Continued from last week
The economic growth we envisage from 2016 onwards should not be constructed on the existing paradigm of exclusion that leaves majority of the populace wondering where the figures of growth come from. In the past, the bulk of the population has been mired in poverty whilst we are told that the economy grew by seven per cent. It should also not be a growth produced from an enclave without connections to other sectors of the economy. An enclave growth will mean that the full benefits of such growth would elude the nation. As well, it should not be a growth fuelled by fungible foreign capital that can easily, at short notice, be withdrawn from the Nigerian economy thereby causing a crisis. It should be a growth pattern anchored on rising employment and value addition, decreasing social tensions and greater faith by all in the economic, social and political systems.
Thus, we have arrived at a situation in the world today where the conventional wisdom of the trickle-down theory no longer works and has been proved to be fallacious. Economic theory no longer believes that growth and wealth concentrated in a few hands trickles down; rather, the prevalent theory based on evidence is that it trickles up. It is now recognised by both the International Monetary Fund and the Word Bank that excessive inequality drags down economic growth rate and makes it unsustainable over time. In other words, the poor and the middle class are the engines of growth and the cylinders of these engines need to be fired at full capacity. The managing director of the IMF, Christine Lagarde, states that empirical evidence shows that if you lift the income share of the poor and the middle class by one percentage point, then the GDP growth increases by as much as 0.38 percentage point in a country over five years. Conversely, if you lift the income share of the rich by one percentage point, then the GDP growth decreases by 0.08 percentage point. She notes that the possible explanation for this is that the rich spend a lower fraction of their incomes, thus reducing aggregate demand and undermining growth.
Policies that give primacy to the needs of the poor and the middle class and their abilities to add value should therefore be the focus of fiscal and monetary policies. Thus, instead of giving tax rebates and pioneer status to multinational firms to extract commodities, such incentives should be channelled to small and medium scale enterprises which are the engine of growth in any economy. Nigeria should be thinking of investments to modernise and bring production to world standards in identifiable clusters of small and medium enterprises such as the shoe and garment industries in the eastern town of Aba, the leather industry in Kano, etc. With improved access to credit, machines and equipment, training and extension services that attend to the needs of these clusters, economic growth will be set on a firm course.
Investments in growth generating infrastructure should be the norm and this should not be concentrated in the big cities but dispersed in such a way that gives equal opportunity to both urban and rural areas to generate wealth.
This brings this discourse to the major investments that improve the capacity of the poor and the majority to add value to the economy. It is all about the social sectors notably, education and health. Education provides the building blocks for knowledge acquisition and opportunities for the poor to grow out of poverty. Our investments in the education sector over the years have fallen short of the requirement needed to acquire technological, life support skills and self-reliance to develop our nation. We have underinvested and the result is our backwardness and poverty. Sadly, we do not even get the best value out of the little that is invested. It has therefore become imperative that sufficient attention be given to how public resources voted for education is spent.
This calls for a complete review and overhaul of our educational system with a focus on skills, technology, ethics and values. The idea of turning out, on a yearly basis, hundreds of thousands of university graduates that have no practical skills and are literarily unemployable is not the way to the future. It will be imperative to identify the skills and competencies where we are seriously lacking behind and use incentives to drive student traffic to the courses. A situation where universities of technology are filled with students studying social sciences and management courses that have nothing to do with technology is unacceptable. Indeed, some universities of technology may have applied to open law faculties. On the other hand, every college of technology wants to become a university as students do not have the motivation to take practical courses that will eventually add value to the economy. The idea that everyone must put on a tie and suit and work in an air-conditioned office is not the way forward. It belongs to the age of intellectually stunted nations and peoples.
In the health sector, strategic thinking leading to strategic interventions is important. We must start from the basic idea that no one is to be left behind in basic health services. This may involve universal health insurance and coverage for all. More investments are needed from the public and private sectors while value for money and greater spending efficiency should be explored. Steps should be taken to reverse the brain drain arising from our highly trained health professionals leaving the country for greener pastures. There is no way to sustain economic growth and be able to appropriately manage the carrying capacity of the nation if we do not have an enforceable population policy that seeks to curtail the rate of population growth which seems to outstrip real economic growth. I do not mean economic growth fuelled by petro dollars but the real growth that comes from our brains and other non-oil human activities.
The ideas of the 1950’s and 60’s that divided the world into producers of raw materials and commodities and those that refine them and add value to them are no longer acceptable in the new Nigeria that we dream of. We can no longer accept being perpetual slaves of this international division of labour. Other countries like China and India refused to develop along this international division of labour and have either redrawn or have taken irreversible steps to redraw the world production and service delivery map. For whatever it is worth, we must set a target to add value to local commodities that we produce, from the petroleum industry to the agriculture sector. For every raw commodity exported, we miss more than thrice what it should have earned if it was refined and processed into finished goods and services. Whatever can be done to ensure that we no longer import refined petroleum products should not wait a minute longer and whatever is needed to revive our agriculture along the full value chain that converts raw commodities into finished products should also be the focus of policy interventions.
The Muhammadu Buhari administration should continue all the policies of the previous administration that seek to create a sustainable economy. Such policies like the National Auto Policy which encourages local assembling and value added should be vigorously implemented. The administration should also renew interest and investments in the steel sector so that in the long run, Nigeria will be able to start the production of engine blocks and other relevant industrial equipment and machinery.
Concluded
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