Economic Growth: Nigeria Government Approach Is Wrong!

People living in poverty in Nigeria remain the same data since 1999 and this time 2011. However, those households living in poverty have sunk deeper into poverty and the gap between them .The success of Nigeria socio-economic prosperity depends on macroeconomic stability and political will. To achieve this, numerous reforms are needed. These include liberalizing the exchange rate regime; adopting prudent fiscal policies; combating food inflation; stimulating exports; adopting incentives for attracting foreign investment; revitalizing agricultural production; supporting land reform; reducing the debt burden; increasing access to fuel and electricity; abolishing price controls; and reviewing the mandate, policies, and operations of the central Bank of Nigeria (CBN).

Nigerian authority should learn lessons from the past and remember that the 1990s and 1980s saw a steep decline in the flow of official development assistance. So instead of taking the promises of the past failed leaders at face value, this government should put in place mechanisms to monitor whether the west live up to side of the bargain. Without mutual accountability and mutual responsibility between my country; Nigeria and the industrialized powers, the MDGs will remain a pipe dream in our homeland Nigeria.

Since poverty still remains a problem in Nigeria; researches on “nigeria4betterrule” database recognizes and makes clear the close relationship between decentralization, poverty and local development. The challenge in Nigeria is to reduce the incidence of the poverty by 50% (meaning 27% by 2015), hence there is a need to understand the variables which influence poverty and the role to be played by the government and by development partners.

Initiating the Nigeria local content policy into the oil and gas sector has not been seen sustaining economic growth over long periods of time and it is one of the most difficult challenges facing this government, but the achievements of these target shows that it can be done. A significant number of Nigerian firms simply will not be able to compete on world markets when facing these kinds of regulatory costs.

Critical to the resolution of these questions is the forging of a new national identity and consensus devoid of the military inherited inequalities, whether these express themselves in cultural, political or economic terms. However, the path to building the new national prosperity has been disputed. An analyst gives a framework of analyzing successful and failures in addressing the national question in the context of local content in Nigerian oil/gas including process industries. The basic prerequisite according to I, Chinedu Arizona-Ogwu; is that such a government program should have the capability of “eroding the power of the dominant class in the rural society”. Related to such transformation of class power is the release of the productive capacity of those who have been excluded through access to land and all related productive elements to make success of set-out capital accessed. Such a process does not only lead to economic recovery of the historically marginalized but has the added positive result of re-affirming and re-humanising the same.

Statistics shows that impact of these costs on a hypothetical exporting firm. This firm sells its product on world markets for a price of 100. In the total absence of red tape (the bar on the left), 50 percent of its costs go to intermediate inputs, 30 percent to wages, and 20 percent to profits. The right hand bar shows the cost structure with regulatory and bureaucratic costs. For exporting firms, the costs of red tape must reduce either profits or wages. Firms cannot increase their price on world markets in the face of such costs, and they cannot adjust their input costs (presumably they are already purchasing the lowest cost inputs). Any bureaucratic costs reduce profits and the ability of the firm to pay the wages that it otherwise could. In these circumstances most firms simply will not bother to invest.

Experience shows there is no single recipe for success in development. Many countries around the world are facing different circumstances and obstacles, and has different endowments (positive and negative) of geography, natural resources, and human capital. The strategy that worked in small, urban, resource poor, strategically located Singapore is different in many ways from that used in rural, resource rich, landlocked Niger Delta. The highest priorities for one people are not the same as for another; moreover, the highest priorities and challenges within a country change over time and during the course of development.

Comprehensive and well-defined stabilization package is needed to ensure credibility, and minimize adjustment costs. It should comprise the following elements: a transfer of quasi-fiscal activities (Qfas) to the government budget. All activities would improve fiscal transparency and accountability. Significant fiscal tightening: This should include QFAs, and could be achieved by reducing the public sector wage bill as well as subsidies to public enterprises. Again, some fiscal spending needs to be focused on food security, health infrastructure, and a targeted social safety net. Exchange rates need to be unified, and restrictions on international payments and transfers removed. Following the adjustment process, the unified exchange rate should be floated.

Underinvestment and hyper-inflation have depleted the physical and human capital of the civil service. In order to enable the various government institutions to fulfill their mandates, rebuilding the capacity of the public sector is a priority. Improving access to utilities and social services (health and education): In order to address the massive failure in service delivery, the government needs to look beyond effectively and rapidly. Luring back human capital lost in the ‘brain drain’: Exiles would need to be convinced that the Nigerian economy has stabilized and is poised for growth, the exchange rate is at an appropriate level, the government is committed to and capable of delivering social services, and the rule of law and security have been restored.

The first 100 days of a new Jonathan government will be crucial for an effective transition as well as constructive socio-economic transformation. While the magnitude of the task at hand will require multi-ingenuous mechanisms to mobilize sufficient intellects, the emphasis will initially be on faster bilateral expertise (such as DFID) effectively assisting the new government during these early days in office.

With economic growth now a realistic prospect over the medium-term (GDP growth is expected to rise to 5.2% in 2012), Nigeria has the opportunity to align economic growth with improvements to the well-being of the poor. In terms of political economy, this requires developmental strategies enabling the poor to participate in economic growth, as well as benefit from it. For example, giving the poor better access to economic opportunities (employment, assets and markets), as well as to basic public services (education, health, housing, water, sanitation, etc), would contribute significantly to growth, for the simple reason that it would allow more of the country’s resources – its people – to become more productive .

Basically, this amounts to increasing the pace of growth and equity through shared growth mechanisms, thus enhancing the country’s capacity to meet its developmental targets in relation to the MDGs. From the perspective of economic governance, it clearly means that alongside macroeconomic objectives – including an increase in per capita income, higher levels of employment (full employment, ideally) and productivity, relatively low inflation, and sustainable public debt and external balance – there must be budget priorities that reflect the need to direct public expenditure towards reinforcing the Nigeria’s capacity to improve the wel

l-being of the poorest of the poor rapidly and sustainably.

The need for free and fair trade regime should specifically be sought to address the issues of the country’s stagnant and declining exports earnings export concentration in primary commodities, falling terms of trade, rising debt service payments and severe balance-of the payments problems. As at the end of 2000, the continent’s total debt stock was estimated at $206 billion, up from $17 billion in 1990. Close to 60 per cent of is owed to bilateral creditors, much of it in non-concessional form, and another 25 per cent to multilateral institutions. A clear benchmark here is that, far from Nigeria’s debt burden declining, it is actually on the increase.

Nigeria has made outstanding progress over the last twelve years following the embraced democracy, far more than almost anyone could have imagined ten years ago. Its growth rate has been among the highest in the world, leading to rapid increases in income, reductions in poverty, and improvements in a range of development indicators. The challenge going forward will be to sustain this growth so that rapid development can continue for the next generation. The major drivers for growth fro the last decade – reconstruction from the military-tyrant regime, the introduction of the so-called reform-projects, and high levels of divestment – are unlikely to be able to spur rapid growth over the long term. The current pattern of growth can continue for several years, but not indefinitely.

Nigeria must begin to make the shift to other sources of growth (outside hydrocarbon-controlled economy) that can provide jobs and the dynamism to increase skills and productivity over time. Experience from other countries shows a way forward through agriculture and labour-intensive manufactured exports, including agro-processing and other light manufacturing for the world market.