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Up until now, the Tinubu government has focused on reforms with a near-term impact: exchange rate and monetary reform; inflation control and fiscal coordination; subsidy rationalisation with safety nets; streamlining permits, reducing multiple taxation, improving customs; and tackling oil theft, banditry, and insurgency. Wags may disagree on how well this government has implemented the slew of activities associated with its reform direction, but it is hard to fault its reading of the economy’s needs. The state of the economy that the incumbent federal government inherited meant that it had to do three things quickly. Stabilise the economy. Boost investor confidence. Trigger immediate growth levers. Necessary, though, these were, their usefulness was always janitorial.
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Every system gains from cleaning, repair, and maintenance work. But without improvements to processes, growth, and development, entropy inevitably sets in. In a world that is presently undergoing an unprecedented degree of chaos and uncertainty, the need to carry out deep structural shifts in our economy is as much a matter of making it more resilient in a rapidly changing world, as it is a question of how we may unlock transformational growth.
What remains to be done? Governance and institutional reform ought to top our reform agenda. On one hand, by sustaining investor confidence, this helps shift the investment mix away from portfolio flows toward direct investment flows. Of course, this will require that the economy is able to speed up commercial dispute resolution and ensure consistent enforcement of contracts. On the other hand, simply by strengthening anti-corruption institutions, improving the efficiency of the judiciary and the police, decentralisation, and granting states more fiscal and policy autonomy to pursue tailored growth strategies, the economy should experience reduced leakages, and better state-level growth.
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Until recently, growth of this sort meant rapid urbanisation on the back of growing industrial hubs. The resulting depopulation of rural areas was the consequence of movement of rural workforces to better paying, low-skilled factory jobs. But it also meant that agriculture practices could mechanise and industrialise, too — lending fillip to the rural economy’s productivity. Today, factories do not need that many people to run optimally, and the minimum skill quotient that today’s factory workers must have is much higher than that offered by the quality of labour fleeing our subsistence, rain-fed agriculture work.
We have no choice, therefore, but to do two things. First, is to turn our large youthful population into a skilled workforce. How, is by aligning curricula with industry needs — STEM, vocational training, digital skills, etc. And by improving public health systems to raise productivity and reduce out-of-pocket health costs. Second, we should shift our agriculture from subsistence to mechanised farming through credit access, extension services, and irrigation investment. While at it, it would not hurt to encourage agro-processing industries to reduce food imports and create jobs. Unfortunately, none of these is achievable before we review the Land Use Act to make access to land for commercial agriculture easier.
The requirements for industrialisation are easily spelt out, too. Despite the best efforts of the Nigeria Police Force and its distaste for the combination of dreadlocked youth and digital devices, our present task environment would have to use the country’s youthful population in the digital economy, outsourcing, and creative industries. Layered on this, is the need to acknowledge very quickly that we will struggle to achieve manufacturing competitiveness, if we cannot provide stable power, improve access to credit, reduce regulatory bottlenecks, and protect local industries against unfair imports while pursuing export-oriented growth.
Yet, overhauling the power sector (expanding generation and transmission capacity, improving distribution efficiency, and allowing cost-reflective tariffs with targeted subsidies for the poor) will not deliver the requisite levels of domestic economic efficiency until we do two other sets of things. Upgrade our ports, rail, and roads to bring down logistics costs for manufacturers and farmers. And prioritise gas as a transition fuel for industry and power, so that we reduce our current reliance on imported diesel.
Reform conversations are never complete without a nod to the sequencing part of it. How do we implement the different initiatives in a way that while acknowledging the economy’s straitened absorption capacity, optimises the benefits from the combined operation of the diverse initiatives? To a related question, “Why can we not do all of these at the same time?”, the ready corollary is to ask if this is not what the cabinet of ministers is about after all? Any which way these questions are answered, this is where financing matters. The incumbent federal government has tried to improve the economy’s tax take by broadening the tax base and simplifying its administration. But the economy is still struggling with full digitalisation of the tax system, seems unable to reduce its dependence on volatile oil revenues, and has a long way to go to improve VAT and property tax collection.
While junking the fuel and foreign exchange subsidy regimes contributed to improving expenditure efficiency, to continue to describe the need to prune the redundancies in domestic public administration in terms of politics does the economy a great disservice. Simply shifting public borrowing towards concessional financing and prioritising public spending on growth-enhancing infrastructure requires a far more efficient public sector than is currently available.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
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