How Can Nigeria Return to Economic Growth?

The fact that someone like Amaechi, who thinks the previous administration hid a recession  from the people which the President he worked for has now graciously uncovered, runs our Ministry of Transport should tell you that ours is a country that does not take itself seriously, let alone demand seriousness from any one.

Yet nothing creates urgency in even the most unserious person like a very serious hunger. And make no mistake about it–Nigerians are hungry. The Minister of Agriculture thinks its heartwarming that our case is not as bad as Venezuela but that is because the Minister of Agriculture, as incredulous as it sounds, is a worse toad than the Minister of Transport. What does the hungry child in Kafanchan care about Venezuela?

Whatever the case may be at the Presidential villa, the reality on Nigeria’s streets is that we are in the grips of a severe recession. One which has to be not only stopped, but reversed. The question is how? An economy is generally a complex beast, so there is no simple answer. But Nigeria’s economy thankfully, is not as complex as most. 70-75% of the working population is engaged in agriculture, Telecoms, Banking and Oil (this one, barely) are the only other viable sectors for much of our real employment and services that cater in some form to those make up much of the rest. Skills barely exist, and the little available capital in the country is heading for the exits faster than your Fuhrer in Aso Villa can clamp them down (and fueling astonishing levels of dollar demand in the process). That, in my view is a fair estimation of what we consider an economy right about now. 

So where do we begin to fix this mess? 

We go back to beginner economics class: what do we have any sort of comparative advantage on? Our low hanging fruit is agriculture, there’s a reason everyone keeps coming back to it. But it’s not enough to do agriculture as a way to grow food for consumption, we have to think in terms of value chains. We want to do agriculture to supply the world with exports.  Cocoa, which we already do but can always do more of is in high enough demand given the growing popularity of premium chocolate across Europe and the States. The Ivoriens won’t be too happy but despite them being ahead we can catch up pretty quickly. We can get serious about our other old favorites: oil palm, rubber, groundnuts. We can get serious about coffee which has surprising amount of potential in the near North (I have a market research thingy someone sent to me sitting on my desk at the moment), and cotton which while I’m a bit less certain, I still think has good promise. Add crude oil and a few odd metals around the Plateau areas and we have the rudiments of an export based economy. Each of these is a massive undertaking, mind you but it is doable. 

Yet this is just one step. We’ve played the raw materials export game since the 1970s, it’s fun but doesn’t make much money and is also rather dependent on global markets too much. So once we have a basic level of activity going on there, we can start moving up the value chain. 

For instance: we can easily parlay raw rubber exports into tyre manufacturing for cars, bikes, bicycles and trucks geared for the African market. We have the petroleum resources to complement the raw rubber needed for that. With minimal training we can have a low cost labor force to help keep the end products competitive in price compared to non-African options. We can do the same for plastics. We could probably do something similar for chocolate although in that case we’d probably need more FDI than in the other cases. We can get the help of the Indiana to parlay reasonable cotton production into basic level textile processing. Ethiopia is doing it, as is Rwanda. We can juice up our livestock business by embracing ranching and settled husbandry versus the nomadic thing and get meat (within the region) and leather (to Europe) exports kicking, with a real possibility of getting European help in doing dairy properly. 

At this point, our economy should at least be stable. We would need massive continuous investment in skills acquisition and education to ever hope to move further up the ladder but we must do that if we are to truly sustain economic growth long term because we cannot make any more progress from here on out unless we engage in manufacturing. And manufacturing needs skills and power. 

Allow our power grid to be decentralized, and give priority to urban locations. Let coal plants provide electricity to Enugu and environs all the way up to the Middle Belt. All private. Let Kainji, Shiroro and friends power the North, complemented by small scale solar and nuclear activity. 

Let the South all the way up to Lagos and co run on gas. All handled by private companies, of which Dangote Refineries is only the start. 

With power in place, we can make shoes, clothes, logging, furniture, nails, iron fillings, plastics, medical devices, consumer goods, motor parts and even assemble cars at home for both our markets and the countries around us. 

At this point, only our skills and education levels, financial and political capital will determine how high we go. 

At the bedrock of all of this is a financial liberalization and regulatory streamlining of the type we have not seen before. Because truth be told, much of the capital to do all of the above will have to come from outside the country at first. Only when the wealth and institutionalization has kicked in will enough local players have the resources and the fortitude to invest in these things themselves.

Another critical but not entirely mandatory  factor is a return to a federal, mostly regional political arrangement. I get the fear that comes with that, the sub units get powerful and threaten the nation’s unity but you can’t hold people together by force forever. At some point you’ll either let go or be forced to so that they can go their own ways or associate in a more meaningful way. I’m a big believer that the units, if given free choice, will stay. Let’s have a little faith.

Finally, How long will all of this take? Phase 1 , agric exports can be done within 5 years. But all told, this could take almost 30+ years of consistent action to materialize. And in that time, our GDP per capita, if population growth holds steady should have grown from around $3000 today to somewhere closer to $11,000. 

Is it hard? Yes. But it can be done. And if I ever have a chance, I’ll help do it. I’m a better minister of anything in this life, after all, than Messrs. Amaechi and Ogbeh. So are you. 

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