By Obadiah Mailafia
The tortoise and the palm tree are not known to be friends. Tall and elegant, palm trees can grow to a height of 200 feet (61.96 metres) in the Andean mountains of Latin America. Crafty and wise, according to traditional folklore, the tortoise is a small hunch-backed animal that moves very slowly. Unless the palm wine tapper decides to carry one in his bag, the tortoise is never going to be able to scale the summit of a palm tree and to behold the frightful wonder of God’s universe from that peak.
I find this metaphor of the tortoise and the palm tree a fitting illustration for the painfully slow pace of economic growth in Nigeria. The palm tree is the ideal we should be aiming for in terms of economic development. Unfortunately, our economy continues to grow at the pace of the proverbial tortoise. It is saddled with too many binding constraints. The slow pace of movement is such that, given current path-dependencies, we are never likely to reach the summits in the foreseeable future.
Looking back, the period from 2000 to 2014 were the golden years, when annual economic growth averaged an impressive seven per cent. With the collapse of the global oil market, coupled with domestic production bottlenecks and rising geopolitical uncertainty, the economy shrunk precipitately. In 2015 economic output fell to 2.7 per cent. Negative growth, a phenomenon never witnessed since the civil war in 1968, occurred, as -1.6 per cent growth was registered in 2016. Things improved to 1.0 per cent as growth was recorded in that year. The economy grew by 1.9 per cent in 2018 while in 2019, climbing up moderately to 2.3 per cent, according to the World Bank.
Sadly, the same World Bank forecasts that the tortoise-like pace of economic growth will persist in the coming years, with a projected 2.5 per cent in 2020 and 2.7 per cent in 2021. According to the influential London-based Economist newspaper, “Severe instability, interventionism and corruption will be major obstacles to economic development over 2020-24”.
Given the long-term trends, the tortoise will never see the head of the palm tree. This is so because our population is growing annually by an average of 2.54 per cent while average annual growth continues to trail population. In practical terms, what this means is that every year, the number of the poor in our country will continue to increase. Poverty will get worse and worse. When you put into the equation a government that thrives on impunity, nepotism and incompetence – a regime that implicitly shares the vision and spirit of the Global Jihadists – then we are in for a big trouble. I have been told that such regimes thrive on economic collapse. Because economic prosperity gives the middle class enough comfort to rebel, whereas people at point zero, they rightly calculate, will be preoccupied with how to survive. This downward secular spiral is bound to implode eventually, leading to an inevitable catastrophe. I speak not as a pessimistic alarmist but as a lover of peace and a lover of democracy and economic freedom.
For the non-economists among my gentle readers, a few elaborations may be necessary. Economic growth refers to the quantitative output of the productive income over time. These days, growth is always analysed within the context of sustainable transformation. By sustainable development, we are referring to transformations that meet the needs of the present, without compromising the welfare of future generations and the balance of the biosphere.
In our day and age, growth is not synonymous with development. Growth refers to structural transformation that enhances livelihoods and higher quality of life. Sustained growth levels are good for the economy because they put the national production system in full throttle, generating higher incomes and boosting aggregate demand. Lower levels of growth, on the other hand, can lead to goods’ deflation, industrial layoffs, labour surpluses and higher levels of unemployment, higher public sector debt and general feelings of hopelessness.
Growth and development are, of course, intertwined. It is inconceivable that human development could be achieved without significant and sustained increases in output growth. But this is not to say that growth will automatically usher in development. Many years ago, it used to be said in Brazil that “the economy is doing well but the people are not.” This phenomenon of growth without development is particularly pronounced in Nigeria. Some years ago, the World Bank published a country report on Nigeria that characterised our development trajectory as one of “jobless growth”. Although we are officially out of recession, the misery index for Nigerians appears to be reaching despair levels. Growing insecurity across the country, deepening poverty, polarising inequalities and rising unemployment, are creating widespread despondency.
In our day and age, sustainable growth must be seen as an inseparable part of human development. Human security is a vital component of human development, in addition to empowerment of women and the youth. Governments that know what they are doing make conscious and deliberate efforts to channel growth processes in a manner that serves the goals of sustainable human development and human security. Policies must be built to ensure sustainable harnessing of natural resources through technology choices that protect the environment and optimise natural-resource utilisation for present and future generations within an eco-system that promotes creativity, entrepreneurship, peace and social justice.
Thinking of equity in sustainable growth requires us to focus on three forms of equity: vertical equity, which refers to the relationship between the rich and the poor and across the various segments and classes of society; horizontal equity, which seeks to improve the relations between various groups and regions within a country; and intergenerational equity, which refers to the obligation of present generations to utilise the country’s national patrimony and in a manner that leaves something for future generations. The Cambridge economist, Partha Dasgupta, refers to it as “natural capital”, defined as those assets of nature that can be directly consumed or indirectly deployed in the production of other goods and services.
Countries such as Norway, Qatar and the UAE have led the way in evolving approaches that enhance the environment while promoting the security of future generations. They also operate sovereign wealth funds running into trillions of dollars. Nigeria’s Sovereign Wealth Fund, by contrast, has a low asset-base of $2.15bn.
A few years ago, the Commission on Growth headed by Nobel laureate, Michael Spence, completed its work. According to Spence, the most successful countries are those that are hooked on to the integrated global economy. Such countries also tap into the knowledge economy and are particularly strong on human capital. In addition, they enjoy macroeconomic stability. They tend to also possess a high level of savings while also being oriented towards heavy investments in terms of both public and private investments. Successful growth countries also implement effective strategies for rapid structural diversification and continuing structural transformation. Growth-driven countries also provide effective market incentives while maintaining flexible labour markets.
The quality of political leadership is vital. Their ability to make strategic choices while articulating a coherent growth strategy and communicating effectively a shared vision for political buy-in are critical. Leaders of high growth countries also have to maintain a persistent, determined focus on the goal of inclusive long term growth; build consensus among stakeholders; and create “pragmatic, effective and when needed, activist government over time.”
Crucially important is “understanding and respect for markets, price signals, decentralisation, and private sector investment”. This must go hand-in-hand with institutional reforms that foster effective regulation while promoting effective delivery and upholding moral norms and public ethics. The government must be seen to be fair and inclusive while promoting a society based on the rule of law – a society that nurtures a progressive eco-system that allows the energy and creativity of the youths to flourish.