APPRAISING NIGERIA’S ECONOMIC RECOVERY AND GROWTH PLAN ...LONG TERM DIVERSIFICATION IN WHAT DIRECTION?
...What Manner of Plan?
ecently, Nigeria unveiled its long-awaited Economic Recovery and Growth Plan (ERGP). Some analysts already believe that the plan ostensibly was crafted to meet the conditionality of the World Bank and African Development Bank (AfBD) to be granted multi-billion dollar loans. It might have also been developed as precondition by the National Assembly to give consent on the $30bn borrowing plan proposed by the Federal government.
Quoting the opinion of some African analysts, the Financial Times (FT) wrote that Nigeria is never short of economic blueprints. In fact, analysts were of the view that the country is usually “long on plans and short on execution”. The fact that a plan was conceived and put together whether in response to recent economic turmoil or as pressure from multilateral lending agencies is nonetheless salutary. However the plan still leaves many questions unanswered by the Federal government, amongst which are:
How is the plan going to be executed, set targets achieved and sustainably embedded, given the current dicey political climate and clamour for constitutional reform of the nation?
What will the federal government do differently to handle a somewhat unfriendly National Assembly that could stand in its way or become a raging bull that might summarily truncate the overall plan?
How in practical terms will the plan achieve the key performance metrics such as job creation, economic diversification, reduction of Debt Service-to-GDP ratio, increasing and stabilizing electricity supply, growing the tax-base and accelerating economic expansion with the current infrastructure gap, wobbly regulatory framework and continued dependence on crude oil export proceeds?
Successive Nigerian governments cannot be blamed for not trying in rolling out economic reform plans or not spending money to achieve their set goals. The efforts in my opinion have historically been disjointed, haphazard and at best, lacked commitment and strong political will. That’s exactly why most keen observers should be asking how this plan and its execution will be different this time around? The election slogan of “change” that ushered the current administration to office in 2015 is yet to fully materialize as most citizens and businesses struggle under the worse economic recession in 25 years.
...Signposts of the Future
My perspective in appraising this latest economic blueprint will be on three fronts: first, the ability of the plan to pull Nigeria out of the current doldrums between now and 2020. Secondly, the role, if any, of this plan in launching the country into the league of the top-20 economic powerhouses beyond the year 2020. Thirdly, the job-creation ability of this plan based on deep understanding of the demographic characteristics and antecedents of economic growth trends in Nigerian within the last decade.
It is a clear fact based on figures from the National Bureau of Statistics (NBS) that over 65% of Nigeria’s population is relatively young and could be considered so-called “millennials”. However, majority of this segment of population remain unemployed. Despite the robust GDP growth number (6% - 7%) achieved within the year 2000-2007 and up till 2014, Nigeria’s unemployment continues an uptrend as economic growth failed to bolster overall employment opportunity, especially amongst the youths. Data from National Bureau of Statistics (NBS) put Nigerian youth unemployment/underemployment at 45.65% as at Q3, 2016.
With an annual population growth of 2.6%, economic growth in Nigeria needs to outpace population; otherwise we might be heading towards a negative inflection point, with dire consequences. Thus, beyond the heavy investments in infrastructure (power, transportation and housing), policy focus should also target nascent sectors that could create gainful employment and entrepreneurial opportunities for this population group. This emphasis is hardly discernible in the just released economic plan. The “youth bulge” (or having disproportionally high young population in Nigeria) creates tremendous long-term market and growth opportunities as it presents formidable social and political challenges if not well-managed - and that’s exactly my point.
The focus of economic recovery in the near-term and long-term growth prospects ought to be entwined and driven by this underlined demographic factor. It is very possible that with the current economic base and proposed plan, Nigeria could rebound by emphasizing the rebuilding of its dilapidated steel plants, investing in large-scale gas-fired thermal power plants and electricity distribution via unified national grid. We can also revamp agriculture, invest in oil refining/petrochemical plants and boost crude oil production and domestic gas consumption. But when the chips are down, it is critical to understand the kind of tectonic shift occurring in the global arena, namely in the Information/Telecoms Technology space; increasing emphasis on renewable energy, deployment of drone technology and investments in smart, nimble and cost-efficient technology gadgets that are increasingly ubiquitous in our daily lives. Consumption pattern by the younger generation will drive these trends going into the future.
Transition to renewable energy that are localized and the utilization of new cheaper materials in the manufacturing and construction industries could render our huge oil/gas and power infrastructure assets obsolete in the next 10 to 20 years and beyond. The evolution of new behavioural pattern with rising utilisation of cheap high-tech gadgets driven by microchips and social media platforms plus the myriad of contents are irreversible trends.
These are all signposts to the urgent need for federal and state governments to invest incrementally more resources in the new media and ICT sectors (including infrastructure backbone, content development and distribution) either directly or through transparent licensing schemes and un-obstructive regulatory framework. The music/movie industry (Nollywood) that was propelled by budding entrepreneurs has now become a notable global phenomenon, while, social media content and fintech (e-payment, mobile money and digital financial services) are conspiring to reconfigure the business landscape and further propel economic growth. From as low as less than 1% about a decade ago, these sectors combined, now represent over 12% of Nigeria’s GDP and growing, according to data from the NBS.
To further illustrate this trend, let us consider some basic facts:
In December 2016, there were 154 million mobile phone lines in Nigeria compared to 500,000 before the advent of GSM in 2001.
Out of a total population of 191.84 million people, there are 91 million internet users reported in Nigeria. According to internetworldstats.com
As at June 2016 there were 16 million Face Book users in Nigeria, which translates to a penetration rate of 8.3%.
Nigeria is ranked 17th in the world based on smart phone utilization; and the penetration is 30% of the population based on data from eMarketeter. The country was said to have 23.1 million smart phones in 2015, a figure projected to increase to 34 million in 2018.
...Let’s Plan for Tomorrow
My least expectation is that, moving forward; Nigerian policy makers at national and regional levels ought to be cognizant of these facts and then plan for tomorrow by capturing these thoughts in their mindset and plans. Investments in emerging sectors by easing the regulatory regime could accelerate improvement in education, healthcare delivery, create entrepreneurial opportunities, diversify export earnings and catalyse long-term economic productivity. How can Nigeria modernize the agri-business sector and make it more technology-driven in other to attract new labour force into this critical value chain? That should be key component of the growth agenda and policy mix.
Increasingly, value of content in the business world has begun to outpace ‘brick and mortar’ investments and attract massive new investments and entrepreneurial zest of the younger and vibrant demographics. This assertion is based on the analysis of top-ten most-valued companies in 2006 compared to 2016. The point at stake for Nigeria is - where does it wants to be in the food-chain of global economics, not merely in terms of size but relative to the quality of investments, infrastructure assets, service-delivery and human capital development?
Some critical points in this regard that quickly come to mind:
Captive power plants (both thermal and renewal energy) can be quickly installed and operated more efficiently in Nigeria by the private sector.
Modular refineries can rapidly be deployed and operated by budding entrepreneurs at local level much faster and effectively than historically been done by the government.
Computing speed is getting cheaper through faster and more robust micro processors that could be installed on various electronic devices just as Internet connectivity is also becoming more affordable and accessible. This will in turn enable wider utilization and traffic in the World Wide Web in Nigeria.
Hardware devices and smart phones are getting cheaper and affordable for most of consumers, which creates a new generation of citizens that will crave more information, contents and services. More often than not the production and distribution channels for IT contents and services will be localized within respective markets and Nigeria must not be left out in the scheme of things.
Some of the youths in Nigeria that are university graduates are either unemployable for lack of experience or requisite skill set, yet are quite savvy about the world around them and IT literate. Training computer programmers and coders that put India on the global IT map has become streamlined much like car assembly in a conveyor belt when Henry Ford built his first factory in Detroit. Nigeria should capitalize on that too.
Facebook founder Mark Zuckerberg must have found something exciting to have invest in Andela – a company that trains and places young and talented Nigerian computer programmers in US companies.
So far that I support the strides to develop an economic recovery and growth plan by the current administration, the task ahead remains quite daunting. The government’s ability to decipher the right approach and design the framework that is practicable and executable; coupled with commitment to engage competent work force with requisite skills will to large extent determine the success of the plan. Ultimately, time will tell whether the ERGP will crystallize into tangible outcomes that can improve life and set the nation on a path for long-term economic and social progress or simply remain just “another plan”.
Chamberlain is the Executive Chairman of Xcellon Capital Advisors Ltd, Lagos, Nigeria