Nigeria Economy : Is there Hope despite The Corruption & The Oil Curse ?

Nigeria is, by far, Africa’s largest economy. It is estimated to have a nominal GDP of $447 billion, nearly $100 billion more than second-placed South Africa. Billionaire investors such as Dangote have continued to invest in multiple industries, helping the country grow. His company is even building an oil refinery, and for that, he has decided to buy the world’s largest regenerator, which was hauled to the site using a trailer with 300 tires. Nigeria has 190 million people, and 110 million of them are actively working to build this economy. Of course, it is Africa’s largest oil producer. Despite all this, the economy of Nigeria is still smaller than the drugs and prostitution industry of the USA, which is valued at $512 billion to $805 billion. Different estimates have been made, but no matter which metric you choose, sex and drugs are big business in the US. Welcome to The Atlantis Report. Nigeria was once a major exporter of groundnuts, cocoa, Rubber. Coffee grows in Nigeria as well as other cash crops. They were once the assembly hub for several car companies. Instead of making cars, they stopped altogether. They have rich territorial waters, but how many fishing trawlers! Zero! That is right. All the ice fish sold are caught by foreign trawlers. Depending on oil alone is a disaster for Nigeria. Nigeria may have the largest economy in Africa (going by nominal GDP), but it has one of the largest populations in Africa too. And if you take a closer look, it’s income inequality is actually quite high, meaning even though it has the largest economy, that’s not something that’s evident by looking at the everyday population. In terms of the Human Development Index (in sub-Saharan Africa), Botswana and Gabon are much higher and reflect a more stable living situation for their respective peoples. In fact, I’m fairly positive that in terms of actual standards of living relative to the general population, Botswana is much more stable for its people. So, in other words, it may not be as high as Nigeria’s, but there isn’t as much inequality among the population if that makes sense. The Nigerian political class is very anti-trade. Nigeria's most significant export is a mineral product, crude oil, their most significant import are the refined derivatives of crude oil. Nigeria is the sixth-largest producer of crude oil in the world. Its oil industry generates over 95 percent of the country's foreign revenue, and about 80 percent of government revenue. The oil industry alone creates over 65,000 direct jobs in Nigeria and more than 250,000 jobs in non-direct employment. Those 315,000 jobs are per the rule, incredibly lucrative, the “oil big boys” as they call them. The rest of the population, though, has to deal with negative effects, the most famous being the Dutch disease. The value of crude oil exports pushes up the value of the currency, making the country’s other exports more expensive. That usually is the problem faced by all commodity exporters. Nigeria has a big problem with its leadership. I don’t know why they seem always to choose leaders who are visionless and lousy. For example, Nigerian leaders have known from the very beginning that depending too much on a single commodity like oil is tantamount to putting all your eggs in one basket. For a long time, the world market price for oil hovered around the $100 per barrel mark. That was the time that the Nigerian leadership should have diversified the economy. Nothing rises forever, so policymakers should have known that oil prices will eventually go down. Unfortunately, Nigerian leadership did not do anything to diversify the economy, so after 2015 when the oversupply of oil caused the collapse of world oil prices, Nigeria’s economy followed suit. The discovery of crude oil in commercial quantity shortly after independence from Britain greatly encouraged corruption in what economists have identified as the curse of a resource. But hope is not lost. Nigeria is a strategically positioned country with its proximity to the Atlantic Ocean. If the present administration and subsequent ones can prioritize massive investment in infrastructure; vis a vis upgrading and improvement in its road networks, construction of seaports and modern airports that could attract international investors, the country is bound for greatness; the population is young, the currency is cheap, and it has some of the highest entrepreneurial participation rates in the economy, compared to many countries. Currently, the economy is beginning to experience some growth, but the world is still experiencing an oversupply of oil due to an increase in new extraction technologies in the USA. It, therefore, appears that the world price for oil is not going up any time soon. What this means is that Nigeria, whose economy depends so much on oil, will continue to experience stunted economic growth for the foreseeable future. In fact, between now and 2050, Nigerian will be lucky to achieve an economic growth of 2%. The sad part about all this is that Nigeria’s economy alone forms one-fifth of Africa’s economy. What this means is that even if the rest of Africa does well in terms of economic growth, an underperforming Nigerian economy alone is able to bring down the collective GDP of Africa to very low Numbers. One major problem with African development in general and Nigeria, in particular, is that many Africans and their governments, mistake the accumulation of western goods for development. In other words, development is not dressing up in other people’s clothing and imitating their ways. Nigeria and Africa, in general, should instead focus their attention on solving basic problems that do not require a lot of money to resolve. Solving many of these basic problems will automatically eliminate other bigger and costly problems. Some of these basic but critical problems include lack of street names and house numbers and addresses. If they cannot even locate people when looking for them, why will investors grant loans to people if the borrower can just disappear when it comes time to repay the loans, and you can not find his street address to locate him. Another issue that can be solved easily and does not require too much money is relocating road vendors and passenger stations and putting them further away from busy roads. There is a whole lot of disturbance that goes on around these car stations and spill unto the roads, causing extra traffic jams. If these stations are relocated a few kilometers from the car stations, the disturbances will not spill over and affect the roads. Last but not least, African governments should start organizing their informal sectors and formalizing them. It has been said that the IMF was shocked when they estimated and got to know how big Africa’s informal sector is. The International Labour Organization estimates that more than 55 percent of Sub-Saharan Africa’s GDP and 80 percent of its labor force is in the informal sector (most of these are not accounted for in any government statistics, making estimates of GDP and employment very low. African governments, therefore, have considerable opportunities to invest just a little money into these sectors. Remember, these sectors already exists, so governments do not need too much money to create jobs there. They just need to put little money so these sectors can be well structured to start contributing to city revenues. Large informal sectors like the one in Nigeria, often adds to city congestion, through informal vending and transport services, but does not contribute to city revenues. These vendors and transportation services should be formalized by building modern markets and passenger stations closer to their present locations, but further away from city streets. Vendors and drivers should then get free spaces or slots within the newly created market spaces without paying for them, but in exchange, they will be required to register their businesses with the cities and pay taxes. They will also be required to sign a contract with the city never to relocate back to the side of the road. These actions will surely decongest the roads and lead to cleaner cities, while at the same time providing the much-needed revenues their cities need in the form of business taxes and licensing fees. They will also be covered by various government statistics, and boost GDP and employment numbers. The Nigeria Economy is so bad because the country depends heavily on importation. They are not taking advantage of both Labor, Land, Entrepreneurship, FDI, or Capital. Labor: They do have the population, both skilled and unskilled labor, but there are no jobs. Land: They do have enough land in abundance, but with a lack of capital and equipment, this is useless. The land has a broad definition as a factor of production and can take on various forms, from agricultural land to commercial real estate to the resources available from a particular piece of land. Natural resources, such as oil and gold, can be extracted and refined for human consumption from the land. The cultivation of crops on land by farmers increases its value and utility. Capital: This is where they have serious problems, Poor production. Examples are—machines, tools, buildings, roads, bridges, raw material, trucks, factories, etc. An increase in the capital of an economy means an increase in the productive capacity of the economy. Logically and chronologically, capital is derived from land and labor. Entrepreneurship: An entrepreneurship is someone who takes on the risk and brings the other three factors of production together. Entrepreneurs are a vital engine of economic growth, helping to build some of the largest firms in the world as well as some small businesses in your neighborhood. Foreign Direct Investment - FDI is when a company owns another company in a different country. FDI is different from when companies simply put their money into assets in another country—what economists call portfolio investment. With FDI, foreign companies are directly involved with day-to-day operations in another country. This means they aren’t just bringing money with them, but also knowledge, skills, and technology. Now If you can combine the above-listed factors together, You will see how fast Nigeria is going to move from a third world country to a second world country or emerging market country. Still Nigeria, with a population approaching 200 millions, has no industrial base to speak of. And is unable to generate more than 10% of its own electricity needs. And has extremely limited infrastructure. Only a handful of decent roads connecting 4–5 larger regional cities; no rail; no inland waterways. The only thing working for the country is a relatively well educated English speaking population. Oil, in my view, is nothing more than Dutch disease. Dealing with any one or two of the above barriers will unlock the Nigerian economy into exponential economic growth. It can (may) happen in the next six months, six years, 60 or 600 years. This Was The Atlantis Report. Please Like. Share. And Subscribe. Thank You.









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