This is Nigeria
Unethical leadership, decay of government agencies, lack of basic services, misplaced priorities of youths, drug abuse, internet fraud, and that which is most personal to me, economic mismanagement. This is Nigeria!
Nigeria has come out of recession but the growth that we celebrate is a jobless growth that is driven mainly by the increase in oil price. Unemployment is at an astronomical level such that two out of every five Nigerians are without jobs. Businesses, on the other hand, lack the enabling environment to thrive as they struggle with electricity challenges, high interest rate on loans, multiple taxation and other challenges that leave them with less profit. With few jobs and constrained businesses, poverty is on the rise.
In January of this year, Nigeria became the poverty capital of the world. We overtook India whose population is seven times ours and emerged as the country with the highest number of poor people in the world. And poverty is like cancer, it spreads. Once you are money poor, chances are that you will be poor in education, health and even happiness.
The security at my office, Mr. Matthew, has two sons who are not in school. Matthew earns N20,000 and like every rational human being, he would rather spend his salary on feeding his family than pay for fees, buy school uniforms or books. Mr. Matthew’s sons are part of the 10.5 million children who are within the primary school age bracket but are not enrolled in school. And you guessed right, Nigeria has the highest number of out-of-school children in the world. On health we are the second largest contributor to child and maternal mortality in the world. This is not just data but even in reality. We’ve turned from enthusiastic, cheerful dreamers to complaisant, nonchalant social media and beer parlor wailers.
Still, a few of us enjoy our commonwealth. Nigeria’s legislators are the highest paid in the world and the overall cost of governance ranks among the highest globally. And so I ask – how can the country with the highest number of poor people in the world have the highest paid leaders? On the other hand, good policies and programmes are in abundance but implementation is typically shoddy. We end up spending what we should invest and even the little we invest, we do not invest it effectively and efficiently. We are gradually transforming from a relevant power house to a country whose most profitable businesses are politics and churches because religion dulls the pain of economically suppressed people.
As citizens we need to roll up our sleeves and contribute our fair share to developing our country. Andela, Konga, Iroko tv are home grown brands that are meeting needs in the society and even abroad. But the real change starts in our minds. We need to take responsibility for Nigeria, we can’t relinquish the future of our nation to a small cohort we call leaders. An important step is choosing the right leaders. A visionary leader that understands that Nigeria has great prospects beyond oil. A leader that will guide us into the fourth industrial revolution. One that understands that the beginning of leadership is being a servant and one is not a leader until he focuses on the needs of the majority that he serves.
We can’t afford to make mistakes in 2019. If you think that what we are facing now is a poverty and unemployment crisis then think again. Half of the country’s population is below age 18 and if we continue to elect visionless leaders the future will be disastrous.
I know its cliché to ask you to get your PVC, and I tried to find another way to say it, but I couldn’t – get your PVC! Vote for our generation, the ones who work during the day and drive ubers at night just to make ends meet, vote for the generation in primary and secondary school who are the most gullible to codeine use but are not old enough to vote for themselves, and finally, vote for the generation that is yet unborn so that our children and grandchildren do not question their heritage.
Bill Gates Problem with Nigeria
Human development indicators show that Nigeria does not adequately invest in its people as the country continues to perform abysmally in key health and education indicators. Nigeria is the second largest contributor to the world’s maternal mortality rate. Worse still, pregnant women are not the only ones faced with this bleak reality as the average Nigerian is expected to die at age 53. On education, 10.5 million children are not enrolled in school, the world’s highest number of out-of-school children, and four out of five children who have completed primary education cannot read.
The country’s low human capital has caught the attention of philanthropists: the founders of the Tony Elumelu Foundation, Dangote Foundation, and more recently, Bill and Melinda Gates Foundation. While at the National Economic Council in March 2018, Bill Gates, co-founder of the Bill and Melinda Gates Foundation pointed out that the government’s low investment in the education and health sectors has contributed to these poor outcomes. In 2018, the proposed national budget for education as a percentage of GDP is a meagre 0.005 percent which is a significant shortfall from the UN-recommended 6 percent. In the same year, the budget share for health stood at 4 percent, significantly lower than the AU-recommended 15 percent.
However, increased funding is not the sole pathway to positive outcomes in these sectors. According to Gates, availability of facilities, stock of medicine and equipment, among other non-financing mechanisms, are equally critical in achieving improvements in the health sector. A paper by my colleague, Joseph Ishaku, shares the same opinion. The study shows the importance of school quality – class size, textbook availability, school organization, and feeding programme – in the learning outcomes of children.
Alternatives to Increased Funding
With the same funding, the government can deliver better education and health outcomes by leveraging on the skills and resources of relevant stakeholders. Partnerships with the private sector, donor community and development institutions will share risks and expertise, promote coordination and prevent duplication of efforts. On education, Abia state is a notable example on public-private partnerships. Abia, which has topped WAEC results across the country for three years (2015, 2016 and 2017) in a row, adopted the Friends of Abia School Adoption Initiative (FASAI) in 2015. Through FASAI, indigenes of the state contribute to the state’s educational system by paying for the fees of school children and/or renovating school buildings.
Infusing technology is another means to help the government accomplish more for less. In the health sector, technology can aid in providing access to healthcare services in rural areas and fragile zones, curtail diagnostic errors and reduce mortality. In 2009, Ondo state government demonstrated how technology can be deployed to solve a health problem. The government initiated the Abiye (Safe Motherhood) Program which offered cell phones to expectant mothers in order to connect them to health workers, increasing skilled-attendance of birth by fifteen-folds.
Lastly, improved data collection is critical in deploying proven methods rather than wasting time and resources by reinventing the wheel. Establishing a unified data collection system at both federal and state levels will aid in making fact-based decisions, utilize scarce resources more efficiently and track improvement in outcomes.
According to economic theory, investments in human capital – skills, knowledge and health of people – is essential to a country’s economic growth process. U.S. history tells the story of how five men – Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, J. P. Morgan, Thomas Edison and Henry Ford – and their workers transformed the U.S. into a global super power. Chinese entrepreneurs in part transformed the former communist nation to capitalism, turning China into the second biggest global economy. Nigeria with its young population structure (over half of the population is below age 18) stands a great chance of reaping significant demographic dividends if its citizens are productive and actively participate in the economy. Investments in education and health sectors will develop Nigeria’s most valuable resource – the Nigerian people – and engender long-term economic growth.
Top Associations Every Economist Should Join
Professional membership organizations are valuable for career development and even for job seekers. They provide access to free publications and a wealth of other resources, the platform to network and make valuable contacts, and an avenue to showcase your research work to peers. We highlight three membership organizations that seek to further the economics discipline as well as professionals in the field.
- Nigerian Economic Society
If you are looking to meet fellow economists, examine and discuss relevant economic and social issues, and play a part in Nigeria’s economic process, then the Nigerian Economic Society (NES) is for you. With over 2,700 members, NES is a membership organization for Nigerian (and non-Nigerian) economists and allied social scientists. The Society which was established in 1958 organizes three main events annually – a One-Day Seminar, a Public Lecture, and an Annual Conference. These events provide the opportunity to engage with fellow economists, the private sector, and the government on cutting-edge research as well as economic issues of national and global importance. A few of the many perks of being a member of the NES is the possibility of presenting your research work to hundreds of people at the Annual Conference and gaining access to NES journals. The next Public Lecture holds on 19 April, 2018 in Abuja, Nigeria.
- Nigerian Association of Energy Economics
The Nigerian Association of Energy Economics (NAEE) is the Nigerian affiliate of the International Association of Energy Economics (IAEE) which is present in over 70 countries worldwide. Established in 2006, NAEE promotes ideas, knowledge and discussions on energy economics to provide a better understanding of energy issues and shape Nigeria’s energy policies. The organization which has over 450 members offers its members the opportunity to network with professionals, grow their careers and present their research study at its conference. The next NAEE/IAEE International Conference holds from 22-24 April, 2018 in Abuja, Nigeria.
- Econometric Society Africa Region
The Econometric Society Africa Region is the membership organization for economists with a knack for econometrics. Being a member provides you with access to the journals of the Econometric Society and Econometrica (an academic journal focused on econometrics) as well as the opportunity to present papers at its annual conference. The Econometric Society’s annual conference is popular for bringing together globally recognized economists like Tim Besley of the London School of Economics (LSE) and Richard Blundell of University College London (UCL). The next Africa Meeting of the Econometric Society holds from 12-14 July, 2018 in Cotonou, Benin.
Can Renewable Energy Solve Nigeria’s Power Problem?
Over 80 million Nigerians lack access to electricity, that’s about 45 percent of the country’s population. The annual consumption of electricity for each Nigerian, which is estimated at 144 kilowatts per hour, lags behind South Africa’s 4,198 kilowatts per hour, Zimbabwe’s 537 kilowatts per hour, Ghana’s 355 kilowatts per hour and ranks among the lowest electricity per capita in Africa.
The country’s constant power outages continue to have severe implications on homes and businesses; undermining job creation, private investment and economic growth. In the first half of 2016, the Manufacturers Association of Nigeria (MAN) claimed that poor power supply cost them N130 billion driven majorly by the increase in the cost of alternative sources of power. Ultimately, higher cost drains the profit of businesses and makes it difficult for local products to compete in the global market.
At the same time, Nigeria has immense renewable energy potential which is mostly untapped. The country has about 427,000 megawatts of solar potential, 14,750 megawatts of hydroelectric potential, and sufficient wind potential. Meanwhile, the country’s 5,000 megawatts electricity production comprises of 26 percent hydro power generation and 74 percent gas power generation leaving out many of the country’s diverse clean energy resources. A critical question remains unaddressed: Can Nigeria solve its energy problem without the government tapping into other renewable energy sources?
At least six African countries are expanding electricity access particularly to rural areas using clean energy. The Rwandan government is exploiting renewable distributed technology to power 70 percent of the country within two years with a savings of $20 million. Renewable electricity generation has also become more appealing economic-wise. According to a recent report by the International Renewable Energy Agency (IREA), the cost of 2017 renewable power projects particularly wind and solar projects fell at the same rate, and in some cases lower than fossil-based projects. Turning to renewable energy for electricity generation is no longer just a smart environmental move but an economic one too.
Another good news is that renewable energy sources are distributed (although unevenly) across Nigeria which makes it possible to bypass the problem of grid extension that plagues traditional energy systems. Also, novel methods of energy expansion, reliant on renewable and distributed technologies, can sometimes provide affordable electricity just days after being installed. MTN’s solar-based Lumos Mobile Electricity which can power homes round the clock is a typical example. These clean energy innovations are providing job opportunities and attracting private investors.
However, it is not all roses with renewable energy considering the volatility of renewable energy sources and the high cost of energy storage which will inevitably affect power supply. Concerns have also been raised regarding the environmental impact of disposing worn out solar panels, wind turbines and other expired renewable energy materials. But the benefits seem to outweigh the costs and so renewable energy innovations may be the missing part of the story on how Nigeria eventually solved its power problem.
With the country’s population growing rapidly, it is becoming obvious that it will have to walk the way of its African counterparts that are unlocking their renewable energy potential if it intends to achieve universal energy access by 2030.
Four Amazing Economists You Should Know
Ngozi Okonjo-Iweala, PhD
With over 30 years of economic development expertise, Dr. Okonjo-Iweala is perhaps the most recognized Nigerian economist in the world. She graduated with an A.B. magna cum laude in Economics from Harvard University and holds a PhD in Regional Economics and Development from the Massachusetts Institute of Technology. Okonjo-Iweala joined the World Bank at age 27 and served in various important capacities including Vice President and Corporate Secretary, and Managing Director of the World Bank. She is a two-time Minister of Finance of Nigeria and the country’s first female Minister of Finance where she was instrumental in tackling the country’s debt problem and implementing significant economic reforms.
Dr. Okonjo-Iweala is a Member or Chair of numerous boards and advisory groups in the public, private and non-governmental sectors including the Global Alliance for Vaccines and Immunizations (GAVI), Lazard Ltd., the African Risk Capacity, Rockefeller Foundation, and Asian Infrastructure Investment Bank. She is also an Adviser to the World Bank on the Stolen Assets Recovery initiative.
In 2014, Time magazine named Dr. Okonjo-Iweala as one of the 100 most influential people in the world; she was named by Fortune magazine as one of the 50 greatest world leaders in 2015; and by Forbes for five consecutive years as one of the 100 most powerful women in the world. She is the founder of NOI Polls and the Center for the Study of the Economies of Africa. She has received numerous awards including honorary doctorates from some of the world’s most prestigious universities such as Yale University, University of Pennsylvania and Amherst College.
Chukwuma Soludo, PhD
Described as a ‘A Great Reformer’ by the Financial Times of London, Professor Soludo is a seasoned economist with a proven track record of public service. He served as the governor of the Central Bank of Nigeria from 2004 to 2009, Chief Economic Adviser to the President of Nigeria in 2003, and Chief Executive of the National Planning Commission from 2003 to 2004. He also championed the African Finance Corporation and became its Founding Chair in 2007.
Professor Soludo graduated with a first class in Economics from the University of Nigeria, Nsukka; and won the prize for the best graduating student for his post-graduate and doctorate degrees in Economics from the University of Nigeria, Nsukka.
He has served as a consultant to many multilateral organizations including the World Bank, United Nations, International Monetary Fund, European Union, and the African Development Bank. He is currently a Member of the International Advisory Group for the UK-DFID; a member of the Chief Economist Advisory Council of the World Bank and the International Advisory Group of the UK Department for International Development (DFID).
Sarah Alade, PhD
In 2014, Sarah Alade became the first female governor (although in acting capacity) to lead the Central Bank of Nigeria (CBN). She joined the CBN in 1993 as an Assistant Director in the Research Department, grew through the ranks and retired as the Deputy Governor of the Economic Policy Directorate of the CBN. Prior to her exit from CBN, Alade served as the Chairman of the board of the Africa Finance Corporation. Early on in her career, she lectured at the University of Ilorin in the Department of Accounting and Finance and worked with the Ministry of Finance and Economic Development, Ilorin, Kwara State.
Dr. Alade has a Bachelors degree in Economics from the University of Ife, Ile-Ife (now Obafemi Awolowo University), an M. Comm. degree from the University of Melbourne and a PhD in Management Science from the University of Ilorin.
Adedoyin Salami, PhD
With a sound background in Economics and a professional career that spans over two decades, Dr. Salami is a one of Nigeria’s renowned economists. He holds a Bachelors, Masters, and PhD degrees in Economics from the prestigious Queen Mary University of London. He is one of the Principal Partners at Kainosedge Consulting Limited and an Associate Professor at the Lagos Business School (LBS), Pan African University. At LBS, he leads sessions that cut across business and economics and he served as director of programmes for five years until January 2005. In addition to lecturing, he works as a consultant for companies and multilateral organizations such as the Department for International Development (DFID), World Bank, United Nations Industrial Development Organization (UNIDO).
Dr. Salami serves on the Monetary Policy Committee, the highest policy making committee of the Central Bank of Nigeria and was a member of the Economic Management Team of the Federal Government of Nigeria. He is also a member of the International Monetary Fund Advisory Group on Sub-Saharan Africa.
Economic Outlook: 5 Things to Watch Out for in 2018
If there’s one thing economists can all agree on, it’s that the events and trends in 2017 have set the tone for an eventful 2018 in Nigeria. Since the economy technically exited the economic recession the big question has been: Will the 1 percent economic growth recorded in 2017 continue and become more evident in 2018? We attempt to answer this question as we break down the five things to watch out for in 2018.
- Higher GDP Growth: Nigeria’s GDP growth rate is expected to be higher in 2018 following predictions from the World Bank and the IMF. While the World Bank forecasts a 2.5 percent GDP growth rate in 2018, the IMF predicts a 1.9 percent GDP growth rate in 2018 which YNE thinks is more realistic. This is because, albeit somewhat impressive, expectations of a positive economic growth rate are heavily reliant on a continuous rise in oil price and minimal attacks on pipelines by militants. However, both oil price and militant activities are unpredictable and beyond the government’s control. Moreover, the country’s 2.6 percent population growth rate outweighs the positive economic growth forecast which will have severe implications for income inequality and poverty reduction.
- Higher Unemployment: Although the economy has technically recovered from the 2016 recession and is expected to continue growing, we expect more people to become unemployed in 2018 for three reasons. First, the length and severity of the economic recession suggests that job losses will continue into 2018. Second, 2018 promises a ‘jobless growth’ since except for agriculture, the growth is not expected to be driven by labour-absorbing sectors. Third, the country’s youth bulge and increasing population implies an increase in new entrants to the labour market which will likely outweigh job creation. Overall, we expect that the high unemployment will taper down consumer spending which will have adverse effects on growth.
- Increase in Minimum Wage: Following the setting-up of a committee to look into revising the minimum wage upwards and the president’s stance towards re-election in 2019, the president is expected to at least double the minimum wage in 2018. If this happens, the morale and spending of Nigerian workers will rise which will be good for the economy. But the impending increment poses some important questions. How will the government fund the increment given that at the current wage the 2017 budget was poorly funded? Why increase the minimum wage when at the current wage workers are not being paid regularly? Will the government increase capital spending since government’s finances are already skewed towards recurrent spending?
- Higher Debt Profile: The country’s total debt stock came up to $61.14 billion in 2017 and the government’s attitude towards borrowing suggests higher debt levels this year. Already, there are plans to issue a green bond for environmentally-friendly projects and a $300 billion Eurobond was issued at the end of 2017. While debts can prove useful in funding critical investments, the rising debt particularly rising external debt implies that a higher portion of our revenue will be used for debt servicing and the economy will become more vulnerable to external shocks. Towards the end of 2017, Moody’s downgraded Nigeria from a B1 to a B2 rating because of the country’s 38 percent debt to revenue ratio, in part.
- Increased Electricity Generation: In December of 2017, Nigeria attained record-breaking above 5,000 megawatts electricity generation levels which was driven bigly by the restoration of the Trans Amadi power plant. YNE expects that the completion of the Azura-Edo power plant and the enforcement of the eligible customer declaration which will permit eligible customers to buy electricity from other licensees apart from distribution companies (DISCOs) will further increase electricity generation in 2018. Overall, Nigerians should expect better power supply if the Transmission Company of Nigeria (TCN) completes its ongoing transmission projects and DISCOs work on the challenges with their feeders.
2018 will be an eventful year in Nigeria! We are eager to witness the ‘Year of Infrastructure’ which the government has promised us and an improved enforcement against tax defaulters as VAIDS comes to an end. But what is most certain is that money is going to be in the hands of party faithfuls and influencers. Sadly, spending amongst a few cannot alone generate strong economic growth. Diversification reforms, job growth, capital stock growth and technology innovations provide better assurance for high and consistent growth rates. However, YNE predicts that government’s focus will be on lobbying and campaign rather than executing economic reforms in 2018.
The Things They Did That Made Them Giants Series: Policy Options for Diversification Part II
In the second edition of the series ‘The Things They Did That Made Them Giants’, we zone in on the service sector as we discuss the sine-qua-non role of foreign governments in advancing key service industries in their countries. The idea is to draw lessons from the stories of the giants as we make recommendations to bring about effective change in Nigeria’s service sector. Albeit the remarkable growth the sector has made in the last decade, there is more potential to generate employment and exports, and advance domestic technologies and human resources.
Information and Communication Technology (ICT) Industry, China
China’s ICT market is currently the world’s second largest ICT market and is expected to reach $844 billion by 2020. Since the mid-1980s, the Chinese government has been promoting the ICT industry through a three-pronged strategy – investing in local tech companies, promoting research and development, and incentivizing foreign investments into the Chinese tech space. The government mandates that foreign companies turn over their technology in exchange for access into the Chinese market; the technology eventually features in Chinese products and operational processes.
Over the last decade, Nigeria’s ICT space has experienced tremendous growth typified by the hike in internet and telecom uptake, proliferation of strong tech-businesses in Yaba (our homegrown Silicon Valley) and elsewhere, and more recent developments like mobile banking. However, consumers face difficulties with access, availability, affordability and quality of data, internet and telecom services. According to industry stakeholders, the biggest challenges are low broadband penetration and the near absence of fixed telephony companies which have caused an over-reliance on wireless technology and mobile networks in delivering good quality voice, data and internet services.
Policy and regulation is a critical area in the ICT space. Stakeholders have raised concerns about the low participation of ICT-related government agencies in streamlining and implementing the legislation on ICT. The comprehensive 2012 National ICT Policy touches on the important areas of regulation and policy, infrastructure, and research and development but its execution has been below par. From taking zero action on creating a consolidated national digital archive to the lackluster development of local talent in software development, the Policy has failed to achieve many of its objectives.
Non-profit Sector, United Kingdom
The non-profit sector is an important aspect of every economy. The sector provides employment and public services to communities. In the United Kingdom, the Charities Commission is responsible for matters concerning non-profits. The Commission is a non-ministerial government department which ensures accountability and the regulatory compliance of non-profits. Consequently, the integrity and excellence of the Charities Commission fosters public trust in non-profit organizations.
On the contrary, Nigeria’s non-profit sector is reeled with a lack of public trust. The proliferation of non-profit organizations combined with weak regulation to monitor the activities of non-profits has failed to build trust in the sector. This has led to missed opportunities as prospective local and international partners look to credible and verified organizations to drive impact. Presumably, effective policy and regulation lies at the root of the growth of service industries.
The Things They Did That Made Them Giants Series: Policy Options for Diversification Part I
Much has been said but too little has been done to diversify Nigeria’s economy. Diversification has been a buzzword since the 1980s, Nigeria’s oil age. Still, non-oil sectors contribute too little to government earnings, employ too few people, and have made very small advances in innovation and technology.
In an effort to break away from a mono-product economy, YNE juxtaposes the stories behind the emergence of today’s leading industries and the current state of Nigerian industries in the series ‘The Things They Did That Made Them Giants’. The idea is to identify crucial differences and adopt best practices to drive local production.
In our first edition, we take a look at how the post-World War II economic boom marked a turn in two of the world’s leading manufacturing industries as we discuss the role of sound economic policies in the development of the manufacturing sector. A sector that contributes only 9 percent to Nigeria’s total output as key components such as the automobile and steel industries continue to dwindle.
Pharmaceutical Industry, United States of America
Home to global brands like Pfizer and Johnson and Johnson, the U.S. is the headquarters of six out of the top ten pharmaceutical companies in the world. In 2016, the industry cornered almost half of the global market and is valued at $446 billion. It’s expansion dates back to the end of World War II when there was a growing demand for antibiotics to save the lives of wounded soldiers.
The U.S. government through the Office of Science and Research Development and the War Production Board supported key pharmaceutical firms to collaboratively identify ways to produce penicillin antibiotics in mass. The government coordinated and funded research programmes providing previously unavailable access to scientific discoveries and exchange. The high-level support led to innovations and heralded a new phase in the pharmaceutical industry.
Several decades later and U.S. policy leaders have continued to fund medical and pharmaceutical research in high levels. The National Institutes of Health spends about $32.3 billion annually on medical research.
Pharmaceutical innovation and research is again stimulated by the government’s strong patent protection policy. The government allows an inventor to earn monopoly profits by giving her the sole right to exclude other pharmaceutical firms from developing a competitor drug for up to seven years. The exclusivity period gives inventors enough incentives to undertake the high financial costs of inventing new drugs.
Finally, the interests of the public and the industry are protected by the extensive regulations of the U.S. Food and Drug Administration (FDA). Owing to the standard of excellence maintained by the FDA, the effectiveness and safety of U.S. drugs are almost guaranteed, securing competitiveness in the global economy; an arena where Nigeria is noticeably absent.
In Nigeria, drugs are not wholly produced locally as the industry imports 98 percent of the raw materials used for production. The industry struggles with dismal infrastructures, poor access to low-interest funding and over-reliance on foreign exchange for importing drugs and raw materials. According to the Pharmaceutical Society of Nigeria, effective drug regulation across the country is lacking with ubiquitous drug counterfeits.
Automotive Industry, Japan
At the end of World War II, Japan had lost a quarter of its national wealth and about 3 million people. With a stern focus, the Japanese government concentrated their remnant manpower and resources on rebuilding the economy which birthed the modern-day Japanese automotive industry.
Japanese passenger cars have become ‘the people’s choice’ all over the world featuring brands like Honda, Nissan, and Toyota. The country’s automotive industry is its largest followed closely by the chemical industry which produces car tires and other rubber automotive parts. Together, the automotive manufacturing and related industries absorb roughly 9 percent of Japan’s labor force.
After the war, Japan Development Bank and the Ministry of International Trade and Industry (MITI) channeled labour and capital from non-performing industries to the automotive industry and other promising industries. MITI deployed low-interest bank loans, subsidies, and tariffs to develop specific automobile companies.
The government’s strategy was to offer Japanese citizens a tax-exempt investment pool (called the Fiscal Investment and Loan Plan) to save their money and give out the savings as loans to key industry players. At the time, an astonishing one-third of bank loans came from private savings.
Since the 1970s, much of what Japan’s automotive industry produces is exported with the foreign exchange earnings invested in energy sources, management, raw materials, and technology. Japan continues to make sky-high investments in automotive research and development. In 2013, $18 billion was poured into automotive research and development leading to constant innovation and high product quality.
On the other hand, Nigeria’s automotive industry is a bit elusive. Innoson Motors, the country’s only indigenous automobile manufacturing company, imports 40 percent of the raw materials used for production.
History has shown that governmental oversight has played a big role in strengthening nascent industries. At ground zero, creating a brand that can dominate the local market and eventually become ‘the people’s brand’ globally is a tad bit difficult in the absence of an enabling environment, one which the free market will not provide.
How Corruption Leaves Us With Less
For the first time, Africans have identified the private sector as a highly corrupt group according to the Global Corruption Barometer report. Corrupt practices involving business executives are often classified as “grand corruption.” Unlike petty corruption were low- and mid-level public officials abuse entrusted power in dealing with citizens, grand corruption favours private interest over national interest and can alter the functioning of the government.
“Grand Corruption occurs when a public official or other person deprives a particular social group or substantial part of the population of a State of a fundamental right; or causes the State or any of its people a loss greater than 100 times the annual minimum subsistence income of its people; as a result of bribery, embezzlement or other corruption offence.”
~ Transparency International
Nigeria is not new to grand corruption, although in recent times there has been a spate of corruption allegations. Usually, the alleged offenders are faced with legal enforcement undermined by weak institutions. But apart from poor law enforcement, our cultural norms as a people strongly determines corruption levels as found by a study conducted by Fisman and Miguel. The researchers examined the conduct of United Nations (UN) diplomats from 149 countries while on official duty in New York, America. Fisman and Miguel found that, although miles away from their home country, UN diplomats from low-corrupt countries like Norway committed significantly fewer parking offences than diplomats from high-corrupt countries like Nigeria.
Nigeria’s tax revenue is reportedly 6% of its GDP, relatively lower than the sub-Saharan African average of 16%. Money laundering, tax abuse and other manifestations of grand corruption deplete public finance, robbing the country of revenue which could have been used to provide infrastructures like hospitals and schools. With a population of 182 million, fewer hospitals and schools suggest a decline in the human capital stock. Corruption reinforces income inequality and low standard of living while feeding an elite class. On the international front, it signals uncertainty which reduces foreign direct investment.
Generally speaking, corruption affects the poorest in society particularly in urban areas but only two out of five Africans feel they can end this impunity. With the rise in open data initiatives and the Federal Ministry of Finance’s whistleblowing programme, bottom-up monitoring has improved. However, top-down monitoring is seemingly stalled as four out of five Nigerians think that the government is doing a bad job in curbing corruption.
2030 is not so far off. If we are to meet Sustainable Development Goal 16: Peace, Justice, and Strong Institutions, the government will need to make more investments in effective corruption prevention systems and create a safer space for civil society to thrive.
7 Significant Elements of the CBN’s Economic Report
7 Significant Elements of the CBN’s Economic Report
In its usual manner, the Central Bank of Nigeria (CBN) published its quarterly economic report providing an account of the changes in the economy. The Economic Report for the first quarter of 2017 was published on 13th July 2017. We explore seven data points from the economic report:
- Bank assets fall
The foreign asset of Deposit Money Banks falls by 14.8 percent to ₦7.56 trillion; other assets fall by 5.7 percent to negative ₦13.02 trillion. The decline in assets has been attributed to bad debts owed banks, induced by reduced economic activity, decline in oil price, and high inflation rate. The CBN’s Financial Stability Report showed that the ratio of non-performing loan to total loan reached a five-year high of 14 percent.
- Banks reduce lending to private sector
At ₦2.23 trillion, lending to private sector declined by 0.4 percent in the first quarter of 2017. This decline is followed by a 1.1 percent decline seen at the end of 2016. With reduced assets, banks are risk averse in lending out to businesses.
- M1 Falls
M1 also known as “narrow money” (notes, coins, demand deposits) falls to ₦9.95 trillion, a 12.7 percent decline from the first quarter of 2017. At the end of 2016, narrow money fell by a record level 28.7 percent. The continuous decline in narrow money reflects the economic recession the country faces as money in circulation falls. With interest rate at 16 percent and reduction in bank lending, M1 is expected to remain low.
- Inflation falls
Inflation in the first quarter of 2017 averaged 17.26 percent, a 7 percent decline from 18.6 percent recorded in the previous quarter. The all-items composite Consumer Price Index (CPI) which measures inflation by way of computing the average change in the prices of everyday commodities rose by 4.3 percent to 222.7. However, the effect of the increase in CPI on inflation was tapered off by the interventions of the CBN in the foreign exchange market. These interventions reduced the effect of a weak naira on domestic prices.
- NSE All-Share Index declines
The Nigerian Stock Exchange declines by 5.1 percent to close at 25, 516. The decline is credited to the high inflation and interest rate which has reduced economic activity. The fall in commodity prices globally, risk aversion, and uncertainty in the economy have played a part in the decline of the NSE Index as well.
- Government revenue lower than budget benchmark
Earning less than we anticipated, the federal government revenue falls by 36.3 percent below 2016 budget benchmark to ₦1.50 trillion. The fall in government revenue is as a result of a fall in both oil and non-oil revenue components.
- Government expenditure higher than budget benchmark
Spending more than we budgeted, government expenditure rises by 7.3 percent at ₦1.68 trillion relative to the quarterly budget benchmark. The rise is mainly due to an increase in capital expenditure at 31.7 percent, recurrent expenditure remains high at 63.3 percent.
To read the full report, click here
The Future of Jobs and Skills
The World Economic Forum (WEF) released ‘The Future of Jobs and Skills in Africa” report on May 2nd, 2017 in an attempt to prepare sub-Saharan Africa for the disruption in jobs and skills brought by the fourth industrial revolution. This digital revolution brought by the widespread use of humanized technology like self-driving cars, thinking machines, and voice recognition systems is set to cause a shift towards ICT intensive jobs, and the loss of jobs vulnerable to automation. According to the report, Nigeria is in the least favourable position as it has limited exposure to the future of jobs, and a low capacity to adapt to the requirements of future jobs.
Untapped Human Capital
Sub-Saharan Africa is the world’s youngest region with 60 percent of its population under 25 (WEF). In one of our infographics, we showed how Nigeria has a young population structure with over 50 percent of its population under 18. However, the country is not leveraging on its demographic opportunity to deliver an ecosystem for quality jobs and future skills. According to WEF Human Capital Index, Nigeria ranks 127th out of 130 world economies with only 44 percent of its human capital potential being maximized.
Africa’s Most Educated
Only 6 percent of Nigerian employers attribute inadequately skilled workforce as a major constraint. Although the country has not achieved universal basic education, it is the African country with the highest share of its population with tertiary education. Nevertheless, highly skilled workers are only about 3 percent of the employment share of total workforce, compared to the sub-Saharan African average of 6 percent and the world average of 24 percent. With regards to quality of education rating, behind 18 African countries, Nigeria has an index of 2.8 signifying a weak educational system.
Be Future Ready
The digital revolution comes with a more technologically driven labour market, increasingly employing professionals in the STEM fields, computer science, engineering, and data analysis. In Africa, increased investment in soft and hard infrastructure is set to create jobs. The pursuit for a greener environment will increase jobs in pollution control – clean energy generation, natural resource management, and energy efficiency. Online talent hunting platforms like Jobberman are expected to increase GDP by $20 billion in 2025 across Africa.
To adapt to the needs of the future, reliable and timely data on employment structure and required skills is crucial. Educators also need these data to understand labour market requirements. In classrooms, critical thinking, creativity, cognitive flexibility and emotional intelligence, should be taught as opposed to rote learning. Increased collaboration between educators and the business sector, and between businesses addressing the skills gap and the community around them is necessary to create and sustain an up-to-date, comprehensive ecosystem of quality jobs and future skills.
To develop Africa’s high-skill talent pool, WEF has come up with eight future ready strategies:
- Increase access to early education
- Improve on digital fluency and ICT skills
- Improve on school curricula
- Increase efficiency of workforce
- Early access to work environment and career advice
- Inclination to lifelong learning
- Robust technical and vocational education and training
- Openness to education innovation
The Land of Multiple Exchange Rates
On 21st April, 2017, the Central Bank of Nigeria announced a new exchange window for investors, exporters and end users. This portfolio investors rate brings the number of exchange rates to ten (even though more have been reported). There is the official exchange rate, interbank rate, international credit and debit cards rate, international monetary transfer organizations rate, Travelex rate, pilgrims rate, fuel importers rate, bureaux de change rate, and the black market rate.
This dysfunction is largely caused by a shortage. At the official rate, supply of forex falls short of demand. Thus, rates higher than the official rate, rates where demand seemingly meets supply have emerged.
The lag in supply stems from the international trade structure of the country, being a net-importer. Too few commodities earn forex; whereas the country is import dependent. The situation worsened in 2014 following the decline in oil price and production level as oil accounts for 70% of Nigeria’s forex revenue.
Government’s intervention in the market to protect the interest of strategic groups has further increased the number of rates. In 2016, pilgrims obtained the dollar at ₦197 whilst the official rate was ₦305. Periodically, the Central Bank directly sells forex to fuel importers, manufacturers, agriculture businesses and airlines at a subsidized rate. This makes arbitrage inevitable. These groups take advantage of the different rates and resell the forex at the market with the highest rate, further feeding the existence of multiple rates.
The simple solution would be to dump the current use of a hybrid of the fixed and floating exchange rate systems and completely float (or devalue) the naira – allow the market forces to determine its value. However, the immediate economic and political implications make this unlikely. A spike in inflation, an increase in interest rate, expensive imports will make the government unpopular.
Still, the current functioning of the market is not sustainable. As government’s interventions deplete the foreign reserves, the lower reserves increase expectations of devaluation and reduce confidence. The loss in confidence makes it less likely for foreign investors, whose forex we need, to invest in Nigeria.
Selective devaluation speaks inequity, scepticism and uncertainty. All of which are not ingredients of economic growth and development.
Broadening The Tax Base
The performance of Nigeria’s tax system is increasingly topical given the decline in government revenue due to the fall in oil price. Tax is the least costly means of funding government expenditure. In 2016, the Federal Inland Revenue Service (FIRS), Nigeria’s agency that assesses, collects and records taxes, was tasked to bring in about ₦4.9 trillion, which aggregates to 67% of the 2017 budget. In 2015, the FIRS collected ₦3.74 trillion in taxes (FIRS). To reach its target and increase the country’s 6% tax to GDP ratio, the government’s tax plan is to broaden the tax base by improving compliance, and imposing taxes on luxury commodities, cigarette, and alcohol.
On the other side of the globe, there are also growing tax debates. Since 2015, there has been a reduction in corporate tax amongst OECD countries with the average OECD corporate tax rate at 25% (OECD). The UK has its corporate tax rate at 19% (OECD) and is presently considering cutting it further. The rationale is that low corporate tax attracts foreign direct investment and this is especially significant for post-Brexit UK.
America is calling for massive income and corporate tax cuts as well. In repealing the Affordable Care Act the wealthy are saved millions in taxes. The reasoning is that tax cuts increase economic activity through consumption and investment, and the increment will eventually trickle down to the common man. However, the data do not always concur. Economic activity has slowed down in some countries that have reduced their tax rates. Canada with a low corporate tax rate of 15% (OECD) is experiencing a stall in economic activities.
Although, there are divergent opinions, high tax rates and economic growth have once co-existed. According to Bill Gates, America’s economic growth increased in the 1960s even though tax rates were high.
Nigeria may have to consider increasing its tax rates. The country’s 5% VAT tax is significantly lower than the low middle-income country average of 13% (IMF, 2011). Although its corporate income tax rate competes favourably, tax holidays and Free Trade Zones (FTZs) reduce the tax revenue that would otherwise be realised. While Ghana has 3 FTZs and South Africa has 2 Industrial Development Zones (International Trade Administration), Nigeria has 14 operational FTZs and 18 underway (Nigeria Export Processing Zones Authority). Although FTZs attract foreign direct investment (FDI), they deprive the country of tax revenue. Moreover, FDI not only depends on corporate tax rate but is also a function of the interplay of factors such as corruption, and political stability.
In addition to imposing excise duties on cigarette, and alcohol; duties on soft drinks, gambling and other commodities that are somewhat harmful to society may also be considered. The enforcement of property tax should also be considered as it has the potential to serve as an equitable and reliable means of increasing tax revenue since its tax base is relatively prosperous and immobile.
Tax laws should be clear, concise and readily available, and tax fraud should be a criminal offence as in some developed countries.
The Rise of Impact Investment
In 2017, impact investment is arguably still a novel investment vehicle all over the world but most especially in Africa. According to the Global Impact Investment Network (GIIN), impact investment is defined as an investment in a company, organization or fund with the intention to generate measurable social and environmental impact alongside a financial return. Whether it’s an individual making an equity investment in a tech start-up in Yaba, our very own Silicon Valley, or an international organization making a debt investment in the energy sector, impact investment is done with the intent of obtaining returns on investment; a focus on solving social or environmental problems; and the ability to measure the desired positive impact. It can be done across sectors and investment instruments; directly to an enterprise or project, or indirectly through fund managers.
The typical Nigerian is underserved by basic amenities as a result of the country’s epileptic power supply, infrastructure deficit, insufficient banks in rural areas, high incidence of corruption, and high rate of unemployment amongst other problems. These are all opportunities for impact investors. Given the statistics, local impact investment is small relative to the economy. As of 2015, there were only four recognised local impact investors – Alitheia Capital, Sahel Capital, Doreo Partners, and The Tony Elumelu Foundation. Research has shown that most Nigerian investors are unfamiliar with the concept and are still sceptical about impact investing. In their opinion, impact investing means they will have to trade off financial returns for social impact, which is untrue.
Amongst its West African counterparts, Nigeria is leading in impact investment with 28 active impact investors, according to GIIN. 8 are Development Finance Institutions (DFI) and the other 20 are non-Development Finance Institutions (non-DFIs). Since 2005, over US$4 billion has been deployed by these impact investors to key sectors. Compared to Ethiopia which has 58 impact investors, almost three times the number of Nigeria’s impact investors, Nigeria’s impact investment sector holds more opportunities for development. Only 7 out of the 28 impact investors have a presence in Nigeria and most of the non-DFIs rely on international sources of capital.
Unsurprisingly, the energy, manufacturing, and ICT sectors account for 68% of the total capital deployed by DFIs. Advancement in power, commodities and connectivity are set to cause impact across all other sectors and as such attract large investments from DFIs. The financial services, ICT, and agricultural sectors account for 65% of the total capital deployed by non-DFIs. The growth potential in the microfinance sector in serving the 40% of the Nigerian adult population without bank accounts, along with the employment potential in the ICT and agricultural sectors have largely driven non-DFIs to invest in these sectors.
Since no government has the financial backing to tackle all of society’s problems and the private sector is almost always altruistic, the role of impact investors in complementing public spending is significant for economic growth and development. Impact investment is a tool with which Nigeria can achieve the Sustainable Development Goals because of its market-based approach – generating financial and social returns simultaneously. Moreover, with a population of 182 million, Nigeria is a fertile ground for impact investment. During the 2014 World Economic Forum, discussions led to the finding that a social impact bond to combat childhood obesity in America would make America’s healthcare system more secure, twenty years from now. Impact investment creates a better future for all.
The Costs of Debt Servicing Infographic
The Economic Growth and Recovery Plan 2017-2020 was launched on April 5th, 2017 by President Buhari. The Plan’s objectives are to increase economic growth and development by stabilizing the macroeconomic environment, achieving agriculture and food security, ensuring energy efficiency, improving transportation infrastructure, and driving industrialization focusing on small and medium scale enterprises. However, over one-fifth of the proposed 2017 budget is allocated to debt servicing. The Costs of Debt Servicing Infographic shows how the ₦1.44 trillion allocated to debt servicing could have doubled the allocation to the 7 key ministries needed to achieve the objectives of The Economic Growth and Recovery Plan.
3 Facts About The National Budget
National debt, or sovereign debt as it is sometimes called, consists of a country’s liabilities that require payment of principal and/or interest to a creditor at a future date. It typically comprises of currency and deposits, debt securities, loans, pensions, insurance, the IMF’s Special Drawing Rights and Standardized Guarantee Schemes. Debt is an important public policy issue the world over owing to the fact that it is an integral part of a country’s economic progress and also considering its impact on firms and households; more so it is especially important in Nigeria. In March of 2016, the Islamic Development Bank revealed that 80% of Nigeria’s revenue is spent on debt servicing.
of Nigeria’s revenue is spent on debt servicing
In view of its significance, 3 need-to-know facts about Nigeria’s debt profile are examined in no particular order:
- Debt Component – The national debt includes all debt accrued by states and the federal government. It comprises of external debt – debt denominated in foreign currency and domestic debt – debt denominated in the Nigerian Naira. According to the Debt Management Office, as at February 2017, the country’s external debt stock was US $11.4 billion. An example of an external debt would be the US $30 billion loan the federal government intends to obtain during the period 2016 to 2018, from the World Bank and the African Development Bank amongst other international organisations. On the other hand, domestic debt comprises of treasury bills, treasury certificates, government bonds, federal government development stocks, and ways and means advances. In comparison to external debt, domestic debt is significantly higher at US $46 billion.
- Debt Size – The size of a country’s debt is determined by the difference between its revenue and expenditure. It is simply the net accumulated budget deficit. Currently, Nigeria’s debt is estimated to be US $57.4 billion. According to Knomena, Nigeria’s gross debt is 14.6% of its GDP. It has increased consistently from 2008, where it stood at 7.3%. In comparison to our East and South African counterparts, Ethiopia at 57.4% and South Africa at 51.7%, Nigeria’s debt as a percentage of its GDP is relatively low. Greece, which is known for its bad debt profile has its debt at 183% of its GDP.
- Debt Impact – Economists have not been able to conclude on the impact of debt on economic growth. In some cases, debt may have a positive impact. Factors such as efficient loan utilization, proper debt management, prompt debt servicing, and favourable trade and exchange rate policies determine the impact of the national debt on the economy.
Typically, debt used to fund public consumption, for instance, salaries and pensions is not worthwhile and presents a danger for the future generation. On the contrary, debt used for economic expansion yields returns that lead to long-term growth thereby improving the ease of debt servicing.
While demographics may not directly determine economic growth, they affect its’ potential. Nigeria’s Demoinfographic gives information on Nigeria’s population structure detailing the proportion of people in the young-age (0-14 years), working-age (15-64) and old-age (65 and over) brackets. It contains age dependency ratios which give an understanding on the number of people tax payers provide social expenditure. Similarly, it states why there is a young population structure as half of Nigeria’s population are under 18; and a shrinking older population.
Poverty and Nigeria
Poverty is generally measured from a monetary stance. It is defined as the state of living under USD 1.25 a day. It is a prevalent problem in Nigeria as it is estimated that about 110 million out of the 182 million Nigerians are living under the poverty line.
Poverty Trajectory in Nigeria, 1981-2010
Source: Calculations by author based on data from UN, Department of Economic and Social Affairs; and CIA World Factbook
Figure I shows that the proportion of the country’s population living in poverty has increased over the years; from 47.2% in 1981 to 70% in 2010. Accordingly, for every 10 Nigerians, 7 were adjudged poor in 2010. In the cohort of 39 African countries where data exists, Nigeria ranks 36th in proportion of population living in poverty. In comparison to our East and West African counterparts, Rwanda ranks 13th at 39.1% while Ghana ranks 4th at 24.2%.
The most successful occurrence on poverty ever recorded is the ‘Asian Miracle’ – the largest decline in poverty ever witnessed in human history which occurred in China. The country achieved the Millennium Development Goals 15 years ahead of schedule! The number of citizens China has raised from poverty accounts for 70% of the world’s total. Poverty rate fell from 84% in 1981 to 12% in 2010.
In China leading the world to achieve the Millennium Development Goals, some relevant reforms are noteworthy:
Sustained Economic Growth – According to the National Bureau of Statistics of China, between 2001 to 2015, the annual growth rate of the Chinese GDP was stable at an average of 9.7%. Driven by industrialization and urbanization, there has been an increase in employment with labour movement towards the secondary and tertiary sectors of the economy accompanied by increase in wages and salaries.
Infrastructural Development – China’s poverty reduction and elimination strategy is development-oriented and as such, since 2012, substantial infrastructural development has been accelerated in disadvantaged areas. Sectors inclusive but not exhaustive of education, health, electricity, communication, water conservancy and transportation sectors have been advanced.
Poverty Alleviation Programs – The Chinese established large-scale, structured and targeted programs with the sole aim of lifting citizens out of poverty. Some programs include the Seven-Year Program for Lifting 80 Million People Out of Poverty (1994-2000), the Outline for Development-Oriented Poverty Alleviation for China’s Rural Areas (2001-2010) and the Outline for Development-Oriented Poverty Alleviation for China’s Rural Areas (2011-2020).
Social Development Programs – Programs geared towards the poor such as compulsory education; the New Rural Cooperative Medical System (NRCMS), which covers over 97 percent of rural residents; social pension system for rural residents; minimum living allowance scheme were put in place to improve the quality of life of the poor. Preferential policies like the unemployment insurance scheme which provides unemployment relief and medical subsidies for the unemployed and; tax reduction and exemption for SMEs who absorbed labour were made.
The effect of poverty is evident in lack of specialization in occupation; inability to afford basic amenities; and diminished happiness and wellbeing which reduce productivity and further continues the vicious cycle of poverty. To reduce the high level of poverty in Nigeria, like China, poverty reduction would have to become a vital component of our national strategy.
Changes in the Forex Market
Since the last days of February 2017, we have seen an increase in the value of the naira on the parallel market. From NGN 570 to USD 1, as at February 16th, the naira has appreciated to NGN 440 to USD 1. The Central Bank of Nigeria’s latest interventions in the foreign exchange market together with other changes in the economic environment are widely responsible for the rise in the value of the naira.
Increased Liquidity – On February 21st, the CBN engaged in a special wholesale intervention where it offered Deposit Money Banks the sum of USD 500 million for a period of 60 days. While adhering to the CBN’s guidelines, the banks are meeting more demand in the retail forex market, whether the end-user is an individual or a business.
Policy Change – The abolishment of the 60% allocation of forex to the manufacturing sector policy has increased the inflow of forex into other areas. Forex for educational and medical needs, as well as, business and personal travel allowance is now available to the public. In addition, using Deposit Money Banks rather than Bureaux de Change (as was previously used) as a vehicle to reach end-users is likely to yield better results since the banks are under the supervision of the CBN.
Stricter Conditions – The CBN’s rules governing access to forex has the potential of reducing round tripping. According to the rules, in order to access forex for medical or educational purposes, the amount needed would be payed directly to the foreign institution’s account. Also, a travellers’ journey time must exceed 5 hours in order to be entitled to basic travel allowance. On the supply side, the Deposit Money Banks are to give a report on the utilization of any forex obtained from the CBN after 24 hours.
Simplified Access – The tax clearance requirement in obtaining forex has been waived by the apex bank. This improves the ease of accessing forex. Also, the CBN has instructed banks to open forex retail outlets at major airports as soon as possible. Although no timeline was given, this signals wider availability of forex from now on.
External Reserve Increment – The CBN revealed that Nigeria’s external reserve increased from $29.65 billion to $29.74 billion as at February 28th, 2017. The $90 million increase may be due to the rise in oil production as a result of the halt in attacks by the Niger Delta Militants. The increase has affected positively the supply of forex.
Although these interventions have contributed to improving the value of the naira, the sustainability of taking out of the foreign reserves to increase the supply of forex is questionable. A more sustainable solution that can meet the long term demand of forex is required.
The 2016 Nigerian Budget
On December 22nd, 2015, President Buhari presented the N6.08 trillion 2016 budget to the National Assembly for approval. The size of the budget triggered debates throughout the country. In the face of the current liquidity crises the country is experiencing, is it optimal to increase the budget by about 35% relative to 2015 budget? Where would the government obtain the revenue needed to fund the budget? Will the size of government spending have a corresponding effect on the average Nigerian? These questions amongst others have been asked by many Nigerians.
Lack of confidence in the country’s economy due to the fall in oil price, the failure of the Buhari administration to hit the ground running as soon as they were elected and the fight against corruption have caused a confidence driven liquidity crises. Economically speaking, the increment in the size of the budget would have two effects – an increase in output and a decline in inflation rate, given the nature of the liquidity crises. With the country’s inflation rate reaching a record high level at 17.6% and the GDP growing at -2.06%, its slowest pace since the ushering of civilian rule in 1999, the increment of the size of the budget couldn’t have come at a better time!
The incessant bombing of pipelines in the Niger Delta creeks coupled with the low oil price has greatly tapered down our revenue given that oil accounts for about 75% of Nigeria’s revenue. Nevertheless, the government of the day is exploring non-oil sectors such as agriculture and mineral resources together with, increasing the tax base in a bid to increase non-oil revenue. More so, the monies obtained from the fight against corruption are soon to be a part of the country’s revenue as soon as the corruption cases are over.
In itself, the increment in the budget size has the ability to improve the standard of living of the average Nigerian through various means – job creation programmes such as N-Power Programme, building more infrastructures across the Transportation, Power, Aviation sectors, the fight against terrorism amongst others. However, in addition to focusing on the accumulation and maintenance of physical and human capital, institutional reforms, improvement in the business climate and improvement in the accountability of government officials is to be focused on in order for the budget to have a larger impact on the welfare of the typical Nigerian.
In conclusion, the impact of the 2016 budget is also influenced by external forces like the level of implementation achieved, leakages, fluctuations in the Naira exchange rate, increase in interest rate and commodity prices. Nonetheless, the 2016 budget may be the first step to achieve the change we desire, the change we need.