Tough Choices (1)
The 21st Nigerian Economic Summit focused on the tough choices needed to achieve competitiveness, inclusive growth and sustainability. We know that Nigeria is the largest economy in Africa and the 26th largest in the world. In spite of this size, it is increasingly clear that the country’s economy is not as competitive as others in the top tier and its growth is equally not as inclusive.
The World Economic Forum defines competitiveness “as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy. The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time. Although the productivity of a country determines its ability to sustain a high level of income, it is also one of the central determinants of its return on investment, which is one of the key factors explaining an economy’s growth potential.” The Forum also defines inclusive growth “as output growth that is sustained over decades, is broad-based across economic sectors, creates productive employment opportunities for a great majority of the country’s working age population, and reduces poverty. Inclusive growth is about both the pace and pattern of economic growth”.
The current state of the Nigerian economy has underscored the urgent need to discuss our realities in competitiveness and inclusive growth at this time and the Nigerian Economic Summit Growth brought stakeholders together in Abuja to do just that.
Even though the country moved up by three places in the 2015 – 2016 Global Competitiveness Index to 124 out of 140 (reversing its downward slide in 3 previous years, the country fell from 115 out of 144 in 2012 – 2013 to 120 out of 148 in 2013 – 2014 and further down to 127 out of 144 in 2014 -2015), it still ranks only 20 out of 32 countries in sub-Saharan Africa. This means that Nigeria merely ranks above Zimbabwe, Mali, Swaziland, Madagascar, Mozambique, Malawi, Burundi, Sierra Leone, Mauritania, Chad and Guinea – the last six are the last in the global rankings.
The continent’s best performers remain South Africa (49), Rwanda (58) and Botswana (71). Rwanda continues its 5-year upward trend and improving in 7 out of 12 pillars. By the way, it might be worth recalling that the 12 pillars of competitiveness are institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, good market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.
There is no Index currently in place to measure inclusive growth but the World Economic Forum has equally developed a Framework for measuring it in its Inclusive Growth and Development Report 2015. The Framework presents a corresponding set of indicators of performance and enabling environment conditions in seven principal policy domains (pillars) and fifteen sub-domains (sub-pillars). According to the Forum, societies that have had particular success in building a robust middle class and reducing poverty and social marginalization have tended to create effective economic institutions and incentives in many of these areas, while supporting growth through sound macroeconomic policies and efficiency-enhancing reforms. The 7 pillars are education and skills development; employment and labour compensation; asset building and entrepreneurship; financial intermediation of real economy investment; corruption and rents; basic services and infrastructure; and fiscal transfers.
On Nigeria, the Report notes that “despite the opportunity offered by its significant oil revenues over the years, has not put in place the factors necessary for creating an inclusive growth process. Despite some significant gaps in data measuring educational outcomes, the picture remains one of low enrolment, insufficient quality, and wide divergence in student performance based on socioeconomic background. Participation in the labour force is quite low, with a large informal sector and much of the population working hard but unable to pull their families out of poverty. Only 3.9% of income goes to labour, resulting in low wages and over 80% of the population living on less than $2 a day. The country suffers from poor infrastructure and a lack of basic services, with corruption and diversion of public funds making it difficult for the government to deliver public goods. Despite a relatively entrepreneurial environment, Nigeria is not yet able to ensure growth that is sustainable and broad-based.”
Nigeria’s relatively poor commentary on competitiveness and inclusive growth interrogates past efforts by previous administrations through the National Economic Empowerment and Development Strategy (NEEDS) by the Obasanjo presidency, 7-point Agenda by the Yar’Adua presidency and the Transformation Agenda of the Jonathan presidency. Each of these programmes espoused ambitious ideals and as fruits of the same party it is expected that there was a continuum in outlook and philosophy. Did they deliver? The answer probably accounts for the sweeping condemnation of the last 16 years that has gained common currency.