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Nigeria’s defective development plan (1)



Last week, I wrote about the Petroleum Industry Act being a sectoral Act expected not to address issues of the larger economy. Coming on the heels of the PIA is the Medium Term Nigerian Development Plan 2021-2025 to address the economy and ‘plan’ to the year 2025. To this writer, the PIA was a disappointment, lacking a real transformative vision for the oil and gas sector.

There was a period in the ‘70s when the oil sector contributed close to 40% of the Nigerian GDP for many years. With diversification spanning the years, oil contributed around 10% to GDP. That ends the good news because 60% of government revenues still come from the oil sector, hence budgets are still tied to the price of oil and not to taxes from non-oil sectors that constitute 90% of the Nigerian economy. This makes the oil sector of the utmost importance to politicians and their cronies, while the rest of us get on with our contribution to the real economy.

Therein lies the problem. The oil and gas sector, which accounts for 10% of the economy, contributes around 80% or more of the official forex supply that determines the value of the nation’s currency, and what happens in the forex markets affects the whole economy. I declare once again that the oil and gas sector addressed by the PIA has become the weakest link in the Nigerian economy.

The PIA cannot address this problem and might make it worse, hence a thorough interrogation of the new MTNDP that is to take us to the year 2025 is imperative. As I asked of the PIA, I also asked of the MTNDP: What is its grand vision or grand objectives? It is to achieve average GDP growth of just 3.8% between 2022 and 2025. Meaning, if achieved, economic growth has hardly overshot population growth of 2.7% for the better part of 10 years, 2015-2025. Hardly the way to lift 25 million people out of poverty or retrieve another 10 million that have dropped into poverty in recent times, these being part of the grand objectives of the plan.

Let us juxtapose this growth objective with the actual performance of the economy 10 years prior to 2015. The Nigerian economy achieved between 6% and 8% growth annually, the best in Africa. Now we are no longer in the top 10 fastest growing economies in Africa. Rather than moving from 7%, we are stuck at below 3% growth. Meanwhile, anything short of growth above 10% — double-digit growth — for decades will keep Nigeria as the despicable poverty capital of the world. There is no other way of lifting 100 million Nigerians out of poverty but by double-digit growth. Let the government stop the delusion.

Back to the Plan: In introducing the plan, we are told it is built on past plans, especially the Economic Recovery and Growth Plan of 2017-2020. The ERGP target was to achieve 7% economic growth by 2020. For each of the years 2017, 2018 and 2019, the economy struggled to grow at 2%. It is this dismal failure that MTNDP is predicated on. Making excuses for this poor performance, our economic managers say they are laying the foundation, yet the new MTNDP proudly states that digging Nigeria’s economic foundation is one of its objectives.

Are we going to lay the foundation for more than 10 years? Please give me the foundation that gave the country 7% annual economic growth for close to 15 years and let us build on that to achieve double-digit growth. To achieve this we might need a change in personnel for as Dele Sobowale opined in Vanguard newspaper of January 3, 2022, this is a regime that does not learn from its past mistakes.

Cutting through the dross of bureaucratic economic language, we find it is more of the same as past plans. Something not in ERGP is that states will be invited in just as in the past when the National Economic Empowerment Development Strategy gave birth to SEEDS, the state’s version. Highlighted is that 86% of the N348 trillion bill of the plan will be financed by the private sector. This is trying to be loyal to the private sector driving the economy mantra. However, typically you have a preponderance of Ministries Departments and Agencies being mentioned than the BUAs, Innoson, Ibeto, etc. Of course, Dangote Group gets a mention because of his exploits at Lekki Free Trade Zone. Meanwhile, it is the likes of these private operators that are the real drivers of the economy, not the MDAs.

In discussing what has been constraints to previous growth, it was mentioned that “limited availability of credit for private investments….” Yet throughout the draft document I didn’t see plans on how to get us back on reversing the rentier culture of our financial institutions. Nigeria was on this track when former CBN Governor Sanusi Lamido started the phase-out of commissions on turnover and other rents. Had we followed through with this singular scheme, banks would have been forced to finance the real sectors of the economy rather than seeking rents to make profits on their investments.

To compound matters, in recent times, we have seen the Nigerian Central Bank take over the role of retail bankers in a plethora of interventions in various sectors of the economy with the banks sitting back enjoying their rent. Now the sale of forex has also been channelled to the banks. Why would banks go out of their way to finance this development plan with this largesse already in place?

For the first time a government document mentioned our economy getting involved in the production and export of complex goods over crudes, but that is about all it got a mention. Given an opportunity for selling the plan on Channels Television what our Finance minister wanted to sell to us as in the plan was that our six geopolitical zones are to specialise in six agrarian crops. This interview gave a window into the government mind and looking in you see misdiagnosis of what is really wrong with our economy. That is a lack of complexity in what we trade with the world. What our finance minister chose to highlight in diversifying away from oil is back to agric our bedrock since colonial days. This was confirmed by the most recent interview with Mr President.

Other oil-rich countries, like Malaysia and Indonesia, have diversified into microchips, electronics, semiconductors, rubberized products, refined palm oil – that is value-added export-oriented agriculture. There is evidence our policymakers are stuck in a mental freeze.

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