Nigeria’s political economy: Opportunities and threats
Data lately made public by the National Bureau of Statistics (NBS) confirms some popular beliefs about our economy. It also shows opportunities and reveals stark economic problems that threaten the robust growth so far.
For instance, Nigerian households approximately spent N447 billion on recharge cards in a month. This amount is 3 times more than what we spent on soap and detergents and house rent.
In terms of food items, the diet of Nigerian households is heavy on meat, fish and animal products, grains and flours accompanied with starchy roots, tubers plantains, and vegetables.
For non-food items and services, health services, building materials, burial services, marriage ceremonies, readymade clothes and tailored clothing were major items and services bought in the last year. Most Nigerians, especially those in the South West, bought Ankara/George materials.
Given the amount spent on Ankara/ George materials coupled with a preference for tailored clothes, money spent on sewing the clothes, mostly by women, was a major expense. Donations to church, mosque and religious group were a significant expenditure for all households.
The data provides information on income generating activities in the economy based on age groups and location. Those engaged in agriculture declined overall, as well as in urban and rural areas. Curiously, the percentage of plots that used fertilizer declined between 2011/2012 and 2012/2013.
Mining, a growing sector in terms of bank loans, showed no increase in number of people employed. This, perhaps, is due to the capital intensive and informal nature of mining and quarrying in Nigeria.
The manufacturing sector showed significant improvement – the number of urban and rural dwellers participating in the industry increased. Buying and selling (wholesale and retail) showed marked improvement across age groups and location, especially in rural areas. Most individuals engaged in the sector are between 45 and 65 age group.
In the financial/insurance/real estate sectors, urban dwellers within the age bracket of 25 and 44 showed the most improvement. This isn’t surprising. Relative proximity to a bank is highest in urban Nigeria.
Data on the financial services sector and other related data, say, households with mobile phones (83 percent of the 5,000 households surveyed had one); point to various opportunities and challenges.
Traders/business owners with higher income and socio-economic status and farmers are among those that financially excluded i.e. without financial access and have been identified professions with most opportunities for financial inclusion.
Someday, rural farmers and traders may draw the attention of financial services providers. However, low income, socioeconomic and education level are barriers.
Another obstacle is how people cope with financial problems. Doing nothing is the default for many households, according to NBS. Grave illness, death of a relative and business failure are risks frequently experienced by households, according to a 2012 survey by Enhancing Financial Innovation and Access (EFInA) – 27.7 million adults experienced serious illness of a household member.
Other coping mechanisms include using up all their savings, selling assets e.g. livestock, incurring debt or taking a bank loan.
Rural households whose breadwinners are farmers are prone to agricultural risks e.g. theft of agricultural produce or loss to fire, flood or storm. EFInA’s survey showed that out of the 5.98 million rural households affected by agricultural risks 42 percent did nothing, 24 percent used their savings, 15 percent cut down expenses and 8 percent sold livestock.
Left unchecked, this incapacity to do something when faced with an economic setback is a threat to Nigeria’s political economy. Nigeria has a young population; most are in 15 and 64 age group and many are migrating to urban centres. If properly tackled, the high incidence of financial insecurity can be turned into business opportunities.