IS NIGERIA'S ECONOMY TRULY GROWING?
The rating of Nigeria as the third fastest growing economy in the world was one news item that drew significant attention when it broke sometime in April. This classification was said to have been by the Islamic Development Bank based on the country’s total GDP figure of N10 trillion ($64 billion). According to the report, with a growth rate of 7.68 percent in 2011, Nigeria is only queuing behind Mongolia and China, with 14.9 percent and 8.4 percent rate of growth, respectively.
Taking it further, government handlers told us that our country today has graduated from a low income country to a medium income one as a result of an improved per capita income which, according to the Federal Government, has increased from $1,200 to $1,400.
Expectedly, the report has generated divergent views, ranging from extreme repudiation to moderate acceptance. Some analysts insist that the classification is misleading and capable of goading government into self-delusion as the reality everywhere in the country in no way supports the seemingly wonderful statistics being bandied about. The questions on the lips of many Nigerians are: Is the country in full employment?
Where are the jobs that are being created? What is the country really producing and exporting, apart from crude oil, that is of great economic value to warrant this position? Meanwhile, we import finished petroleum products. How do we explain our budget that is always in deficit without any meaningful investments in significant growth areas within the economy? Where is the funding for agriculture from where majority of the population earn their living?
Theoretical economics explains economic growth to mean the capacity of an economy to supply increasingly diverse economic goods to its population based on advanced technology and with sufficient and necessary institutional and ideological adjustments. Thus, three dimensions to growth are identifiable, all of which must be available in the right numbers to truly support the thesis that an economy is growing.
The first is a gradual but consistent rise in output over time. The primary measure of output is the Gross Domestic Product (GDP), which is the aggregation of an economy’s annual total value of the output of goods and services within a given period of time, usually a year. This can be calculated either by summing up the total amount of money households spend to buy products and services or the total cost incurred in creating the products and services by economic agents.
The second factor presupposes the availability of relevant technology and infrastructure as permissive factors for growth. The size and quantity of infrastructure and technology in a country determines the capacity of the economy to produce and supply diverse goods and services to the population; otherwise the economy will be import dependent. But a largely import-driven growth usually dislocates other fundamental economic indices, such as currency values. It induces inflationary pressure, reduces purchasing power, and ultimately lowers standard of living of the population.
Perhaps the most critical of all the dimensions of growth and one which has generated much debate in economic theory is the nature and quality of institutions driving the growth process. As diverse as the views may be, the central theme suggests that no meaningful growth will occur in an economy if the institutions that are responsible for the transfer of resources from one economic agent to another are not strong.
Available data shows that Nigeria’s aggregate output has been on a gradual but steady rise for some time now, with quarterly gross domestic output averaging 6.71 percent since 2005, and reaching a historical high of 8.29 percent in December 2010. These are indeed positive developments which have put the country on the map as a new economy emerging from sub-Saharan Africa.
Expectedly, researchers from respected quarters are assigning positive outlooks to the country in spite of all obvious challenges. According to a recent RenCap study, an expected GDP revision will see the country to be where Argentina was when it joined the G20. It is not surprising therefore that our policymakers are very positive that project 20:2020, by which Nigeria aspires to be amongst the 20 most economically strong nations in the world in the next 8 years, is on the right course and certainly realisable.
But, can we sincerely say that this economy is growing? The rate of growth of GDP is often used as an indicator of the general health of the economy. Fundamentally, a consistent rise in the rate of growth of real GDP signifies that an economy is buoyant and this will usually reflect an increase in the level of employment, a rise in purchasing power and a general improvement in the condition of living. Are these the case in present Nigeria?
The reverse is equally the case when the rate of growth in GDP is declining. In other words, a decreasing rate of growth leads to rise in unemployment level and general decline in the level of prosperity amongst the people, as witnessed in the eurozone since the financial crisis of 2008. It is therefore anomalous that the quality of life in Nigeria is moving in the opposite direction of the positive growth records being attributed to the economy. As a result, it is pertinent that we ask the hard questions and provide honest answers to be able to properly situate the Nigerian condition.
It is the opinion of this writer that the critical problems of infrastructure deficiency, weak institutions and the monster of corruption should be fundamentally addressed before any real growth can take place; otherwise, Nigeria will remain a country in motion but no movement for a very long time to come.
Written By Onyebuchi Ejiogu