The peril of unequal growth

 Since 2009, when Nigeria avoided economic collapse, the economy has expanded – GDP in 2012 was $273 billion. The economy is projected to grow by 7 percent in 2013.

But despite this impressive macroeconomic performance, most Nigerians are yet to benefit from the gains. Economists wonder why Nigeria’s growth, in agriculture and trade, is not generating enough welfare benefits. Non-oil sectors like agriculture and trade have recorded exponential growth but have been unable to provide jobs: in 2011 three-quarters of Nigeria’s working age population were unemployed or out of the workforce. Even more, compared to Vietnam, a country with similar income, Nigeria has more uneducated people of working age, i.e., 15-65-year-olds. 

Trade and especially agriculture are considered sectors with the potential to generate pro-poor welfare. Despite its size – in terms of percentage of GDP and number of employed – growth and economic opportunities in agriculture have been limited. (A survey in 2003 noted that of all occupations, agriculture had the highest incidence of poverty.) Hopefully, the agriculture minister’s plans to commercialise agriculture will bear broad-based benefits.

Until then, the enormous structural, demographic and geographical imbalances risk making poverty dynastic: children of the poor likely to become poor due to widening gap in access to quality education, health and nutrition. Nigeria was ranked 153 of 186 countries in the 2013 United Nations Human Development Index. If this vicious cycle of inequality amid stupendous growth persists, Nigeria will become a country where the “poor cannot sleep because they are hungry, and the rich cannot sleep because the poor are awake”.

Ownership of wealth in Nigeria is a monopoly whereby the richest 10 percent consume 38 percent of national income while the poorest 10 percent consume 1.8 percent. A similar situation is reflected in the labour force – in terms of wage employment, government, which controls revenue generated from oil, has monopoly. With three-quarters of government revenue from oil, an oil supply shock, expected due to shale revolution in the US, the industrial scale of oil theft and its effect on already dwindling production will adversely affect government revenues and the purchasing power of civil servants.

Continued dependence on oil risks increasing fiscal deficit, can lead to accumulation of debt, credit risk, and could put more pressure on monetary policy. Investor confidence is deflated when Nigeria’s oil income is threatened. As things stand, an oil price below budget assumption of $79 per barrel and a reduction in production volume coupled with hike in piracy along the West African coast make Nigeria fiscally vulnerable.

To counter these lingering problems, President Jonathan and his aides need to focus. The challenges are known, a number of ministers have the capability to drive reform but they need to be given autonomy and shielded from the present petty but pernicious provincial politicking.

Agriculture, hospitality, ICT and housing have been identified as sources of growth; these markets reflect the urban growth in the country. Fixing roads that connect potential hubs of growth will stimulate growth in these sectors beyond city boundaries. The World Bank reckons that labour-intensive light manufacturing of garments, footwear, leather products, and assembly production require low skills, have high export importance and the largest potential for generating jobs.