Path to Nigeria’s economic revival

CBNThe National Dialogue (conference) on Economy and Development, convened under the auspices of the National Assembly, will open in Abuja today. The original title of the conference was The National Dialogue on Economic Development and Reconstruction.

The word ‘reconstruction’ that has been dropped from the title of the dialogue actually better captures what Nigeria now needs. The word reconstruction conjures up the image of the effort or process required to restore a broken security and economic system brought about either by war or natural disaster.

The situation that Nigeria currently confronts is anlaogous. A conflict has been raging in the North East region for over five years, involving the armed forces and the Boko Haram terrorist group. The conflict-affected areas have suffered all atrocities associated with war: death; displacement; destruction; and abductions of many people, including the Chibok girls.

Meanwhile, the Niger Delta- the main source of Nigeria’s oil wealth — has a huge unfinished peacebuilding agenda and teeters between peace and possible renewed violence. Outside these two regions, insecurities reflected in armed robbery and kidnappings are rife.
On the economic front, years of high oil price have succumbed to falling oil price, especially after the 27 November 2014 OPEC meeting in Vienna, where that organisation, of which Nigeria is a member, decided to defend its market share rather than price.

In the past seven years, oil price has fallen from its peak of $148 per barrel in July 2008 to $115 in June 2014, $71.50 the day, after the OPEC meeting on 27 November 2014, and less than $50 presently. The falling oil price has had severe adverse repercussions on the economy.

Foreign reserves are depleting. Domestic and external debt is rising. Growth is projected to decelerate from 5.5 percent to 2.6 percent in 2015.
Moreover, the fall in oil export revenue is coinciding with a fall in non-oil export revenue, further clouding the country’s fiscal and trade balance outlook. Meanwhile, inflation is on the rise.

As the economic situation has deteriorated, a national debate has erupted about the proper course of economic policy.
The current national economic context is eerily reminiscent of the situation in 1986, when the oil price also witnessed a major decline.
The major difference between then and now is that the security situation, as described above, was not as troubling as at present. Then, an anguished national debate also erupted on whether Nigeria should seek the financial support of the IMF-World Bank and adopt their structural adjustment programme (SAP).

Three main issues dominated that debate: privatisation of State Owned Enterprises; liberalisation of the trade regime; and devaluation.
Critics of devaluation warned then that the presumed benefits of devaluation will not materialise because Nigeria was –and still remains– a mono-product economy, with the price of oil quoted in dollars.
Advocates of devaluation argued that, by making the prices of Nigeria’s products relatively cheaper, devaluation will improve Nigeria’s export diversification.

This supposed benefit has proved elusive: In 1984 oil accounted for 97 per cent of Nigeria’s export earnings, today oil accounts for 90 per cent of Nigeria’s export earnings. So much for improving Nigeria’s export diversification, as a consequence of devaluation.

The inconvenient truth is that devaluation is only one arrow in the quiver of economic policy making, which has to be carefully targeted, to complement other strategic economic and public policy objectives.
Starting from the premise that development is not sustainable with peace, and peace is not durable with development; a wide ranging reconstruction effort is required to re-launch the country.

Reconstruction is both a metaphor and a practical expression of the scale of effort that is needed. That effort should rest on five major pillars.

First, there has to be renewed effort to tackle the unfinished peacebuilding agenda in Niger Delta and begin the process of the reconstruction and rehabilitation of the conflict-afflicted areas of the Northeast. In Niger Delta, there is need for a major environmental clean-up in the area; infrastructure development; and economic revitalisation of many of the communities.

The evolving North East Marshall Plan, estimated at N200 billion, should have a laser-beam-like focus on three issues: de-radicalisation of the youth through training and employment creation; supporting the re-integration of internally displaced persons; and undertaking the reconstruction of damaged infrastructure and rehabilitation of vital institutions in conflicted-affected areas. Provided, they are well-designed, the reconstruction efforts in these two regions will provide huge job opportunities for the unemployed youth.

Second, there has to be a re-invigorated commitment to reform the country’s security sector with a focus on strengthening the rule of law anchored on rehabilitating the police. The argument that the police force is not up to the task of maintaining domestic law and order rings hollow, in so far as the police force will only rise to the challenge, if it is well funded and equipped, including better accommodation for the lower ranks.

As a complementary step, the use and role of the military in the maintenance of domestic law and order must be drastically reduced, and eventually eliminated; while re-orienting it to focus on deterring external aggression and defending the territorial integrity of the country.

Security and rule of law are a necessary but not sufficient condition for promoting economic growth and development, which is the third strategic objective. Nigeria must rapidly address four major constraints that have impeded its growth and constrained its export diversification: inadequate infrastructure, in particular power supply; the inability to add much value to its agricultural products; the failure to join the global production chains of the competitive industrial sectors; and lack of a critical mass of scientific and technological cadres.

The consequences of the last factor are increasingly being felt in the country’s growing dependence on foreign scientific and technical expertise for a range of complex industrial, commercial, construction, and agricultural work.

Fourth, people must reap the ‘dividends’ of economic growth. The fact that an estimated 70 percent of the population live below the poverty line of $1.25 a day shows that most Nigerians have not benefited from the growth spurt of the past decade which has seen Nigeria emerge as Africa’s largest economy.

A central feature of the national reconstruction effort must involve creating more jobs, in so far as increased employment opportunities hold the keys to poverty reduction. Such complementary measures as vocational education and improved access to health care have to be taken.

Fifth, at a time of dwindling oil revenue, funding these priorities would require that the federal government exploit some existing avenues and adopt new approaches. The first is ending the oil subsidy and improving tax collection. The second is to ensure that local and foreign firms operating in the oil sector pay all their dues- royalties, profit taxes, duties and bonus signature commitments that are still outstanding- and cutting off middlemen in Nigeria’s oil sales transactions. The third measure is to vigorously combat corruption and recover stolen assets as means to garner more resources for the strategic reconstruction objectives.

If the government can take policy measures to enhance the safety and security of Nigerians as well as improve their economic and social conditions, it will earn the respect and enjoy the support and goodwill of all Nigerians.

• Mr. Otobo is a Non-Resident Senior Expert in Peacebuilding and Global Economic Policy at the Global Governance Institute in Brussels, Belgium.

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