a nation with great potentials to become a reference point to lead the African economy ,in terms of market size and rated third largest market with hidden opportunities in agro business and the agric sector in general.
Undoubtedly, agriculture would continue to play an important factor to reshape the global economy in the coming decades. Nigeria’s economy with agriculture accounting for 44 percent of its GDP, signifies the extent of other opportunities open to investors as the country seeks to sustain growth through new economic strategies to develop agrobusiness for both local and internal market.
Attention is focused on high agricultural product importation on one side and to reverse the current low yield to encourage efficient domestic production on the other side. Statistics shows that Nigeria has land area of 98.3 million hectares of which 74 million hectares is arable and little is being utilized, indicating significant opportunities for growth.
To sustain growth, development strategies must focus essentially on the three most important areas. As matter of urgency, the country must investment heavily in infrastructure, particularly in power , education, skills acquisition and agriculture to diversify the economy.
Economic development policies are conceptualized as a result of strategies and synergies between enhanced human capital of a nation, involving complementary investments in physical and social capital. If Nigeria lacks the ability to innovate in response to economic growth,as well as in strategies and policies, the possibility to sustain growth and transform growth into real economic development will be constrained Aderohunmu is an economic analyst