Last week I wrote on the Petroleun Industry Act (PIA) 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(MTNDP) 2021-2025 to address the economy and ‘plan’ to the year 2025. To this writer the PIA was a disappointment lacking in real transformative vision for the oil and gas sector.
There was period in the seventies when the oil sector contributed close to 40% to Nigerian GDP for many years. With diversification spanning the years oil contributes around 10% to GDP. There 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 utmost importance to politicians and their cronys while the rest of us get on with our contribution to the real economy.
Therein lies the problem, the oil and gas sector that is 10% of the economy, contributes around 80% or more to 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 of 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 ask of the MTNDP. What is it’s grand vision or grand objectives? It is to achieve an average GDP growth of just 3.8% between 2022 and 2025. Meaning if achieved economic growth has hardly over shot population growth of 2.7% for better part of ten years, 2015-2025. Hardly the way to lift twenty five million people out of poverty or retrieve another ten million that dropped into poverty in recent times, these being part of the grand objectives of the plan.
Let us juxtapose this growth objectives with actual performance of the economy ten years prior 2015. The Nigerian economy achieved between 6% and 8% growth annually, the best in Africa. Now we no longer in top ten fastest growing economies in Africa. Rather than us moving from the 7% we are stuck in below 3% growth. Meanwhile, anything short of growth above 10%, double digit growth (ddg) 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 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(ERGP) of 2017-2020. The ERGP target was to achieve 7% economic growth by 2020. For each of the year 2017, 2018 and 2019 the economy struggled to grow at 2% for each of the years. It is this dismal failure that MTNDP is predicated on. Making excuses for this poor performance our economic managers say they are laying foundation yet the new MTNDP proudly states digging’ Nigeria’s economic foundation as one of it’s objectives.
Are we going to lay foundation for more than ten years? Please give me the foundation that gave the country 7% annual economic growth for close to fifteen 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 3rd January 2022, this is a regime that does not learn from it’s 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 NEEDS( National Economic Empowerment Development Strategy) gave birth to SEEDS, States version. Highlighted is that 86% of the #348 trillion naira 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 and typical you have a preponderance of Ministries Departments and Government Agencies (MDAs) 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 through out 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 started the phase out of commissions on turnover(COT) 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 channeled 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 specialize in six agrarian crops. This interview gave a window into into government mind and looking in you see a 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 Indonesia have diversified into microchips, electronics, semi conductors, rubberized products, refined palm oil – that is value added export oriented agriculture. There is evidence our policy makers are stuck in a mental freeze.
The PIA and MTNDP documents reveal how beholden our policy makers are to crude oil and gas and primary agriculture. Have they not read such authoritative books as that written by our very own Professor Kingsley Moghalu – EMERGING AFRICA? There are other books that have given a diagnosis of why we remain poor, one by Erik Reinert; How Rich Countries Got Rich…..AND POOR COUNTRIES STAY POOR! The two books gave the same reasons and in a nutshell it is a lack of transition to complex goods production for export. To buttress this diagnosis, Prof. Oyelaran Oyeyinka in his article published in Punch newspaper January 3rd edition gave a comparison between Malaysia and Nigeria’s global trade. In 2020 Nigeria shipped $33.5 billion goods abroad, mainly crude oil, while the 33 million people of Malaysia shipped $234 billion mostly non-oil high value exports.
Going through the MTNDP Draft document I saw the production of complex goods mentioned once, more or less like an after thought. For another example, let’s turn to page 31 of the document. Here a strategy for the Culture Tourism and Creativity industry is being highlighted. The plan states that MDAs CAPACITY will be boosted ….to identify commercial opportunities in the Creative sector…..” MDAs in Creative sector? Sounds like an oxymoron. Which of the MDAs fathered Nollywood the second largest film industry in the world by output?
There appears to be a lot of micromanagement along MDA lines such that you can follow the input of each ministry or agency in the MTNDP 2021-2025 document. Meanwhile history teaches us that packaged water, from pure’ satchet water to bottled or table water, was sprung on the nation by enterprising individuals. Neither was smelting crap metals into iron rods a baby of Ministry of Steel. Let us encourage many business ideas to grow and blossom with Government Agencies getting out of the way!
Our developmental challenge is cut out for us and the MTNDPlan has failed to key into it. Let us simply identify what we have left undone and GET IT DONE. After all, these NEEDS SIP ERGP ESPs and now MTNDP are not what delivered the largest economy in Africa. If anything what Nigeria needs now is for the Private sector using Think Tanks to fashion for us their own plan. We are told there was private sector contribution in making of the plan but from the draft introducing the plan to larger populace one can’t see much of such input, we require an authentic action plan from the organized private sector rather than this ‘government plan’.
NEED FOR AN IDEOLOGICAL OVERHAUL OF OUR PLANNING MINISTRY: There were ideological debates of whether there was need for a nation to have Development Plans or ‘Industrial Policy’. The debate went along the Socialism/Communism versus Capitalism divide. With the early succesess of centrally planned Soviet Uniont Industrial Policies planning had the day. But there are drawbacks and unintended consequences of such policies that developmental purist should guard against.
These include possibilities of stifling innovation in an economy and also putting limitations on what enterprising young people or business men can do. In recent times we witnessed a clash between our two foremost industrialist as regards interpretation of Nigeria’s Sugar Policy. If this can happen to a Samad Rabiu, what chance does a neophyte in business have?
There is also an inevitable lapse into over regulation that also stifles an economy. Mature economies with high par capita GDP can afford the luxury of high regulations while low income countries cannot. All these and more must be considered when foisting policies, plans, or acts on the country. To circumvent these downsides I believe law makers in Nigeria should also have a sunset clause in laws that have to do with the economy. Bureaucrats should be aware of these drawbacks and limitations so we do not dovetail into a planned socialist economy.
With a price tag of #348 trillion naira given the MTNDP one is not certain we have not crossed this rubicon. Also apportioning who spends what between the Private and Public sector gives an impression that our economy for next four years have all been worked out to the last kobo. This is pure gallery playing and take over of the roles of entrepreneurs and markets by central planners’.
My conclusion is that we have a philosophical dilemma on our hands as elucidated by Friedrich Hayek in his book Road to Serfdom. Prof. Kingsley Moghalu rightly wrote in his book Emerging Africa that we have foundational issues to sort out about our economy. Some of these fundamental issues bother on psychocultural issues of who we really are and why some plans work elsewhere but is doomed to failure in Nigeria.
For now we are stuck with MTNDP 2021-2025 document and to live with it I suggest it is viewed as the base or lowest rung. Climbing the ladder to higher rungs is left to you and I and budding serial entrepreneurs, not government. Unfortunately designers of this defective plan want continuity regardless of political changes, pg.14 of the draft document. This will be calamitous as they suggest they intend to ‘adopt measures that will prevent disruptions…..due to change in government. They really do believe they are doing right by us!
Olugbenga Jaiyesimi 08123709109 jerry3jaiye@gmail.com
