By Omoh Gabriel
Nigeria’s economic managers are fond of reeling out economic indices and informing the country that the economy is doing well. Very often, they adjudge the economy as doing well with economic growth rate.
The Minister of Finance and the CBN Governor have at various point this year comforted the nation that the economy has grown by as much as 7 per cent. During the last annual meetings of the IMF/World Bank, the Finance minister told the world that the economy has grown as expected by 6 per cent.
The question being asked is: Can any economy grow by as much as 7 per cent without absorbing more labour in an economy where close to 40 per cent of the able-bodied labour force willing to work cannot find jobs? Can an economy grow by this margin in the face of retrenchment in the critical sectors of the economy?
Can an economy grow in a situation where financial institutions are not granting credit, can an economy grow in a situation where there are no new investments, no replacement of machinery, instead of industrial expansion, there are closures? In most developed economies, how many new jobs created stand as a measure of the level of growth recorded?
The progress of economic recovery from the ashes of the global financial melt down in the US and elsewhere is being monitored by growth in job placement. Here, it is by how many people are thrown into the unemployment market. The government does not have a vague idea of how many Nigerians are unemployed, yet the economy is growing by 7 per cent.
The United Nations Conference on Trade and Development, UNCTAD report released in Geneva on January 17, 2011 slammed Nigeria which economy was supposed to be growing at 7 per cent with a red card: foreign direct investment (FDI) into Nigeria dropped by as much as 62 per cent in 2010, from $6 billion in 2009 to $2.3 billion in 2010, the worst in many years, and even worse than during the global crisis. Foreign Direct Investments are important to any nation because they are sources of job creation unlike portfolio investment.
According to the UNCTAD report, while developing and transition economies increased their Foreign Direct Investment inflows by 10 per cent in 2010, Nigeria’s FDI fell by a whopping 62 per cent. FDI was more than doubling every year, and even at the peak of the global crisis in 2008, stood at about $8.5 billion. The international investors are sending a strong message to Nigeria, yet the nation’s economic managers are fooling the country with data that do not show improvement in the economic well-being of Nigerians.
Economic growth in elementary economics is premised on expansion of production of goods and services, increase of per capita gross domestic product (GDP) or other measures of aggregate income, typically reported as the annual rate of change in real GDP. Economic growth is primarily driven by improvement in productivity, which involves producing more goods and services with the same inputs of labour, capital, energy and materials. Economists draw a distinction between short-term economic stabilisation and long-term economic growth.
A. H. Ekpo & O. J. Umoh in their article: Overview of Nigeria economic growth and development stated that the long-run path of economic growth is one of the central questions of economics; despite some problems of measurement, an increase in GDP of a country greater than population growth is generally taken as an increase in the standard of living of its inhabitants. Over long periods of time, even small rates of annual growth can have large effects. A growth rate of 2.5% per annum will lead to a doubling of GDP within 29 years, whilst a growth rate of 8% per annum (experienced by some Four Asian Tigers) will lead to a doubling of GDP within 10 years.
According to Dr. Okonjo-Iweala, Managing Director, World Bank: “It is interesting to note that African economies are growing, but what does this mean to the attainment of millennium development goals? Growth is a big part of halving poverty by 2015. When an economy grows, there are benefits to the economy. Not all growths. Is it growth that is creating jobs, is it growth that is putting food on the table?
“That is the kind of growth we are looking at. The World Bank is trying to work with countries to look at the quality because you can have what we call jobless growth. So in Africa, we need job-creating growth and that means looking at several sectors where jobs are being created like agriculture. We really have to invest. If you invest in agriculture, you cut down on poverty and enable people to be productive, not the old type. We are not talking of just increasing output.
“We are talking about different form of investment, adding value to the chain. So how do we process and market the goods produced, how do we increase productivity on the continent which is one third of that in other continents? That is the answer that can be part of the equation if it is the proper type of growth.” Has this growth being touted by government functionaries in Nigeria reduced the level of poverty in the country? Certainly not. Poverty index has risen from 45 per cent in 1999 to 70 per cent today.
Dr Okonjo-Iweala debunking the growth claim at the annual meetings said: “When we talk about growth in Africa, it is a little bit confusing. In Nigeria, they said the economy grew by 7 per cent when there are millions of jobless youth, the future of Africa’s economic growth seem bleak when it is taken into consideration the volatile nature of primary commodities, oil that they depend on.
How prepared are these countries to stay afloat if commodity prices crash on the international scene?” Nigeria’s growth index is occasioned by rising oil prices. When prices of crude are high and it earns more money, to the government, that is increase or growth. Agriculture also forms part of this. Any time there is good harvest and there are increases in agricultural production, government and the CBN rushes to the media to proclaim economic growth. These are factors that government has no contribution or direct control over. Supposing oil prices crash today, the economy will shrink.
The Nigerian economy has always had growth. In the period 1960-70, the Gross Domestic Product (GDP) recorded 3.1 per cent growth annually. During the oil boom era, roughly 1970-78, GDP grew positively by 6.2 per cent annually – a remarkable growth. However, in the 1980s, GDP had negative growth rates. In the period 1988-1997 which constitutes the period of structural adjustment and economic liberalisation, the GDP responded to economic adjustment policies and grew at a positive rate of 4.0 per cent.
In the years after independence, industry and manufacturing sectors had positive growth rates except for the period 1980-1988 where industry and manufacturing grew negatively by – 3.2 per cent and – 2.9 per cent respectively. The growth of agriculture for the periods 1960-70 and 1970-78 was unsatisfactory. These growth rates have not transformed the economy. In fact, there has been no dramatic change in the way Nigerians do things. No development.
In Nigeria’s economic history during the early 1960s, the agricultural sector suffered from low commodity prices while the oil boom contributed to the negative growth of agriculture in the 1970s. The boom in the oil sector lured labour away from the rural sector to urban centres.
The apparent increase in industry and manufacturing from 1978 to 1988, was due to activities in the mining sub-sector, especially petroleum. Capital formation in the economy has not been satisfactory. Gross domestic investment as a percentage of GDP, which was 16.3 per cent and 22.8 per cent in the periods 1965-73 and 1973-80 respectively, decreased to almost 14 per cent in 1980-88 and increased to 18.2 per cent in 1991-98. Gross National Saving has been low and consists mostly of public savings especially during the period 1973-80.
Government officials more than ever before continue to tout GDP growth rates which essentially show the obvious: Nigeria is lifting more barrels of crude oil, and the weather has been very clement to spur agricultural growth!
Professor Chukwuma Soludo last week said that the Minister of Finance should be celebrated for making it into the Guinness Book of Records for assuming office when oil price was about $75 per barrel and external reserves stood at about $42 billion and within 9 months earned a world record as the Head of an Economic Management Team (EMT) that lost about $10 billion in foreign reserves at a time of unprecedented export boom, with oil price now over $90 per barrel; the world record as the Finance Minister who had the fastest rate of debt accumulation in Nigeria’s history, even at a time of oil boom and presented a budget where not a kobo of oil revenue is spent on infrastructure, power, etc but 114 per cent of revenue spent on consumption; and as head of the Economic Team when literally all international ratings for Nigeria worsened, even worse than during the global crisis of 2008 and 2009, and for the first time in several years, the outlook for the economy is adjudged NEGATIVE, with FDI collapsing, a clear indication of loss of confidence by international investors, yet, in the calculation of the Minister of Finance and the CBN, the economy is growing.
With the ever increasing unemployment in the country, Nigeria is on the march towards what is happening in the Arab world. Down the road, many Nigerians will take to the streets to demand accountability from their leaders. In fact, what is happening in Egypt at the moment will be a child’s play when that of Nigeria erupts. Minister and CBN, keep deceiving Nigerians with your data. Soon, the chicken will come home to roost then the people will not only have their say, they will have their way.