By Omoh Gabriel, Business Editor
THE Nigerian economy can be aptly described as an interlocking set of vicious circles that perpetuate economic stagnation and rural poverty which various governments since 1960 have been struggling to break away from without success. One of these circles involves the savings – investment gap.
In Nigeria perceived by many to be naturally endowed with abundant resources, productivity is low because investment is low in available resources. Investment is low because savings is low; savings is low because incomes are low; incomes are low because productivity is low.
Since the discovery of oil in commercial quantity, the average Nigerian and government functionaries have reclined to rent seeking. A culture of selling oil and sharing the proceeds has taken over the psyche of the people. Nations Nigeria was at par with 50 years ago have gone far ahead in economic development through hard work and visioning. In 1961 Nigeria’s total revenue was N223.65 million which was entirely from non-oil export earnings.
It rose to N477.70 million in 1962, N498.19 million in 1963, N554.43 million in 1964 and N654.34 million in 1965. In 1966 the total revenue rose to N612.88 million and in 1970 total revenue stood at N634 made up of N166.60 million earnings from oil. With increase in export of crude oil on commercial basis from 1970, Nigeria’s revenue profile improved as total revenue jumped to N3.724 billion with non-oil exports contributing just N813.40 million. As at 2009, Nigeria’s earnings was N3.191 trillion with non-oil export at a mere N865.561billion.
With the advent of oil export, Nigeria’s dependence on oil which price is determined by the vagaries of the international market and the quantity determined by OPEC’s quota allocation put the economy on the edge. In the opinion of the World Bank representative in Nigeria, between 1965 to 1987, Nigeria’s Gross Domestic Savings decreased from 17 per cent to 10 per cent.
In comparing 12 countries’ growth rate at the time with Nigeria, it was discovered that during the two decades from 1965 to 1987 the World Bank found that Korea, with a population of 42 million in 1987, joined the rank of middle income countries by increasing its per capita income from US$650 to US$2,400. In the same period Malaysia and Brazil accomplished the same while Nigeria’s per capita income declined from $440 in 1965 to $375 with a population of 120 million in 2004.
Further Nigeria’s per capita was $420 in 2000 lower than what it was in 1965. In 2001 it rose to$ 432, $407 in 2002, $452 in 2003. This implies that in 2004 Nigerians were no anywhere near what Indonesia, Malaysia and Brazil had attained in 1987. In the same period the World Bank observed, Korea’s industrial share in GNP increased from 25 to 42 per cent; in Indonesia from 13 to 32 per cent and in Argentina about 42 per cent.
By World Bank calculations, the most potent factor in economic growth is gross domestic savings. From 1965 to 1986 Korea’s savings rate increased from eight to 35 per cent; for Indonesia from eight per cent to 24 per cent; for India from 16 per cent to 21 per cent. For Nigeria, it decreased from 17 per cent to 10 per cent and for Japan it was maintained at 32 per cent. The situation in Nigeria remains largely the same as savings have not improved beyond what they were in the 1980s if not worse off.
While Korea achieved about 94 per cent level of secondary school and tertiary enrolment, Nigeria, during the same period (1965-1986) achieved 29 per cent, the World Bank noted. The implication is that while these countries have reached a self-sustaining growth, Nigeria has been trapped in debt, $32 billion in 2004, deficit budgeting N315 billion in 2003 and population explosion 120 million 2004 and estimated at 140 million in 2010.
In 2008 (the latest available figures) Nigeria’s per capita income was $2,300, South Africa $10,000, Saudi Arabia, $20,700 and Singapore $52,000. Malaysia which had about the same development indices with Nigeria in the 60s in 2008 had a per capita income of $15,000, South Korea $26,000, and Indonesia $3,900.
The effect is that the living standard of the populace is on onward decline and this has dragged more Nigerians into the poverty line. A recent study shows that more than 70 per cent of Nigerians live below $2 a day. The situation has not changed much. These are the realities starring the populace in the face as Nigeria celebrates 50 years of independence.
Nigerians are celebrating 50 years of growing poverty, government wastage, political mediocrity, social inequality and the ever widening gap between the rich and the poor.
What has Nigeria achieved? Is it epileptic power supply and huge youth unemployment? Are we celebrating mounting industrial close downs, inadequate foreign exchange, lack of drugs in hospitals, flying inflation, high government borrowing and an army of able-bodied men turned beggars because they cannot find jobs?
Maybe, there is something to celebrate.