Analysis and Commentary
The economy of 21st century will not be plausible to dissect and analyze in the absence of politics because both politics and economic activities are entwined and reinforced each another. This is where political economy of Nigeria becomes significant due to consequential co-existence of the two enmeshed entities. Political economy is at the epicenter of state capitalism, an interaction between free economics and government.
In case of Nigeria there is no way one can isolate or divorce politics from the economy. The growth and sustainability of the country’s GDP is rooted on political stability or lack of it. While the economy is making some gains, the politics can be likening to the second law of thermodynamics, which is characterized by increasing disorder and instability. Nigeria’s economy in spite of its gain was still derailed by the state of the politics. The instability and rumblings in the country especially in northern Nigeria; where senseless and continuous bombings by the strange religious group Boko Haram have proven that these actions are not conducive for vibrant and sustainable economic growth.
According to the numbers coming from The National Bureau of Statistics (NBS), the country’s Gross Domestic product (GDP) was impressive at estimated annual growth of over six percent. The problem with the statistics of NBS is that many financial and economic leaders are back peddling in the endorsement of the numbers from NBS. Notwithstanding, there is a threshold of evidence to justify the stipulated economic growth especially the consumer spending and confidence. Just like any other thing in Nigeria the so called empirical tabulations coming from NBS may not be backed with authentic scientific procedure and verifiable methodology.
By any standard the above six percent economic growth is not bad at all especially when compare to the weak global growth that stood at less than 3 percent. Even Obama’s United States has seen one of its weakest GDP growths that barely rise to 2 percent. Therefore Nigeria’s economy is hovering and cruising at a bullish rate.
The major problem with Nigeria’s phenomenal growth is its inability to create jobs for millions of Nigerians, who are without jobs. Majority of the population are being swallowed by serious poverty and abject poverty that is steadily creeping into many homes in Nigeria. Those that have it worst are the youths who have the most recorded unemployment number in the country. The national unemployment number given by The National Bureau of Statistics (NBS) cannot be accepted, due to incoherent collection of date especially in the rural areas where vast majority of Nigerians dwell.
According to Vanguard, “The percentage of labour force that is without job is alarming while the army of the underemployed youths is frightening. Apart from the figures released early this year by the National Bureau of Statistics, which puts unemployment rate in 2011 at 29.3 per cent, the situation has over the years grown from bad to worse. From 2006 until 2011, the unemployment rate averaged 14.60 per cent, reaching an all time high of 23.90 per cent in December of 2011 representing about 20.3 million Nigerians who are currently jobless.
The situation which was put at about 71 per cent early this year would have rocketed to over 75 per cent, throwing even some of the hitherto employed out of jobs. The matter is compounded daily as higher institutions churn out fresh graduates to add to the already saturated labour market.”
Another major change coming to Nigeria’s economy is the rebasing with new methodology of calculation that will catapult the economy up to 40-60 percent. At the moment Nigeria nominal GDP stood at $247 billion as for 2011 according data from IMF. But with the rebasing the economy will be reaching up to $395.2, this will put Nigeria on the path of overtaking South Africa’s $422 billion economy in near future as the largest economy in Africa. This is a cosmetic change without any direct effect on the populace. But the new image will probably make Nigeria more noticeably and may even attract investments.
The new rebased economy will move Nigeria from the 40th largest economy to a 30th position. But even with that Nigeria will not make it to the twenty largest economies by 2020 as it envisioned and planned with its 2020 vision. The plan to become among the twenty largest economies by the year 2020 was poorly strategized and feebly implemented. The instability, not-so-well macroeconomic fundamentals and poor infrastructures are the barriers to the lofty goal.
Nigeria must put her attention and energy on solving the real issues of poverty and unemployment in the country not on make-believe adventures that she is not ready or equipped for.
Even if you are hiding under a cave, almost everybody has heard about Ph.D Nigerians who were applying for truck driver positions at Dangote Group of Companies. The number of joblessness which can even be higher as stated above, is an alarming number and should serve as a clarion call to policy makers and politicians that all is not well in the house of Nigeria. This is not the time to point fingers of blame to higher academic institutions for turning out graduates. After all education is the key for industrial development of a nation. Therefore it is not prudent and productive to blame the victims and academic institutions for doing their jobs. In Adam Smith’s Wealth of a Nation, he propounded the theory of division of labor. Adam Smith stipulated and argued, if not drive the point home that each sector and department of an institution must involve in co-dependency for a productive outcome.
Coming back again to political economy, in the relationship between politics and economy, no nation can thrive in economic stability with majority of its youths without jobs. The overflowing energy and restive state of the energetic youths cannot be managed without jobs for them. The problem of bombings, terrorism and kidnappings can be significantly reduced with gainful employments of the youths.
The macroeconomic policy and its implementation may be said to be fairly stable. The application of the monetary policy and the outcome from Central Bank of Nigeria has been stable for a while. The Central Bank of Nigeria (CBN) under leadership of Sanusi has failed to deliver as they promised to keep inflation rate under less than 10 percent. The yearly inflation rate was above 12 percent. At the fourth quarter of 2012 inflation rate ended at 12.3 percent in December from previously 11.3 percent in October.
Sanusi’s Central Bank of Nigeria by now has hit a roadblock with tightening of monetary tool to mop liquidity in order to checkmate inflation. But that has not been really successful and application of monetary policy as a tool to combat inflation has appeared to be waning. The benchmark interest rate as of fourth quarter of 2012 stood at 12 percent. CBN was instructed by IMF to cool off its aggressive application of monetary tool by steadily jacking up interest rate.
Apart from the devastating impact of the flood in 2012 that destroyed properties, displaced inhabitants and killed many people: The weakness of the relationship between monetary and fiscal policies cannot be overemphasized, which made the fight to lower inflationary activity much complex. There should be an effective coordination between the fiscal policy coming from the executive and monetary policy coming from the Federal Reserve Bank. Taxation and incentives can be used as tools to attract capital and consolidate economic growth.
Nigeria is gradually but steadily accumulating foreign debts by increasingly borrowing from international financial institutions. It is paramount that the accumulated loans are invested in the areas of the economy that needs to be improved for further wealth creation. The building of infrastructures including modern roads, bridges and provision of clean drinking water and steady electricity are necessary infrastructures for economic development and elevation of the nation’s wellbeing. The wealth of a nation endures and flourishes with the provision of the existential necessitates for optimum living and productivity.
Nigerian government has an important role to play in the development of her nation. The path to economic development, sustainable growth and stability are paved with discipline, hard work and 2020 vision. Government does not necessarily create jobs but must be an enabler for economic growth by protecting life and property. This implies that there must be a credible roadmap to maintaining stability. The social and physical infrastructures must be present for development to make any headway and to be sustainable.
Electricity, roads, railways, and security infrastructures are tools for upward economic growth and development. Government must do more beyond being an impartial referee and tax collector.