Rescuing the Economy from Looming Debacle

25 Dec 2012

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World Bank

Crusoe Osagie warns that the Nigerian economy may be on the brink of collapse despite its boundless potential for greatness

Except providence intervenes, Nigeria may blunder into a storm in about three decades from now and this joyful Christmas day may be a good time to reflect on this gloomy prediction.

There are highly optimistic projections about the country’s fortunes from various authorities such as the World Bank and Goldman Sachs, with all of them saying that Nigeria is one of the nations that hold the key to global economic prosperity in the coming decades.

According to Prof. Jeffry Sachs, a globally-renowned economist and Director of the Earth Institute at Columbia University, who is also one of the youngest economics professors in the history of Harvard University in the USA, Nigeria would practically like to make the BRICS (Brazil, Russia, India, China and South Africa) the BRINCS by the end of the decade.

The economist added that “to those who only know Nigeria as a country that squanders its oil wealth, this ambition might seem outlandish. But for those of us who have had the chance to work with its leadership, this goal seems fully within reach.”

Reasons for Optimism

Listing the five reasons for his optimism about the country, Sachs named the reform that Nigeria has been undertaking over the past dozen years.

He stressed that the country has changed since June 8, 1998, when the ex-military leader Sani Abacha died, opening the way for a restoration of civilian rule and the strengthening of critical institutions, including the National Assembly and state and district governments.

The second reason for the Nigeria optimism, according to him, is the advent of democratic elections. “President Jonathan came to power when his predecessor, Umaru Yar’Adua, died in office. This April, he won a resounding mandate of his own in elections that were praised by observers as by far the freest and fairest in Nigeria’s history. The president’s democratic mandate is not in doubt, even if tensions linger in Nigeria’s traditional North-South ethnic divide.

“The third is the global wind in Nigeria’s sails. The rise of China and India is reshaping the world economy, and providing solid support for Nigeria’s growth. Commodity prices are high, as the Asian giants tap global markets. Nigeria can expect to sell not only its vast hydrocarbon deposits at good prices, but also a wide range of agricultural products and manufactured goods.

“The links with Asia won’t be only through exports. China is determined to be a major partner, financing core infrastructure - highways, rail and power grids - and developing major industrial capacity.

“The fourth is the “age of convergence,” the tendency of developing countries like Nigeria to make unprecedented economic advances through the deployment of best practices and advanced technologies. China, of course, has been doubling its GDP every seven years with blistering economic growth rates of 10 per cent per year.

“Nigeria is enjoying robust annual growth of around 7 per cent, and could catch up to China’s rate if policies are well designed and implemented. Information technologies are rapidly spreading, from the heart of sprawling Lagos to the most remote villages. For the first time, Nigeria will have a network of up-to-date information, providing a platform for sharply higher productivity and economic specialisation.

“The fifth is Nigeria’s commitment to tackling extreme poverty and disease throughout the nation. The president’s senior adviser on the Millennium Development Goals, working with the National Assembly, has been leading a bold mechanism to transfer federal funds to state and local governments in a robust and accountable manner.

“All over the country, schools, clinics and water points are being built. It’s a great honour for us at the Earth Institute to be working with the government on this initiative. Although all these fantastic forecasts may have been correctly made, Nigeria surely will not achieve these lofty goals if it continues to operate the way it is currently operating”, Sachs said.

To him, “It may also be necessary to point out that there are as much odds against Nigeria’s emergence as a leading global economy as there are potentials.

“The nation and its operators often brag about its large population of about 170 million people but they forget that a 170 million population with low purchasing power; poor formal education and with an orientation that the way to achieve financial prosperity is to loot subsidy funds, pension funds, bank depositors savings and a host of other commonwealth is certainly not the type of workforce or market that takes a country to greatness”, he added.

Unending Wealth

Apart from having a population that is becoming mostly defective, there appears to be a fundamental assumption that the nation’s mineral and other material resources being wasted on the platform of mindless corruption are somewhat inexhaustible.

In the past couple of years, we have heard of billions of dollars stolen through crude oil theft, fuel subsidy fraud, banking fraud, pension fund scams, mismanagement in government spending to mention a few. Massive resources being frittered in a way that bothers even the simplest of minds.

Timely Warning

Contrary to the baseless assumption of endless availability of resources, The Economist magazine some years ago published a report, which posited that Nigeria has only about three decades to exhaust its crude oil reserves.

If this prediction holds and in the 2050s Nigeria does not earn significant income from petroleum, there will be severe crisis, considering the fact that not much industrial and infrastructural investments have been made in these boom years that are fast rounding up.

Rice Dimension

Also, the Minister of Agriculture and Rural Development Dr. Akinwunmi Adesina, recently sounded an alarm that appeared to have fallen on deaf ears. At a forum in Lagos, he stated that as from 2050, the same period that the Economist magazine has set for the possible exhausting of Nigeria’s crude oil, the nation will need $150 billion annually to import rice to keep Nigerians from dying of starvation.

Keeping in mind that Nigeria’s national budget for the year 2013 is about $31.3 billion, does a rice importation bill of $150 billion by 2050, a time when Nigeria will probably not earn anything from crude oil, not mean the extermination of the Nigerian state and its constituents? These tough questions beg for answers from operators of the Nigerian economy.

If a pure Nigerian politician makes such a claim, handling it with an attitude of levity may not carry significant consequences but with this declaration coming from a first class Agricultural Economist with experience in International Institute of Tropical Agriculture (IITA), Rockefeller Foundation and Alliance for Green Revolution in Africa (AGRA) it should be a national emergency.

Adesina lamented that $150 billion (N23.4 trillion) would be spent to meet Nigeria’s annual rice demand by 2050 as the nation’s population continues to rise, stressing that Nigeria currently imports five million metric tonnes of rice and that the figure will increase to an estimated 36 million metric tonnes by 2050.

“Nigeria is now the largest importer of rice in the world. As our population rises, demand for rice is projected to rise from the current level of five million MT to 36 million MT by 2050. Unless Nigeria begins an aggressive import substitution programme for rice, it will spend $150 billion annually importing rice by 2050 and the nation will be broke,” he said.

Points to Ponder

Apparently, handlers of this country are so busy chasing politics and they forget that the very object for which politics is necessary is at the verge of extinction. It may be interesting to be president in Nigeria today. It is certainly trendy to be State Governor, Minister, and Ambassador and so on. But it is only so today because Nigeria is at peace and possesses a lot of easy funds to run government.

By the time this cheap oil money runs out, by the time there is a violent revolution resulting from starvation and poverty it will become a major sacrifice to be a leader in the country and all those who governed in the period of waste will become victims of societal hatred.

Leaders must heed these subtle alarms and do everything necessary to prevent the collapse of Nigeria’s fragile economy.

Tags: Business, Nigeria, Featured, Economy

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