Politics as Nigeria’s Major Economic Problem 17 May 2011 Nigeria cannot be said to lack resources. No. It is one of the richly endowed countries in the world. It cannot be said to be poor at development planning. Certainly not! There are enough of that, old and new, in files of various ages in the Ministries, Departments and Agencies (MDAs). And for economists, there is no need to ask because it has some of the best and the brightest. Nigeria boasts of some strong economic indicators, with prospects of a complete turn-around. The economy has been growing at an average annual rate of 8 per cent, just as the IMF and World Bank have declared it as one of eleven economies to watch in the next decade. But high poverty and unemployment levels mean that the average quality of life is poor. On the 2010 United Nations Human Development Index (HDI), Nigeria is ranked 159 of 178 countries - lower than Togo, Ghana, Senegal and Gambia. People tend to take this measure seriously because it is a comparative measure of standards of living for countries worldwide and a means of measuring the impact of economic policies on the quality of life. Natural economic expectation is that with her rich resource base and the quality of human capital, Nigeria would be high on the HDI, but there lies the Giant of Africa among the poor. Former President Babangida was spot on when he observed that the economy had defied all economic theory and logic. He had the services of erudite economists like the late Professors Ojetunji Aboyade and Adebayo Adediji at his disposal. This paradox is one of the many reasons why a school, to which I belong, is persuaded to believe that the greatest of Nigeria’s economic problems is rooted in Aso Rock. Let’s start with this example. Whatever anyone feels about President Goodluck Jonathan, it will be unfair not to acknowledge the improvement in electricity power supply in the country. Without looking at the numbers, there has been a noticeable increase in the hours of electricity supply to homes and offices. At the moment, power generation stands at 4,000 megawatts, the highest the country has recorded in recent times. Now, ask the welder, the vulcaniser, the factory hand, and the child at home: you don’t have to study economics to appreciate the importance of electricity to their well-being and national economic development. Yet for years the supply of electricity deteriorated so consistently that it became a privilege to have it for a few moments. Various governments didn’t have a handle on it. Let’s fast-forward to the second coming of President Olusegun Obasanjo. Obasanjo embraced a full-blown reform regime with the enactment of the Electricity Sector Act in 2005 and the subsequent establishment of the Nigerian Electricity Regulatory Commission. Consequently, the public monopoly PHCN was unbundled into a single transmission company, six generating companies and 11 distribution companies. Despite its imperfections, the programme was on course to improving power supply. And when the Yar’Adua administration came on, it was expected that it would run even faster with the baton, but the process was suddenly halted and the baton hurled away. With all the investment and commitment to the process frozen by the stalled reform process, hope was lost again. But what happened? Interest and lobby groups needed the status quo to remain to keep them in business. The national interest didn’t matter much to them. The official reason for stalling the process was that the PHCN needed to be stabilised and made economically attractive to investors. A cock and bull story! President Jonathan jump-started the process, after years of waste, loss of investment and loss of momentum. And now there is hope again. The point I am making is that, as the Jonathan power- supply example shows, Aso Rock’s commitment is a key success factor of economic programmes. Aso Rock established the Excess Crude Account (ECA) and grew it to $20 billion against all odds. Now, also against the opposition of other stakeholders, Aso Rock is on course to establish the Sovereign Wealth Fund. Any doubts about the Fund’s usefulness have been erased by the importance of the ECA. There are many more examples of Aso Rock’s overwhelming influence on the economy. It was an Aso Rock decision that killed the Presidential Initiative on Cassava, which had a laudable objective of promoting cassava as a foreign exchange earner for the country and boosting self-sufficiency in food production. Farmers and the processors who embraced the initiative with hopes to benefit from its numerous advantages are now left in the cold to count their losses. The dream of a N10 billion a year cassava tuber industry is dead. Even where government policies are implemented without flip-flops, leakages through large vents of corruption means that projects are not completed or they are not completed on time and budget. Considering the urgency of electricity projects, it was shocking to hear reports of an alleged N5.2 billion fraud in the Rural Electrification Agency. Corruption is a hemorrhage of resources meant for economic growth. There is another on-going case that validates the view that corruption remains a major impediment to growth. Dr. Hassan Muhammad Lawal was appointed Minister of Works and Housing on December 17, 2008 in a cabinet reshuffle by the late President Yar’Adua. He left office in March 2010, when then Acting President Jonathan dissolved the cabinet. During his tenure, some major roads, including Apapa roads that serve the ports in Lagos, got so bad that one morning, most newspapers attacked government for negligence of vital roads. That was only when the Apapa roads, through which nearly all imported petroleum products pass to the rest of the country, got some attention. Now, with allegations of fraud and money laundering to the tune of some N75.5 billion, over which Lawal and 15 others have been arraigned, one wonders about the opportunity cost of that amount – kilometres of road which could have been rehabilitated. If ministers and other government officials bleed the economy in a way that stalls programme implementation and economic development, the blame goes to the President. Political appointees are not elected by the people. Corruption is wasteful to the national economy and only exemplary leadership and robust anti-corruption drive can curtail it. There are other forms of waste, which only Aso Rock can curtail. It cannot be said that Aso Rock is unaware of the implication of the huge yearly recurrent expenditure of the budget. And for sure, there has to be a way to address the waste in the National Assembly. These are huge holes successive occupants of Aso Rock have failed to plug becuase of politics. This is yet another: for goodness sake, should a major oil exporter continue to import petroleum products, while local refineries operate epileptically? Nigerians seem to delight in the absence of queues at the fuel station, without bothering about the billions of naira spent every quarter to import petroleum products. They also seem to be unconcerned about racketeers who corner much of the supposed government subsidy. Of course, they bother less about the opportunity cost of the billions of naira wasted. But it lies in the infrastructure and social amenities such monies could have provided. So much is wasted or stolen in a country with huge developmental needs. It is commonsense, not necessarily economics, that without a functional infrastructure, the economy cannot grow desirably. President Jonathan has made a good choice with the decision to improve electricity supply, but I believe he can add critical roads and rail transportation. These are likely to cut the high cost of production in the country by some 45 per cent. Without requisite infrastructure, the economy has become inefficient. Economic efficiency refers to the use of resources so as to maximise the production of goods and service. Getting the largely idle real sector to work again will be a major boost to economic growth and also reduce the worsening culture of idleness and over-dependence on the national cake. Complacency over oil revenue has caused the neglect of other sectors of the economy, but this has to stop to enable the country achieve an all-round growth. Doubtlessly, President Jonathan’s success in the next four years will be a direct function of his economic achievements. Improve living conditions, get people productively engaged for economic empowerment and they will not be bothered about the politics of Abuja. Predictably, this will even reduce the insecurity in the land – less idle hands. But to achieve the desired economic success, he needs an empowered economic team. There shouldn’t be any problem working with the nucleus of current National Economic Management Team (NEMT). Going by the articulation of key members of the team, there is no doubt that they have a grasp of the challenges of the economy and a blueprint for an all-inclusive economic growth, which is already being implemented. As I have said before, in growing an economy, a President’s support for his economic team, in a polity invested with hawks, is very essential. Former Finance Minister, Ngozi Okonjo-Iweala has confirmed my point in a recent Financial Times interview. She said of the economic team she led, “…we were a team and we had a committed president (President Olusegun Obasanjo) at that time.”