Opinion: Bringing back growth to the Nigerian economy (1)

by Tunji Andrews

With the main Nigerian production forte being without doubt, agriculture, I believe we should use the agricultural sector as our case study; and its success model could be used as a benchmark for implementation in other sectors.

For a few weeks now, in the articles I have written and the interviews I have granted, I have come to realise in retrospect how negative I had become in relations to my perceptions of the Nigerian economy. Recently, I wrote the article “NIGERIA’S GDP: PUNCHING BELOW ITS WEIGHT”, which focused on the under-performing nature of the Nigerian economy and how we have unceremoniously dropped out of the top 10 list of fastest growing economies in the world. The low did not however come until after I was guest to Duncan Bartlett on BBC’s World Business Report to comment on Bill Clinton’s assertions on the fact that Nigeria had failed in effectively managing her oil income.

I can’t say if it was the fact that I had just painted Nigeria in the worst possible light (within the bounds of the truth) or maybe it was knowing that the show (which had my views on it) would be aired simultaneously all across the world or maybe it was the “traitor look” I got from the Nigerians who listened to the show; but, I indeed felt low. I couldn’t place what they had expected me to do; lie/cover up or tell the cold hard truth, as I had just done. However, in solemn meditation I realised I had a 3rd option, maybe even more, which I unconsciously ignored; as, I could have told the truth by highlighting the good and the bad, but alongside showing the possibility for improvement (because there are). With the lightbulb switched on in my head, I felt inspired to write a 6 part article on how I believe Nigeria can grow its economy at a rate proportional to her potential; in the hope of exorcising my demons of guilt.

I believe that from which ever way you look at it, with vast mineral resources, cheapest labour around, a population of over one billion, largely undervalued and fast growing markets, with one of the highest bond return values around, Africa is definitely the new Asia; with Nigeria right at the middle of it all. With the 2nd largest economy and the largest population on the continent, Nigeria is by far Africa’s most profitable destination. Even with Nigeria’s security and integrity challenges, the Nigerian stock exchange still boasts of almost 50% of its value coming from foreign investors; the bond market also enjoying similar foreign interest.

I do not assume to know all the answers, but it is my view, that should Nigeria fix these 5 issues, she would be able to consistently pull a 15% GDP growth (minimum) every year for the next 10 years. I call them my 6-point growth agenda:

  1. Trade – Both foreign and domestic
  2. Financial inclusion
  3. Infrastructure
  4. Cheap and accessible Capital
  5. Security
  6. Education

I would attempt to touch on trade in this article and will look at the other five in subsequent articles: so do look out for them.

Now, Nigeria in September of 2012 recorded a trade surplus of 3.38 USD Billion, a figure many believe Nigeria could easily double or even tripled, if it set its manufacturing and agriculture house in order. Trade figures, between 2002 until 2012, showed Nigeria’s Balance of Trade averaging 2.2 USD Billion, reaching an all time high of 6.2 USD Billion in May of 2008 and a record low of -0.4 USD Billion in June of 2003. Sadly, though, exports of oil and natural gas account for more than 95% of total exports. With Nigeria’s main exports collaborates being the USA (30% of total in 2009), Equatorial Guinea (8%), Brazil (6.6%), France (6%) and India (6%). Nigeria imports mainly being industrial supplies (32% of total), transport equipment and parts (23%), capital goods (24%), food and beverage (11%) and consumer goods. The main import partners are China (17% of total), Albania (11.3%), United States (7.5%), France and Belgium.

It is my opinion that leaving the responsibility for non-oil export growth largely with the Federal Government is a measure that would ensure we never attain this. I would prefer to first look inwards at inter state trade to meet domestic need and boost internal consumption, which with time would naturally grow into export, when supply exceeds demand. This, I believe would grow gradually on the back of a ready market and can create a trade structure that can make access to funds and support infrastructure easier. Please, be not fooled that the process I am about to explain is at all easy, but with a step by step plan, I am sure Nigeria can make it happen.

Now, with the main Nigerian production forte being without doubt, agriculture, I believe we should use the agricultural sector as our case study; and its success model could be used as a benchmark for implementation in other sectors. We all are well aware that this sector has suffered great setbacks since the emergence of oil, not to mention a withdrawal of active government participation within the sector. Recent governments have showed interest, but, it has become so difficult to re-institutionalise agriculture having ignored it for so long; knowing Nigeria used to be self-sufficient prior to the oil boom. It is my belief that Nigeria can revive its glory days and I believe the path sits in the institutionalisation of a growing system of domestic consumption.

Agriculture, a major branch of the economy, which provides direct and indirect employment for about 70% of the population, can be transformed by commercialization at the small, medium and large-scale enterprise levels. However, with agricultural holdings remaining small and scattered, farming in Nigeria has not been able to grow beyond the conventional type carried out with simple tools, as large-scale agriculture is not common. However, it may amaze you to note that Agriculture has managed to contribute an average of 32% of the Nations GDP since 2001, with major crops like beans, sesame, cashew nuts, cassava, cocoa beans, groundnuts, gum arabic, kolanut, maize (corn), melon, millet, palm kernels, palm oil, plantains, rice, rubber, sorghum, soybeans and yams.

Different schools of economists define production and consumption differently. According to mainstream economists, only the final purchase of goods and services by individuals constitutes consumption, Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services. What I propose is a consumer-led growth in manufacturing/production, where states can structure their markets in such a way that it becomes the market of first resort to a partnering selling state. The whole idea really boils down to structure; where the food demand of a market like Lagos state (with huge population and little farm space), can in partnership, be the market of first resort to an Ekiti state (with low income and massive farm space) for instance.

Now, both markets and farmers would have to come under a structured body, which can help accurately determine what both demand and supply is at both ends and in a stock exchange type setting, a regulatory body can help facilitate trade and control prices. What this effectively does, is to give famers an accurate projection of what their end yields would be in terms of cash. This can help effectively put a value for insurance of farm produce and also become collateral to facilitate access capital from banks, since the market is already established and the price relatively determined. Via such a program, all registered farmers and sellers can be listed on a regulatory website in terms of their produce or buying capacity and years in practice; this would not only help them have an official platform to which banks and partners can view their profiles, but also open them up to foreign buyers, who may be interested in their produce.

Naturally, this would require strong border control that would discourage all farm produce outside the organised network entering or leaving states. I mean, for control in terms of supply and demand to be strictly adhered to, black market scenarios must be eliminated.  The ministry of trade (to whom all the credit may eventually go to), would need to oversee all the bodies and align them for seamless transactions, the states, farmers and traders. Getting in consultants from the Nigerian Stock Exchange may also be a very great idea to help create a stable online exchange system that is well aware of all the complexities of farming and farm produce trade.

The farmers would need to get themselves organised into a strong, united agricultural front, with this single organisation acting as the mouthpiece for all farmers at a national level, with the purpose of ensuring the best possible financial and social position for the farmer within the national economy. This situation may be largely unique but makes good sense in that both the farmers’ organisations as such and the agricultural cooperatives are organised and controlled by farmers to promote their interests.

Finally, the states would need to learn how to put political sentiments aside for the greater good of economic growth. Not only would it give the states greater room for trade, it will also help the state have a detailed record of all farmers and traders within its boundaries for effective tax purposes.

An organised internal trade/domestic consumption network may look like a huge challenge for a Nigerian setting where everything is politicised and monetised, but, I am convinced it can work and will also effectively grow our production rate steadily till supply exceeds demand and thus, naturally boost export.

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Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.

 

One comment

  1. Wow! This Tunji Andrews guy should run for president

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