The resulting hurdles in the path of doing business in the country explain much of our abysmal productivity numbers. From agriculture, through manufacturing, to today’s effusion of service businesses, the relationship of inputs to outputs in our value conversion processes has two outcomes. First, we cannot produce enough to meet local needs. And what little we produce cannot compete in terms of price and quality with the output of comparable economies. Not surprisingly, our budding entrepreneurs would prefer that government builds a commercial and trade wall to protect them from such competition.
If you can, however briefly, ignore the debate over whether, in its policymaking, the Federal Government should see Nigerians as citizens, rather than as taxpayers, then the Tinubu government’s tax reform has simply moved the local conversation around how to make the domestic economy work to concern over the sustainability of government’s revenue streams. At about 6.7 per cent of its gross domestic product (GDP), as against an average of 18.8 per cent for the rest of the continent, Nigeria’s tax take, compared with other countries, would suggest that a paucity of funds is one of our government’s biggest problems.
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Yet, pay careful attention to the financial canvas painted by the fortunes of the national oil corporation (the NNPC) and the shadows around the subject of our government’s resources darken and lengthen considerably. When the likes of Norway opted to build up a sovereign egg nest from crude oil exports earnings, we chose to parlay our earnings into the domestic economy, distorting relative prices in the process, impairing the economy’s allocative efficiency, and establishing new incentive structures that hurt local enterprise. Paraphrasing Yakubu Gowon’s timeless insight on Nigeria’s fiscal weltanschauung, the truth is that “money has never been our problem in Nigeria, how to spend it has been.”
Try rendering this in more colour (instead of the monochrome representations that our government prefers), and it becomes obvious that since 1960, political choices and not revenue constraints have impeded the Nigerian State’s ability to engineer positive outcomes for its people. What have we chosen to direct spending on over the past six decades (and counting)? A commodious government establishment, largely. But just as crucially, we have also shelled out scarce, non-replenishable assets on the inefficiencies across the system, resulting from the multiplication of agencies, and paid for a national reluctance to bring down the cost and increase the convenience of citizen-government interfaces. This latter failure is the more galling in the face of the recent plethora of electronic identification systems, including for mobile phone ownership. Despite extensive internet penetration and use, and the almost universal adoption of electronic payment systems, we simply are not convinced of the utility of both a unique electronic identifier for each citizen, and a single electronic portal for the conduct of all government business, especially elections.
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The resulting hurdles in the path of doing business in the country explain much of our abysmal productivity numbers. From agriculture, through manufacturing, to today’s effusion of service businesses, the relationship of inputs to outputs in our value conversion processes has two outcomes. First, we cannot produce enough to meet local needs. And what little we produce cannot compete in terms of price and quality with the output of comparable economies. Not surprisingly, our budding entrepreneurs would prefer that government builds a commercial and trade wall to protect them from such competition. But that, in itself, is the most regressive tac practice that the Nigerian State has had in place since it convinced itself of the need to transit from a public sector-led economy to a private sector-led one. Simply getting utilities to work would be a much better place to start the process of fixing our domestic productivity issues. But giving how decrepit most of these outfits currently are, that would mean dedicating a huge chunk of money – which government does not have – for their rehabilitation. Why not let these state-owned operations pass into private ownership? One argument against this option is the example of the electricity distribution companies (DisCos), especially the travails this segment of the power sector has undergone since its privatisation.
Of course, it is in this context, largely, that the inability or unwillingness of successive federal governments to implement the Oronsaye report makes no sense. After reforms that remove our economy’s supply constraints, the resulting boosts to productivity should show up in enhanced tax receipts, lower inflation rates, and a more sustainable debt-to-GDP ratio.
Except that the case made by the DisCos’ failure is of arranging the auctions that lead to SOEs transition to private ownership in a way that optimises the process – we must ensure, in other words, that in any such privatisation process, the most qualified bidders win, irrespective of who these may be. In the end, an essential reform of the economy’s supply space would require the radical redesign of domestic legislative and regulatory infrastructure to make private investment in the economy a lot easier than it is now.
A difficulty with this reasoning is that we often pose the private investment case in terms of attracting foreign direct investment. But it is a no-brainer that we ought to be wary of non-resident investors who bring their monies into financial markets that savvy and wealthy locals are fleeing from. In other words, the pro-private investment reforms that we need to encourage, going forward, must be such as to entice Nigerians with means to leave their wealth in naira-denominated assets.
Markets would matter, too – a lot. As do the guilds that currently dominate (and constrict) them at the bottom of the value ladder. Across domestic markets – whether it is the Nigeria Stock Exchange or Onitsha Market – what we need to do is ensure that there are as few barriers to entry and exit (of suppliers and consumers) as possible. Competent regulators would matter also – to police and prevent non-competitive behaviour in the interest of consumers’ welfare.
At a further remove, the professionalisation of the civil service would be a critical accompaniment to the strengthening of the domestic regulatory mechanism. Of course, it is in this context, largely, that the inability or unwillingness of successive federal governments to implement the Oronsaye report makes no sense. After reforms that remove our economy’s supply constraints, the resulting boosts to productivity should show up in enhanced tax receipts, lower inflation rates, and a more sustainable debt-to-GDP ratio.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
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