Nigeria's Road to Development

Debt in Nigeria has such a bad reputation. Most people are afraid that we’ll end up where we were before the paris club deal in 2006 more about the paris deal HERE. That’s fair enough but fear alone isn't sufficient to remain at status quo. If you ever feel yourself getting anxious about Nigeria’s debt profile compare it to that of similar countries. The last time I checked the numbers weren’t alarming. Nigeria's public debt to GDP ratio is currently at a healthy 13%. Some analysts claim that 20% is the acceptable debt to GDP ratio.

The infrastructure Nigeria needs to grow isn’t going to fund itself. The capital has to come from somewhere. A good source of capital is public private partnerships; however this source is highly unpredictable and it wouldn’t benefit Nigeria to be dependent on it. The other option requires government interventions. I'm guessing it would take an estimated influx of $15billion a year for the next 3 years to see some real change. I don't think the government has that money right now. They could access the local capital market which is a strategy they've been following in the recent past. But borrowing from this source has its disadvantages. It could lead to crowding out - increase in interest rates leading to reduction in private sector investment spending in the country. In order to prevent this from happening, the FGN should tap into the foreign capital markets.

What's the solution?

Whatever angle you view the challenges of Africa’s largest economy from, the good news is there’s a solution. The way I see it, the road to development is paved by debt. Not idle frivolous debt. Productive self-liquidating debt, used to finance roads, hospitals and other basic infrastructure which in turn will increase the productive capacity of the economy. Sounds easy right? I think so too.

The tricky part is the leadership behind the plan and implementation. For whatever reason, getting the different organizations needed to form strategic alliances and plan in order to implement the solution is more difficult than it initially appears. Politics, tribalism, lack of vision, to name a few, get in the way of the action.

Ideally, all 36 states of the federation should be part of the solution. It would be helpful if the states were less dependent on the government for income. They can do this in a variety of ways. For example, developing the state's natural resources which can be exported, creating internal revenue for the state. This way, at the end of every month, the state can afford to pay their worker's salaries without looking for federal government handouts.

Whatever the challenges are, the truth is the fundamentals of the Nigerian economy are super positive and the country demonstrates long lasting staying power.

We have a vast amount of arable and irrigable land that isn't currently utilized

Nigeria has a large mostly idle population - I don't think we're at a danger of exhausting affordable labor anytime soon

Potential areas of growth and diversification of the economy in addition to the already mentioned agricultural industry:

Hollywood: one of the reasons Nigeria performed better than South Africa in the recent economy rebasing was because growth in the film industry was accounted for

Manufacturing: one of the fastest growing sectors of the Nigerian economy

What’s more? We’ve witnessed noteworthy milestones over the past one and a half years

  • Peaceful transition of power from PDP to APC in March 2015

  • Bank Verification Number (BVN) implementation in an attempt to get rid of duplicate and fraudulent bank accounts

  • Fuel subsidy removal which was received with very little resistance compared to other times in the past when the FGN tried to get rid of it

  • Implementation of Treasury Single Accounts (TSA) expected to increase revenue by reducing leakage of finances in the system given that all Ministries, Departments and Agencies are prohibited from keeping other operational bank accounts

When all's said and done Nigeria just might be on the right, albeit hilly road to development...

Oops I said it🙊,


#atticsbychinju #currentaffairs #development

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