The Nigerian government and the two Washington financial institutions (The World Bank and the IMF) projected 7% (seven percent) GDP growth for Nigeria last year; this growth, however, was to have zero job creation in attendant; we are talking about the world 7th largest oil exporting nation here. To foreclose irritating questions to the authorities on what that means, it was explained that it does not have to translate to job creation. They seem to dare our sensibilities. The report we got last week, true to predictions, was that the Nigerian economy actually grew by 6.8% last year; very close. Thanks largely to the price of oil - the only tangible contribution to that economic growth. The Nigerian government, however, beat its chest last week for a credit that it does not deserve. That is very deceitful; unless we are trying to re-invent economic wheel. Maybe we are intoxicated with drinking too much oil.
Gross domestic product is defined as the total value of goods produced and services provided in a country during one year. Oil still remains over 96% of Nigeria's external earnings, and maybe slightly less than 86% of the goods produced within Nigeria in dollar term. Other non-oil exports was only $2.765 billion, about 4%. The remaining 14% of production will account for other goods produced and the epileptic, substandard, services provided. This means, the productivity of you and I, outside the oil sector, is less than 15%, in spite of our daily 8 to 5 hustle and bustle; and we sure really hustled. This calls for great concern, especially when the country dreams of becoming one of the twenty largest economies in 2020. What is there to celebrate, when there is no light, no road, no rail, no water, no security, no hospital, no quality education, and above all no jobs?
I agree that Nigeria has the potential, because the resources (manpower and wherewithal) are there abundantly. What is lacking is the political will to do the right things. This is not about removing subsidies to provide palliatives, without which we are told these things should not be expected; it is about redirecting resources. Nigeria does not have to go and borrow, as our experts believe; nature has lent us enough through vast oil reserves, good weather, fertile land, and large population. However, the country's leadership does not seem to believe that Nigeria can make it; otherwise they will not be stealing what is needed to multiply the country's wealth. Even if they must steal, why can't they wait for the country's external annual earnings to grow to over $300 billion, instead of the paltry $65 billion that is mostly from oil? They could then steal as much as they could and the people might not notice.
For Nigeria to move forward economically, it needs reforms in tax system and the insurance industry; as well as a revisit to the exchange rate mechanism. However, my son, an economics postgraduate at Brandeis University, Massachusetts, argues that the warped exchange rate is caused by the distortion in the market forces, which can easily be addressed by effective tax reform. He believes that the forces at play at the forex market are excess naira liquidity that government ought to have mopped up by taxing the rich adequately. Those willing to buy forex with a lot of naira can afford to do so because they are grossly under taxed. An example is the present imbroglio between the government and the British air carriers (British Airways and Virgin), on the overcharging of the rich between Lagos and Nigeria; it has buttressed the arguments that the rich in Nigeria are embarrassingly under taxed. It is why the rich people pay those exorbitant fare without batting an eye. That excess money ought to have been mopped up by government by taxing them. The foreign airlines are only cashing in on the defects in our tax system that produces excess liquidity. This is the biblical "seeing the speck in other people's eyes and not noticing the log in our eyes."
Nigeria's tax issue are all rhetorics. The National Assembly ought to sponsor and pass a Tax Bill urgently to give the exercise the force of law. In America, you cannot dodge Uncle Sam (not paying tax) without consequences. If we don't fix tax, there will be damaging economic consequences. Take, for instance, the issue of fuel subsidy removal - a waist of time and ill-conceived exercise. I have always suspected the motives of our so called experts. Fix the tax and the phantom subsidy removal will disappear. President Jonathan can still redeem the strained people's affection of him by going full-force after tax dodgers, particularly the rich (earned or stolen wealth) in our midst. It is their potential tax that will create good road, rail, light, jobs, etc. Jonathan can still be the Robin-Hood of our time. Robin Hood, however, had shoes, while Jonathan did not; our President now has several pairs. Jonathan should Just Do It - the slogan of one of his many acquired brands.
Apart from tax, the other key area is the insurance industry. In capitalism, there is this thing called the cost of borrowing other people's money. It is a function of supply and demand; it can, however, be tempered by government intervention through legislation. Banks' business is about deposits and depositors dictate the cost of borrowing. In Nigeria today, individuals are the largest depositors in our banks, and they dictate the interest rates. That situation can be reversed, by making the insurance industry the largest depositors in Nigerian banks through legislation. Every government's duty is to protect the interest of everybody; and for that reason, government makes it imperative for its citizens to take insurance on their economic activities in order to protect the third party (other people). Insurance serves as economic security for individuals also. The economic benefit to the nation is the premiums (little drops of water) that become the largest deposits (oceans); and soon dwarf the deposits of individuals in banks. With that, government would have, by legislation, created a pool for government and the people to borrow from at lower interest rates; and it will still have control over the rates.
What I reiterated above are the basics of economics that we wittingly or unwittingly ignored, which our experts have turned into a puzzle; or maybe deliberately frustrating us. The proposed tax bill will have to take cognisant of our level of corruption and should prescribe the stiffest penalty to tax collectors, as deterrent to collusion with tax evaders. There is no running away from these two fundamentals of economics. It by shying away that we got into our miserable position in the first place. The IMF and the World Bank had advised same in the early 1980s, but has been on the shelf for so long. The initial success of the devaluation of the naira deceived Nigeria. With the government awash with so much of ever depreciating naira, we thought we had invented an economic master piece; then, suddenly, corruption loomed to some unbelievable dimension; we then got stuck in the mud. Unless we go back to brass tags, by running government largely on tax; oil dependency doomsday maybe in the offing. Sanusi also warned.
Samuel Akinyele Caulcrick,Lagos.