Speech at The Platform on “Re-Designing the Nigerian Economy with New Ideas”; The Covenant Place, Beside the National Theatre, Iganmu; October 1, 2019.
Happy Independence Day Celebration!!!
Many thanks to Pastor Poju and the organizers of The Platform for the invitation. Let us start with a disclaimer. We accepted the invitation on 17th May, 2019 and had written our remarks a few weeks back. When our membership of the Economic Advisory Council was announced on the 16th September, we agonised as to whether we should still honour the invitation or whether we should still present the paper. Finally, we decided to be here but have removed several of the pages that contain issues we believe should be on the agenda of the Council— we do not want to pre-empt the work of the Council. More specifically, we do not focus on the macroeconomic, sectoral, and structural policies, programmes and projects needed at the moment. We focus on the future, and concentrate narrowly on the type of meta-level, political-legal-governance foundation upon which the future can sustainably stand.Our thesis is that if you want to change a persisting economic structure, change the underling institutions (we can write a fat book on this: our experience with the NEEDS vis-à-vis banking recapitalization/consolidation was one case study that showed that to translate the hitherto slogan of private sector-led economy into reality needed a different banking/financial institution…). For the national economy, it will be difficult to have a competitive and prosperous post-oil economy of the future (with additional hundreds of millions of citizens anddwindling land space) with the same legal and institutional foundation designed for consumption of oil rent.You can’t build a 100 storey-building upon a foundation of an old bungalow. A post oil economy requires that all agents maximize their fullest potentials, and what is required will be a national rather than a federal response. You can’t clap with one hand. Once the focus is wealth creation rather than sharing and consumption of oil rents, we need a new national business model. Unfortunately, the link between law- Constitution- institutions- Judiciary, etc and economic transformation seems to be the weakest link in our design of national agenda.In the future, hopefully the National Assembly, Ministry of Justice, the states and other stakeholders might take up the assignment….
We have not come to read the Book of Lamentations about Nigeria’s woes, nor to sing the songs of David. We see the half-empty glass, but we prefer to focus on the half-full glass. We want to focus on the future—rather than the past or the present. As mentioned above, we are asked to speak on“The Economic Restructuring of Nigeria”—an omnibus topic indeed! Since the First National Development Plan (1962- 68), transformation of the economic structure/diversification has been the fulcrum of all national plans. For decades, every government has tried its brand of ‘economic restructuring’ or economic diversification and yet the economy remains tied to the life-support of oil, peasant agriculture and largely informal services sector. Income inequality, poverty, and unemployment remain major defining features of the economy.
The urgency of the moment is warranted by the context of the new and complicating realities. Oil will be history in less than 20 years’ time but the pressures of peculiar demographics and geography are upon us. Nigeria has one of the highest population growth rates in the world. If current trends continue and you believe the population figures, then the future may be overwhelming.By the time a child born today turns 30 (about 2050), there will be about 400 million Nigerians and when she is 80 (about 2100), there will be about 752 million Nigerians (third largest population in the world). All these people will have to survive and prosper in a tiny but declining land mass (923,000 sqkm) – declining due to desertification and erosion, and Nigeria will have the highest population density in the world among the top ten most populous countries. Lagos is estimated to be home to some 88 million people by 2100 crammed in barely 3,345 sqkm of land (or 26,307 persons per sqkm—a nightmare! Lagos is clearly unsustainable in the long run and risky for its business concentration). All these people will need land, housing, water, food, power, education and health facilities, sewage and waste disposal, transportation, and yes, job, jobs! The population is very youthful with 43% between 0-14 years old; 53% between 15-65 years and 4% over 65 years.
And the world is not waiting for Nigeria. The world is on the 4th Industrial revolution with digital economy and we are struggling with the first stage of Rostow’s stages of growth. Artificial intelligence together with other future technologies such as robotics, synthetic biology, computational science, nanotechnology, quantum computing, 3D and 4D printing, internet of Things, cognitive science, self-driving vehicles, etc— will surely produce totally different social and economic configurations than what we know today. Check out China’s “Made in China 2025 Plan” and its targeted top 10 industries with an aim to dominate the world. All these entail humungous creative destruction going on with huge job losses and future structural unemployment. While electric cars are fast replacing diesel/petrol cars many of our people are still building petrol stations; small shops are proliferating while agglomeration in terms of huge shopping malls together with e-shopping are the trend; automation is upon us, etc. Ordinary people who can’t explain what has hit them, resort to all sorts of criminal activities to survive.
Most futurologists believe that with billions of people being added to the global population, only new systems for food, water, energy, education, health, skills development and job creation, economics and governance will avert potential disastrous consequences for humanity and the environment (See the 2015-16 State of the Future). Economic restructuring strategy of the future therefore entails thinking through the alternative future scenarios and mapping out alternative possible proactive responses. In which areas/sectors does Nigeria proactively position to become global leaders by the end of 2050 or the century?Closer home, Nigeria has signed the African Continental Free TradeAgreement (AfCFTA). Insularity won’t be an option. The name of the game of the future in an increasingly integrated world is innovate/compete or die.
Let’s break it down. Economic restructuring of the future is about positioning Nigeria to compete and win in an increasingly complex world thereby guaranteeing the security, prosperity and happiness of the 400 or 752 million Nigerians, in a world without oil. It will require deploying a gamut of legal-regulatory-governance regimes, macro and sectoral policies and programmes to alter the spatial/geographical concentration of economic activities, structure of production from primary to industrial and post-modern service sectors, from peasant to commercial agriculture, from exhaustible natural resources to renewable and dynamic human resource as engine of sustainable development; etc.With a current GDP of about US$400 billion (down from $540 billion) and negative per capita income growth (with rising unemployment and poverty), the restructuring of the future would entail transformational changes to generate and sustain broad based growth of at least 7% (from recent 1-2%) which is required for poverty reduction and employment generation. Put differently, if we target to be a middle income country of say, US$7,500 per capita by 2100 (from about $1,930 currently), then we need a GDP of over US$5.5 trillion by 2100 (thereby requiring double digit annual growth). The agenda to do this won’t just require thinking outside of the box—it would require thinking without the box at all: big, bold plan and action! At the macro level, the fundamental challenge currently is that the economy is stuck at a very low speed lane in the context of a debt cliff with little fiscal space, while monetary policy is at near its limits, and low savings-investment trap, with rising unemployment and poverty. To get to poverty reducing and employment generating trajectory in the short-term requires serious heavy lifting, with major difficult choices and extraordinary coordination ahead. Surely the governments at all levels have their jobs cut out for them, and we won’t dwell on that here.
In sum, the alternative future that we see is one without oil, and where other exhaustible natural resources play very little role. The future economy will be driven by people—our youths and technology. Nigeria’s people/youths remain its potentially greatest asset— potentially renewable resource for productivity, huge market, and even export. Yes, the next bigger than oil export earner for Nigeria will (potentially) be its human capital. Currently, Nigeria earns almost as much from oil exports as it earns from remittances from its Diaspora. But we cannot export illiterates in a world driven by digital revolution. The easiest way to waste the future is to continue to churn out millions of semi-illiterate, largely unemployable citizens, most of whom see criminality as the only route to escape the poverty trap or drug as the opium for solace. With an urbanization rate of over 5%, the conflagration that might ensure when hundreds of millions surge to the cities but can’t find jobs, housing, water and food can only be imagined. Soon, the rich won’t be able to sleep because the poor, homeless and hungry are awake.
By the way, who says that we can’t have smart population policy that encourages people to have the number of children that they can train, and also ensure reliable population census using biometrics rather than the political population figures we have? Whatever the case, the challenge is how to deliberately optimize the potentials of the huge youthful population to be highly productive at home and competitive/exportable abroad. An educational system with 21st century curricula powered by technology that guarantees one youth, one to three skills might be a winning strategy. As the Western population ages and declines, they would need productive labour and Nigeria can smartly position to become the largest supplier of such labour- indirectly through outsourcing or directly.Nigeria would have to leapfrog the industrialization ladder and services sector to provide urban jobs and rely upon smart technology to grow the food to feed the hundreds of millions. Peasant agriculture has little future especially as the population density surges with rapidly declining plot of land per capita. If Nigeria prospers relative to its neighbours, it would witness a surge in migration from other African countries under the free movement of goods and persons protocol—with all the further complications for existing facilities.