Removing obstacles to inclusive growth
As the president-elect prepares to face the task of governance, we wish to place the issue of inclusive growth on the front-burner. This is because the consensus of opinion is that the relatively high Gross Domestic Product growth rates averaging over 7.1 percent in the last decade have not led to shared prosperity.
According to a 2014 McKinsey Global Institute report on Nigeria, the country would attain a GDP of $1.6 trillion by 2030 if it maximises its potentials. Nigeria has a huge endowment of resources, a growing consuming class, youthful population and rapidly growing trade and consumer sectors to propel it to this estimated growth. However, growing at 7.1 per cent, Nigeria is rising but without Nigerians.
Though it has some of the richest black people on earth, some of the poorest people on earth can still be found in Nigeria. The income inequality and distribution was at the forefront of the World Economic Forum for Africa (WEFA) held in Abuja last May.
President Goodluck Jonathan, in his special address at the WEFA, said, “The African continent is rising. We must ensure that our poorer and vulnerable neighbours are carried along. We must ensure this growth is inclusive. We must ensure there is maximum inclusiveness through creating opportunities for people to create opportunities for themselves.” Similarly, the 2014 McKinsey report on Nigeria said that the benefits of economic growth have not been shared across the population. “Recently, there has been progress in reducing poverty, but between 1999 and 2010, there was little improvement in poverty despite strong economic growth.” And the deepening poverty can be found both in the rural and urban areas. Since rural Nigeria depends on agriculture for livelihood, a broken agricultural model has only worsened the poverty level. Low productivity, lack of access to markets, and rising rural population contribute to this poverty in rural Nigeria. Causes of poverty in urban areas can be traced to informal nature of most small businesses, which creates unsecure jobs, and high cost living in the urban areas, which drains workers of any kind of savings.
Analysts say that if Nigeria can address the structural issues that create rural and urban poverty, growth in the GDP can now result to decrease in poverty. According to the McKinsey report, if Nigeria makes and implement the proper structural reforms and GDP grows by even 6.4 per cent for the next 15 years (as it has done in the last 3 years), by 2030, it is estimated that 30 million Nigerians will be pulled out of poverty. “If Nigeria can link urbanisation to rising productivity and incomes in that period, urbanisation could contribute an additional $640billion to GDP by 2030. This is based on the urbanisation experiences of Brazil, South Korea and the United States – countries in which GDP rose by an average of 5.3 per cent for every percentage point of urbanisation.”
The recent rebasing exercise by Nigeria’s National Bureau of Statistics, supervised and validated by the World Bank, International Monetary Fund, and African Development Bank, showed that most of the increase in GDP came from changes in manufacturing, real estate, communications, and other services, which are all growing rapidly.
However, recalibrated real growth in agriculture, at 2.6 percent per year, is less than the previously reported 14 percent. The share of resources to the economy has fallen by more than half, from 33 percent to 14 percent. The National Bureau of Statistics estimates a preliminary overall growth rate of 6.4 for GDP in real prices between 2010 and 2013.
The outgoing government of President Jonathan sought to drive inclusive growth through agriculture and manufacturing
A 2010 World Bank report warned that unless obstacles to job-intensive industries in Nigeria are removed, the country’s youth unemployment crisis will only worsen as well as the attendant youth unrest. About two million Nigerian youth enter the labour market yearly. Investments were encouraged in labour intensive sectors like agriculture and manufacturing. Agriculture was hugely promoted as it holds the promise of Nigeria’s transformation. In the words an agricultural expert and one-time Resident Representative of African Development Bank (AfDB) in Tanzania, Dr. Sipho S. Moyo, “It is estimated that agricultural growth in sub-Saharan Africa today is 11 times more effective in reducing poverty than growth in any other sector including mining, oil and gas.
The majority of Nigeria’s poor live in rural areas and over 14 million families depend on agriculture for their livelihood. Increased strategic government-led investment in agriculture, complimented by private sector investment is therefore crucial now, more than ever.”
We urge the incoming All Progrssives Congress (APC) government at the centre to build on the foundation that President Jonathan tried to lay and guarantee Nigeriams the fruits of inclusive growth.