Restructuring Nigerian Economy: The Soludo Challenge

Chukwuma Soludo

The structure of Nigeria’s political economy seems antediluvian in outlook. With pretentions to political and economic federalism, the country is in dire need of fundamental structural changes to help launch it into the fast lane of economic growth and development. Nosa James-Igbinadolor reports

That Nigeria’s political economy has been in a state of arrested development over the past 50 years is not in doubt. With an economy highly dependent on receipts from oil and thus decidedly susceptible to external shocks, the economic history of Nigeria shows an economy that has staggered and wobbled heavily in a bid to achieve sustainable growth and development.

Despite being the largest in the Africa, the structure of the Nigerian economy is typical of an underdeveloped country. Over half of the country’s GDP is accounted for by primary sectors, with agriculture continuing to play a strong role. The petroleum sector is the major driver of the economy, accounting for over 90 per cent of export earnings and about 85 per cent of government revenue. The sector contributes some 15 per cent to GDP, in contrast, the industrial sector accounts for a tiny proportion of economic activity of less than six per cent while the manufacturing sector contributes only four per cent to GDP.

Bedeviled by debilitating socio-economic leviathans including corruption, bad macroeconomic and fiscal policies, poor leadership and governance, Nigeria’s political economy continues to toddle in a lamentable ocean of stymied growth. The recently released International Monetary Fund (IMF), report on Nigeria declared that, “issues of transparency and corruption rank high among the concerns of Nigeria’s population and have a substantive impact on macroeconomic outcomes in the country, particularly in the petroleum sector.” The report called on the federal government to “accelerate their anti-corruption efforts to maintain momentum against both entrenched challenges and evolving threats.”

It is these entrenched challenges especially structural challenges that posit perhaps the most formidable threat to the capacity of the country to engender sustainable economic growth and development. It was the late political economist, Prof. Claude Ake, who asserted that political conditions in Africa, and also in Nigeria are the single greatest impediment to development. Nigerian politics would appear to have been constituted to prevent the pursuit of development and the emergence of relevant and effective development paradigms and programmes.

Ake argued that many factors had been offered to explain the apparent failure of economic development in countries like Nigeria. They include the colonial legacy, social pluralism and its centrifugal tendencies, the corruption of leaders, poor labor discipline, the lack of entrepreneurial skills, poor planning and incompetent management, inappropriate policies, the stifling of market mechanisms, low levels of technical assistance, the limited inflow of foreign capital, falling commodity prices and unfavorable terms of trade, and low levels of saving and investment.

It was perhaps against this obvious challenge that former Central Bank of Nigeria Governor and member of the Economic Advisory Council, Prof. Charles Soludo, posited that unless there was a national consensus on restructuring the nation’s political economy away from the current ineffective and inefficient structure, the country was unlikely to achieve any real progress capable of meeting its economic aspirations.

Speaking recently at The Platform Nigeria’s annual independence lecture themed “Redesigning the Nigerian Economy with New Ideas”, Soludo noted that, “if you want to change a persisting economic structure, change the underling institutions.”

“For the national economy, it will be difficult to have a competitive and prosperous post-oil economy of the future (with additional hundreds of millions of citizens and dwindling land space) with the same legal and institutional foundation designed for consumption of oil rent. You can’t build a 100 storey-building upon a foundation of an old bungalow. A post oil economy requires that all agents maximise their fullest potentials, and what is required will be a national rather than a federal response. Once the focus is wealth creation rather than sharing and consumption of oil rents, we need a new national business model,” he noted.

The reality is that Nigeria has grown and continues to grow at the pace of centre in Abuja, a pace that has been determined and driven by the quality of leadership we have had over the past 59 years. What this means is that federating units that would have hitherto achieved high economic growth and be in the fourth or final stage of Rostow’s stages of growth have had their development stymied by the poor, unwieldy and ineffectual leadership from the centre.

Thus, the inelastic structure of the Nigerian state couple with continuous bad leadership have left the country as nothing, but a rent collector of oil and gas sales. Soludo affirmed this when he warned that the nation’s constitution, together with its command and control institutions concentrated at Abuja was designed for and around the sharing and consumption of oil rent. The former governor opined that that dubious structure had largely become outdated for the demands of a productive economy which required viable and supple rather than unitary federalism. “As the oil rent that held the system together is tapering off,” he noted, “its internal contradictions have burst open, requiring a coterie of survival/coping mechanisms to keep the system afloat. But for how long?”

It was no doubt against this tapestry of self-induced thwarted growth that the IMF last week called for “a comprehensive package of measures whose design and implementation will require close coordination within the economic team and the newly appointed Economic Advisory Council, is urgently needed to reduce vulnerabilities and raise growth”.

Soludo’s speech was obviously in sync with the IMF conclusion when he warned that economic restructuring was necessary to position Nigeria “to compete and win in an increasingly complex world thereby guaranteeing the security, prosperity and happiness of the 400 or 752 million Nigerians, in a world without oil.”

He added that restructuring Nigeria’s political economy “will require deploying a gamut of legal-regulatory-governance regimes, macro and sectoral policies and programmes to alter the spatial/geographical concentration of economic activities, structure of production from primary to industrial and post-modern service sectors, from peasant to commercial agriculture, from exhaustible natural resources to renewable and dynamic human resource as engine of sustainable development; etc.” He also said, “with a current GDP of about US$400 billion (down from $540 billion) and negative per capita income growth (with rising unemployment and poverty), the restructuring of the future would entail transformational changes to generate and sustain broad based growth of at least 7% (from recent 1-2%), which is required for poverty reduction and employment generation”.

An Abuja-based social and political analyst, Mr. Ese Idiegbe, agreed that the nation was in dire need of economic restructuring but pondered whether a national consensus could ever be reached on such a project. According to him, restructuring the nation’s economy will reduce the pressure on the centre and ensure development in the agglomerating tiers of state and local governments. It will allow states to control their resources and hence help to drive effective growth in the sub-national levels of government.

Idiegbe further added that economic restructuring should de-emphasise gold and silver and emphasise intellectual resources, “even if the Niger Delta controls the oil in Nigeria and they do not possess the intellectual capacity to develop and manage that resources there, then how beneficial can we say the resource of oil has been to the region´? He agreed that the calls for restructuring would be difficult to implement in view of “the fact that some interests would be affected.”

Attorney and constitutional reforms advocate, Mr. Eze Onyekpere of the Centre for Social Justice in Abuja, sharing his thoughts on economic restructuring, agreed that “some sections of the Nigerian elite are resisting the restructuring agenda and believe that they will lose their entrenched interests and privileges in a restructured Nigeria”, noting that “it is the political configuration that allows the economic restructuring to proceed unabated and in the direction of positive change in the standards of living of all.”

He further argued that the future of Nigeria was one where the polity and economy was restructured from foreign exchange and government revenue earning. “We need a restructuring process that sits us down into new planning and policy frameworks which would question the received wisdom that we are meant to be among the backwaters of the world. Clearly, the restructuring we need should start from the new paradigm of decoupling carbon intensification from economic growth and decarbonising the entire value chain of development if we are to remain relevant in the new age. This ideally should start with agriculture and its full value chain, manufacturing, information technology, services and other key sectors.

“It is a restructuring process that will not centre the generation, transmission and distribution of energy in Abuja when the companies and people that need energy for production and service delivery are scattered across the federation”.

Onyekpere, who spoke to THISDAY, further posited that the nation needed to redesign its debilitating way of doing business in order to properly restructure for growth. Addressing critical issues affecting the nation’s economy, he said the “first area of restructuring is the production sharing contract which has been due for review and which the president talked about when he said we had lost about $16 billion over the last 10 years at $1.6 billion a year, which is about N576 billion annually.”

“If we review the production sharing contract under the Deep Offshore and Inland Basin Production Sharing Contracts No 9 of 1999, we will get an additional N576 billion. Secondly, we talked about restructuring the joint venture equity financing which in 2018 and 2019, we budgeted to realise about N710 billion , if we do that, we would be able to get about N1.5 trillion annually. Also, over the past five years, the federal government has been collecting stamp duties from banking transactions through the banks and the central bank, these monies amount to hundreds of billions if not almost a trillion naira and nobody is telling us where these monies are. The federal government should be held responsible for the whereabouts of these monies and whoever is responsible should be held to account.”

He further noted: “Now budgeting N305 to the dollar by the federal government in the budget is fraudulent when we know that nobody gets the dollar for that amount except a few in the highest levels of government. Maintaining this dual rate of N305 for a selected few while the bulk of Nigerians access foreign exchange at N360 is not a fit and proper practice in monetary policy. If the right thing is done by using N360 as the benchmark, the federal government stands the chance of raising not less than N500billion in new revenue, which will be used to further reduce the deficit. Now if we keep going, the fuel subsidy which they are doing now is the greatest scam on the planet. Under Jonathan when the economy was growing at about 6 per cent, they said they were doing subsidy on about 30-35 million litres of fuel a day and people said it was a scam. Now fast forward there has been a recession under this government, the economy has been on a downward spiral since 2015, millions of people have lost their jobs and NNPC is still insisting that they are subsidising the same amount of petroleum products. This is the greatest scam on planet earth. If you remove this scam of a subsidy, you will get about N1.2 to N1.5 trillion a year.”

“Look if you talk about restructuring, the federal government has no business with electricity. There is no reason why someone will generate electricity in Imo, Oyo or any state and is forced to put it in the national grid, where they will lose about 35 per cent of it and its only one grid. It is so senseless. Why don’t you allow states to generate, distribute and transmit their electricity in their states and that we you don’t lose any percentage of it. Let it become a competition. Let Lagos do their own, let Kano do their own. Why don’t we take the railway out of the exclusive legislative list and that way stop losing billions of naira? These are all avenues for fraud. Who would have known that the PI&D contract if not because we were about losing 9.6 billion dollars?

“It is very important that we demand as a people that every negotiated contract by the federal government of Nigeria must be available online for public review before such a contract is implemented. If this had been done with respect to the PI&D issue, one idle lawyer or journalist would have rung a bell and pointed out the anomaly of it all. This idea that someone would go and negotiate a contract on behalf of Nigeria and put it under his pillow is disgraceful. We ask Rotimi Amaechi to tell us how much Nigeria has borrowed from the Chinese to build our rail system. Now they are talking about the upcoming oil licensing rounds and they are not talking about the criteria they would use. They know why they are not talking about the criteria.

Why need to first of all restructure the way we do business so we can effectively rearrange our structural deficiencies,” Onyekpere added.

A key test for economic development and growth for any economy remains the ability and capacity to guarantee that the majority of the population of a developing country are manifestly better off and that their living conditions are improved. What is clear is that the Nigerian economy has failed its people and it has manifestly failed because the country has chosen to remain an antediluvian political economy, which hard rock structure remains unyielding to fundamentally needed changes.