Nigeria runs the most expensive governance structure in the world
Nigeria’s success or failure in confronting extreme poverty will be pivotal for the rest of Africa
69% of Nigerians are living below the extreme poverty line of USD1.90 per person per day and that it will cost about USD24 billion to lift them out, Oxfam international, a confederation of twenty non-governmental organizations with the objective of ending injustices that cause poverty, in its recently released report, has said.
According to the report, Nigeria runs the most expensive governance structure in the world, with an over-bloated civil service, government advisers and aides, whose salaries are often very high.
The international organization reportedly stated that the federal and state governments in Nigeria had exacerbated inequality in the country by underfunding public service, such as healthcare, education, women empowerment and sanitation programs, amongst other things.
Hence, in terms of overall inequality, Nigeria was ranked last out of 157 countries and ranked 125 out of 145 countries on the Gender Inequality Index.
One of humanity’s most hopeful developments in recent decades has been the dramatic drop in extreme poverty. In 2000, some 1.4 billion people lived at or below the global poverty line of $1.90 a day. Today, the number is about 600 million.
This remarkable change is mainly due to growth in China and India: Much of sub-Saharan Africa, particularly Nigeria, has failed to share in the success. A decade ago, Nigeria had far fewer people in extreme poverty than either China or India; today, according to data compiled by the World Data Lab, it has more than both combined. The count stands at more than 90 million, and has risen both in absolute terms and as a share of the total.
Nigeria’s young and fast-growing population is projected by the United Nations to double in size by 2050, making it the world’s third-biggest. Even assuming that the proportion of Nigerians living in extreme poverty stops rising as quickly as it has in recent years, it’s on course to remain extraordinarily high for the foreseeable future.
Nigeria Is Cornering the Market in Extreme Poverty
Nigeria’s success or failure in confronting extreme poverty will be pivotal for the rest of Africa, too — partly because of its huge population but also because of its outsize influence over its neighbors. The government led by President Muhammadu Buhari, recently re-elected to a second and final four-year term, bears a grave responsibility. One wonders whether a politician known as “Baba Go Slow” is up to the task.
His record over the last four years is discouraging. Economic growth has barely recovered following the 2014 crash in the price of oil, which remains Nigeria’s biggest export and source of government revenue. Per capita gross domestic product is less than it was when he took office. Joblessness has more than tripled. Efforts to spur agriculture and other non-oil parts of the economy have failed. Foreign direct investment has fallen by more than half since 2010.
Going Nowhere Fast
Islamic extremists such as Boko Haram and Islamic State remain a serious threat, violence persists in the oil-rich Niger Delta, and environmental pressures due to climate change have stoked clashes between herders and farmers. All told, more than 2 million Nigerians have been displaced by conflict. The country also has the world’s second largest number of people suffering from HIV/AIDS, and faces huge burdens from tuberculosis, malaria and other diseases. Governance remains weak, corruption and crime rampant.
Despite everything, Buhari retains a reputation for personal integrity and the commitment to fight graft. But he needs to give equal weight to economic revival, without which there will be little progress in quelling conflict and radicalism. This in turn means moving away from the statist mindset that he’s displayed since the 1980s, when he became head of state following a military coup.
In particular, he has steadfastly resisted devaluing Nigeria’s currency, likening a depreciation of the naira to “murder” because of its impact on the prices of imported fuel and food. Nigeria maintains multiple official exchange rates for different transactions. This stops the price system from allocating resources to their best uses, and draws the government ever more deeply into managing the anomalies and inefficiencies that ensue. To promote domestic manufacturing and farming, for instance, Buhari has restricted access to hard currency for importers of more than 40 categories of goods, including cement, fertilizer and textiles. The result is predictable: more smuggling, more shortages, and a thriving black market in currency.
In the longer term, Nigeria should aim to float its currency, as proposed by the International Monetary Fund and Atiku Abubakar, Buhari’s challenger in February’s election. In the short term, unifying the exchange rates and liberalizing access to hard currency would be a big step forward.
Economic reform could also lure more foreign direct investment — which is sorely needed, especially in infrastructure. Nigeria’s decrepit refineries force Africa’s biggest oil producer to import 90 percent of its petroleum products. Its electricity-generating capacity is less than one-sixth of South Africa’s, though its population is three times bigger. Access to power and good roads would be a big help to agriculture, which employs two-thirds of Nigeria’s workforce. Lacking cold-storage facilities and efficient transport, Nigeria’s tomato farmers, for example, must sell to traders at harvest when prices are low, and can suffer losses of up to half their production. Most recently, gridlocked ports are holding up exports of cashews.
To fund public investments, Buhari’s government will need to boost non-oil revenue through better tax compliance and enforcement. Until the tax system is fixed, further reliance on debt would be unwise, even though the country’s debt ratio looks modest at roughly 25 percent of GDP. The problem is that Nigeria collects relatively little revenue, so debt service eats up most of the budget. It already accounts for 60 percent of federal revenue, and the figure is expected to rise to more than 80 percent by 2022 — a level the International Monetary Fund calls “unsustainable.”
Buhari’s priorities are understandable: Fighting Boko Haram, restoring safety and security, and curbing corruption are essential if Nigeria’s prospects are to improve. But reviving the economy is no less urgent. Consider that nearly 2 million Nigerians enter the workforce every year, while unemployment stands at more than 20 percent. The country that could be Africa’s dynamo is instead its biggest demographic time bomb. Before it’s too late, Baba Go Slow needs to hurry up.