Achieving sustainable growth rate – Hallmark
A review of the performance of the economy in the past year throws up mix signals. Largely, the Gross Domestic Product (GDP) maintained an impressive upward thrust, giving indication that, with improved policies and consistent implementation, the economy will rebound further this year. To record a comfortable two percent growth rate over and above that of 2012 in a global economy that stagnated was remarkable. But there are also challenges facing the economy going forward such as translating this growth to welfare development.
For example, Nigeria has had a splendid macroeconomic outlook since the restoration of civil rule in 1999 when real gross national output shot up to 6.9 per cent, and has chugged on at an average of 7.5 ever since, showing unique resilience, even in the face of global financial meltdown in 2008; the country’s real national output popped forward at 15.1 per cent, its highest rate in over half a decade. From 2011, the economy has, however, cooled off a bit. The discovery of huge deposits of shale oil in the United States of America (an effective alternative to Nigeria’s fossil fuel) may also compound Nigeria’s long term growth outlook, especially considering that the economies of the Asian powerhouses (an alternative market) have decelerated significantly, with China seeing its growth drop to 7 per cent for 2013 and India’s dipping to 4.7 per cent for the current year. This is unfamiliar terrain for these two countries that have become accustomed to seeing growth rates of over 10 per cent per annum in the past decade have huge import for the global economy. A concert of these developments portends difficult days ahead and our leaders and policy-makers must show perspicacity to chart a safe course for the long term health of the economy.
Growth must be accompanied by development
The foregoing rosy economic growth figures mean naught except they translate into better socio-economic conditions of Nigerians. In other words, to be of any moment, our growth statistics must be turned into improved standards of living of the citizens. In basic terms, a nation’s economic growth tracks certain quantitative indices that measure the relative change (increase or decrease) of the productive capacity from one period to the next, usually yearly; while economic development describes the human social and economic conditions within an economic entity over a period. A school of social-economists persuasively argues that the translation of economic growth into economic development is a primary purpose of governments. Thus, economic growth, which is an outcome of improving productivity and increasing national income, should enable the economy to support and sustain policies that improve the economic, political and social well-being (or economic development) of the people.
Nigeria’s fiscal and monetary authorities must, therefore, increasingly realize that credit ratings are meaningless, in and of themselves. Whatever credit ratings a country attains over and above investment grade should be translated into lower international borrowing costs and ultimately into improved investment capital inflows that build local productive capacity. So far Nigeria has not seen this boon. One explanation is that the fiscal authorities have been more interested in maintaining high public sector cost structures and bizarre resource misapplication than being mindful of changing global realities. With the country’s population growing at over 3 per cent per annum and its gross domestic output growing at barely twice this rate, it requires no seer to foretell a per capita income and productivity crisis in the near future. The country’s GDP must grow at a pace of at least 10 per cent per annum over the next decade and its population growth must be kept down to between 1.5 and 2 per cent per annum. Already Nigeria has one of the youngest populations in the world (with over 70 per cent of the population with ages between 0 and 35) and this means severe pressure for jobs, schools, healthcare, housing and recreation facilities. With oil prices likely to drop steadily over the next decade, the future seems bleak.
This newspaper has consistently called on both the fiscal and monetary authorities to take radical decisions concerning the nation’s economic management. Every single kobo of public spending must be matched by clearly identifiable marginal economic benefits to the nation which can be juxtaposed with the attendant marginal costs. The size of government is unwieldy and the cost unsustainable at about 70 per cent of the budget. The President must be made to understand that the economy can no longer support the huge public sector that continues to suck the life blood from the economy.
Shrinking the size of the government will release more funds for infrastructural development. Nigeria is in a race to grow at a pace that would lift more of the citizens out of poverty. This can only be achieved when government pursues policies that will translate our current economic growth into economic development.