April 21, 2014 | Filed under: Analysis (BusinessDay) | Author: Tolu Ogunlesi
Some time
around the time of independence from Britain in 1960, Nigeria began to be
referred to as the Giant of Africa, a promise that soon fizzled out in the wake
of a civil war and a succession of military dictatorships.
Today
Nigeria is once more hailing itself the continent’s new colossus. An update of
its gross domestic product estimates places it as Africa’s biggest economy,
overtaking Johnny-come-lately giant South Africa. The country has become a
favourite among international investors including Temasek, Singapore’s
state-owned investment company, and Atlas Mara, a venture of former Barclays
chief executive Bob Diamond.
Much
attention has been paid to the restructuring of the national economy revealed
when the government nearly doubled estimates for GDP. The services sector is
now thought to contribute half of GDP while agriculture and oil and gas have
fallen significantly. Nollywood, the homegrown film industry, has finally been
officially acknowledged. Manufacturing has also increased.
But this is
only part of the story. Differences in poverty and unemployment rates across
the country’s 36 states are remarkable. Ninety per cent of the total value of
cash transactions in Nigeria are accounted for by only seven states, according
to the central bank. Ali Mohammed Pate, a former health minister, points out
that there is a 14-year gap between life expectancy across the country’s
states. Average poverty rates range from 30 per cent in the wealthier south
west, where cities such as Lagos are located, to 60 per cent in the
impoverished north east.
When the
rebasing is interpreted on a state-by-state basis, the disturbing gap between
the country’s frontline states and its laggards – of which there are several –
will become even more stark.
Consider
Lagos, Nigeria’s biggest state economy and the hub of the banking and
telecommunications industries, home to the country’s biggest port complex, and
also its most populated state. Renaissance Capital, the investment bank,
estimated that it contributed about 12 per cent of Nigeria’s GDP between 2009
and 2011. That statistic may have changed as a result of the rebasing exercise.
But if not, it implies that the Lagos economy is worth $61bn. That is
one-and-half times Kenya’s output, and larger than all but a handful of African
countries.
In Kano, the
commercial hub of northern Nigeria built around agriculture and manufacturing,
rebasing indicates that the state economy rivals Ghana’s. This might make
investors rethink the widespread view of the north as nothing more than a
benighted haven for the Islamist terrorists of Boko Haram, blamed for this
week’s deadly bomb attack in Abuja and the kidnap of more than 100 girls from a
school in Borno state.
But securing
a perch as Africa’s largest economy means little to the tens of millions
struggling with routine power cuts, recurring fuel shortages, persistent
unemployment, and rising inequality. The country’s Gini coefficient, a measure
of income inequality, rose from 0.429 in 2004 to 0.447 in 2010. In GDP terms
Nigeria may have shoved South Africa to second place, but the real achievement
will lie in jumping up 32 places needed to meet South Africa on the UN Human
Development Index.
The new GDP
figures shine a spotlight on the alarming gap between Nigeria’s potential and
its reality. It is, for example, a glaring anomaly that the world’s 26th
largest economy has one of the lowest levels of electricity consumption per
capita, well below the African average, and occupies 147th position on the
World Bank’s Ease of Doing Business Index for 2014 – nine spots down from 2013.
The percentage of the total population living below the poverty line is far
higher than in the major emerging economies. Fewer than 10 per cent of
Nigerians have any form of health insurance.
Nigeria
needs to focus less on economic abstractions and more on improving the lives of
ordinary citizens. Even if government claims that 1.6m jobs were created last
year prove accurate – youth groups are not convinced, and are demanding
evidence – this would hardly make a dent on an unemployment rate approaching 24
per cent. Forty thousand households can now claim conditional cash benefits,
but this too is a drop in the ocean.
If Nigeria
is to become a real economic giant, it needs to stand on its own two feet. At
the moment, this colossus is shuffling along on feet of clay.
Tolu Ogunlesi
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