Rethinking Nigeria’s economic policy, if we truly have one

To fail to plan is to plan to fail. This is a common slogan that many people quote in making arguments for developing a strategy towards achieving their vision. The same thing goes for businesses. And indeed countries also plan at the macro level. While it seems routine and basic to have a plan of […]

To fail to plan is to plan to fail. This is a common slogan that many people quote in making arguments for developing a strategy towards achieving their vision. The same thing goes for businesses. And indeed countries also plan at the macro level.

While it seems routine and basic to have a plan of action towards achieving one’s objective, it has been proven to be sacrosanct in achieving greatness. If nothing, it prevents haphazard and disjointed knee-jack reactions to new realities, especially as a thoroughly developed plan would not only be ambitious but also anticipate challenges and how best to mitigate them. It would be anchored on the optimum feasible region in the opportunity set matrix of the country.

Everyone, including the West, continues to admire China and many Asian tigers like Taiwan, Malaysia, and Indonesia, but perhaps if there is one document that is seen as a gospel book outside of the constitution, it is the development plan. The development plan has been one common denominator in the meteoric rise of these nations that have achieved spectacular miracles in the transformation of their economies and ultimately the lives of their citizens.

The development plan goes beyond the mere expression of ambitions; it is a serious plan of action, backed by relevant and coherent strategy on how the ambitions would be achieved. It lays the fundamental transformations that must take place for the envisaged goals to be achieved.

It is not a message of hope, it is a call to work and I mean serious work and not just a fanfare tick-the-box celebration that Nigeria seems to do in recent times. Nations that have the path of greatness, rising as it were from nothing to achievements have been distinguished from others by their unwavering commitment to the targets set in such plans. They are marked by a top-down flow of determination to achieve the set goals, no matter the challenges that appear on the way.

This cannot be said of the various efforts that have been made by successive administrations to put the Nigerian economy on a sound footing.

It is in this context that one must look at Nigeria’s ambitious $840 billion investment plan. The growth plan, launched by the President Muhammadu Buhari-led administration, is an economic plan that aims to return the economy to annual output growth of five per cent by targeting N349 trillion or $840 billion in infrastructure investment over the next five years, 85.7 per cent of which is expected to be financed by the private sector.

 Perhaps answering the private sector call for more relevance in national development policies, as succinctly echoed at the country’s 27th national economic summit, the elevating role of the private sector in financing over three-quarters of the planned spending in Africa’s largest economic blueprint is exciting. However, like many of Nigeria’s grandiose economic plans, many economists fear this may just be another compendium of wishful thinking but inoperative whitepaper.

Besides the ineptitude of the government in pushing through economic reforms relevant for a disciplined implementation of economic plan, the paucity of capital relevant for financing the huge infrastructure requirement is widely noted to be a show-stopper.

At barely 14.3 per cent financing expectation from the government, the public sector is projected to invest N10 trillion or $24 billion annually, approximately four times the central government’s budget on infrastructure spending in 2021. Analysts say if the state governments are sincere about developing infrastructure, they can complement the central government’s effort to deliver at least half of the planned public sector infrastructure spending. However, the private sector seems to have been set to fail in its role of financing a whopping N59.8 trillion or $124 billion in annual investment, several multiples of current capital formation in the country.

In fact, the biggest pool of investable funds in the country is the pension monies, which is primed to be over N12.8trillion, over three-quarters of which the government has already borrowed in the form of investments in government securities. Incidentally, Nigeria has not been as attractive to foreign capital over the past decade, with foreign direct investment waning to barely $870 million in the second quarter of the year.

So, something drastic needs to be done to prove wrong the doubting Thomas, especially as a GDP growth of five per cent is the least expected of the country if it must lift the over 90million people or some 42 per cent of its population living below $2 per day out of poverty. Incidentally, the Public-Private-Partnership (PPP) model, which was well canvassed in Nigeria a decade ago, seems to have proven a less viable option for the country, as it has been fraught with many failure stories.

One supposed silver bullet that may potentially attract domestic and foreign private capital to Nigeria is the “Guarantee” model, as recently being advocated by many development finance institutions, including the Private Infrastructure Development Group (PIDG) as a novel but compelling approach to unlocking private capital for infrastructure development. Again, many crystals have failed in Nigeria. The question now is: can this work for Africa’s most populous nation?

Interestingly, the Central Bank of Nigeria, working with the country’s sovereign wealth fund and the Africa Finance Corporation recently announced the establishment of an Infrastructure Credit Guarantee Company, christened “InfraCorp”, with a seed capital of  $2.4billion. More so, PIDG, through its operating entities GuarantCo and InfraCo Africa has partnered with the Nigeria Sovereign Investment Authority, KfW Development Bank, Africa Finance Corporation, and African Development Bank to launch InfraCredit in 2017, a specialised infrastructure credit guarantee aimed at unlocking domestic local currency, private long term capital for infrastructure development.