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The economics of nation-building
ibrahim ayagi
Continued from Yesterday
GROWTH
rate in real gross fixed capital formation is an area of great importance to any
and all economies. The differential between income and consumption expenditure
is saving. Whatever is spent on current production is consumption and whatever
is not currently consumed is saved. Savings assigned to real fixed capital
formation are real investment which can be defined as expenditure in the setting
up of non-directly consumable products. This is the investment that produces not
directly consumable items, but produces tools and implements that are used for
the production of consumable goods. Investment in directly consumable goods does
not promote rapid economic growth. What promotes rapid economic growth is
investment in real fixed capital formation.
The figures for the real growth rates in
capital formation in Nigeria show a negative growth rate of -2.90 per cent in
1999, which rose to 17 per cent in 2000, fell to 15.20 per cent in 2001, fell
again to 11.20 per cent in 2002 and finally fell drastically to 3.50 per cent in
2003. With the decline in the growth rate of real capital formation, the saving
rate must have declined also, and the consumption rate must obviously have
risen. This is good politically and socially in the short-term. This is what is
called, in today’s parlance, the "democracy dividend." However, it is bad for
real economic growth. The Nigerian economy needs real investment in steel and in
other industries that produce goods for other industries to process. If Nigeria
had done that, the GDP growth rate achieved could have been higher than what it
has been. All the three tiers of government are responsible for this. Their
outlook for the Nigerian economy is constrained by the immediate future - their
desire to provide for the immediate consumption of goods and services by their
constituencies. While this is, of course, important, the other aspect of real
investment in heavy industries cannot be over-emphasized. This is the aspect
that will cater for the future growth of the economy. In other words, this is
real nation-building. Without it, and with the current practice of investing in
directly consumable goods, and furthermore, with the rapid growth of the
population, Nigeria’s progress towards industrialization will stall to a virtual
standstill. Economic growth could be stalled by rapid population growth unless
the leap forward is greater than the population growth. This can be brought
about by a rapid rise in the savings which are effectively invested in the real
sector.
The inflation rate in 1999 was 13 per
cent. It was the intention of the Obasanjo administration to achieve a single
digit inflation rate by the end of 2003. This has not been achieved. Indeed, the
inflation figure posted by the Federal Office of Statistics (FOS) for 2003 was
14 per cent.
The value of the national currency is an
important instrument of government policy. In the Nigerian context, the exchange
rate of the naira vis-a-vis the United States of America’s dollar and other
convertible currencies is an important element that affects the life and
well-being of Nigerians for obvious reasons: First, Nigeria receives over 90 per
cent of government revenues from the export of crude oil which is valued in
United States dollars, and secondly, Nigerians import a lot of the things that
they consume.
The objective of the Obasanjo
administration has been to stabilize the value of the naira vis-a-vis other
currencies. In 1999, N96.10 exchanged for one US dollar; it was N86.00 to the US
dollar in 1998; and N22.00 to the US dollar in 1994. This represents a
devaluation of the naira of over 336 per cent or a devaluation of about 70 per
cent per annum! The figures for the subsequent years of 2000, 2001, 2002 and
2003 are N101.70, N111.70, N118.56 and N129.30 per US dollar, respectively. The
result for the years 1999 to 2003 shows a total devaluation of 34.5 per cent for
the 5 years or an average devaluation 6.9 per cent per annum - thus, reducing
the instability in the value of the national currency to only 10 per cent of
what it was before the Obasanjo administration.
The growth rate in the manufacturing
sector was 3.44 per cent in both 1999 and 2000. However, it rose to 6.99 and
10.07 per cent in 2001 and 2002, respectively. In 2003, the growth rate declined
to 5.66 per cent. This is a reasonably modest achievement. Furthermore, capacity
utilization in the manufacturing sector which was 28 per cent in 1999, had
reached at least 60 per cent by the end of 2003. The implication of this is, of
course, obvious both for the creation of employment and for increased
production.
The transport sector in Nigeria is being
revolutionized by the Obasanjo administration. The changes in the transportation
system in the country are tremendous. During the military administration, a
minister was known to have stated that most Nigerians at that time were riding
their last cars! This meant that when the cars they had became old and
unserviceable, that would be the end of their owning motor vehicles. They could
not afford to replace them. And that was virtually true until 1999. The coming
of the Obasanjo administration changed the situation by doubling, tripling and
even quadrupling the incomes of most employed Nigerians. A typical example is
that of university lecturers who had been marginalized into poverty, but most of
whom now own their own vehicles and maintain them without sweat. Life is now
comfortable for them.
The figures show that in 1999, 103,000
motor vehicles were newly registered in the country. In 2000, the figure rose by
51 per cent to 156,000 and further rose by 26 per cent to 196,000 in 2001. In
2002 and 2003 the figures for newly registered vehicles rose to 290,000 (i.e.,
48 per cent) and to 340,000 (i.e., 17 per cent). For the overall period of 1999
to 2003, the rate of growth of the newly registered vehicles was 230 per cent.
An added significance of this achievement is the fact that you see on Nigerian
roads all over the country normal people driving brand new motor cars!
However, this is not the area where the
transport system in Nigeria is being revolutionized. The revolution is in the
private transport system - a system of transportation owned and operated by the
private sector. In major cities and towns, various types of buses and taxis fill
the streets and motor parks for passengers. The roadside motor vehicles’ picking
and dropping points as well as the formal motor parks are now a demonstrable
semblance of order and discipline. They now do the hitherto "un-Nigerian" thing
of queuing up for passengers. The number of passengers has increased in the same
proportion as the increase in the overall population of the country, yet the
number of all types of buses and taxis is enough to accommodate all lined-up
passengers and still leave many vehicles waiting for hours for the next sets of
passengers. The situation is the opposite of what used to happen before 1999 -
the absence of queues of passengers waiting for buses; now the buses wait for
the passengers.
To add to the transport revolution in
Nigeria is the existence of what is now popularly called the Okada - the
tens of thousands of motor- bikes that compete with the buses and taxis on the
roads, but with an added edge over them of accessing the various nooks, alleys
and corners where motor vehicles cannot reach. These Okada motor bikes are
plentiful all over Nigeria, and even in the remotest of rural areas.
All this is a demonstration of private
effort by Nigerians all over the country. However, what happened and is still
happening did not happen before 1999. The initiator and facilitator of this
private sector revolution in transport is the Obasanjo administration which not
only provided the environment for the revolution to take place but also
introduced the KEKE NAPEP programme as a demonstration and a supplement.
A structural transformation has taken
place in the Nigerian telecommunication system. This transformation can rightly
be said to be the sole handiwork of the Obasanjo administration. The growth rate
of telephone and cellphone lines was 5.50 per cent in 1999; the growth rate rose
to 10.40 per cent in 2000 and to 67 per cent in 2001; it rose phenomenally by
176.60 per cent in 2002 and by 74.20 per cent in 2003. This is a most dramatic
event. By 1999, most Nigerians not only did not have access to telephone lines,
but in fact did not even know what the possibilities were in the communication
system. By 2003, a large number of Nigerians, especially in urban areas, had
access to cellphones. One can say that virtually all members of the middle class
society not only have access to telephones and cell phones but actually own one
line or even two (2) cell phone lines. You see people everywhere with their
handsets either in their pockets or near their ears communicating. Even some of
the drivers of motor vehicles and the "Okada" have the GSM handsets.
All this is, of course, a demonstration
that Nigerians have today a heightened level of disposal income than they did
before 1999. People with inadequate incomes do not involve themselves in
spending heavily on a high technology communication system. Furthermore, the
heavy expenditure on telecommunications has its multiplier effect on other
activities throughout the country. A large number of hitherto unemployed youths
have now found a paying trade in the selling of GSM cards; even some disabled
Nigerians now find it more profitable to trade in GSM cards than to beg for
arms.
The number of hotel beds was 12,914 in
1999; it rose to 27,496 (a rise of 113 per cent) in 2000; the number rose by 11
per cent to 30,699 in 2002; and rose by 22 per cent to 37,528 in 2003. The room
occupancy rate rose from 71 per cent in 1999 to 82.5 per cent in 2003. The
number of visiting foreign nationals to Nigeria was 1,392 in 1999 and rose to
3,897 (a rise of 180 per cent) by 2003. All these indicate the participation of
foreign nationals in the Nigerian economy. The figures bear testimony to the
success of the Obasanjo administration of attracting foreign investment into the
Nigerian economy. The policy has not yet achieved its major objective of
attracting foreign investment in significant amounts in the non-oil sector of
the Nigerian economy, but there is no doubt that the efforts is succeeding as
demonstrated by the heightened inflow of foreign nationals into the country.
This presentation has now come to the
section on concluding remarks. What is the conclusion of the presentation? The
normal thing that people do to conclude such a presentation is to summarize the
most important points, what they mean and what their objectives have been.
However, this paper has been quite long and covered many points. It will take
another long time to summarize and present the essential points. This presenter
would not like to tax the patience and endurance of this august audience more
than it has already done. It is for this reason that the conclusion of this
presentation is left to the perception of the audience as individuals and that
of the Development Policy Centre as an institution. It suffices to say that the
presenter would hope that all those that listen to or read this presentation
would come to the conclusion that a demonstration has been given, buttressed by
facts and figures that in terms of effective nation-building of Nigeria, the
Obasanjo administration is the best government Nigeria has and has had for a
very long time.
•Concluded
A paper delivered by Prof. Ibrahim Ayagi, Chairman,
National Economic Intelligence Committee (NEIC) at a Founder’s Day Lecture of
the Development Policy Centre, Ibadan, last month.
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