(Bloomberg Opinion) — One of humanity’s most hopeful developments in
recent decades has been the dramatic drop in extreme poverty. In 2000,
some 1.4 billion people lived at or below the global poverty line of $1.90
a day. Today, the number is about 600 million.
This remarkable change is mainly due to growth in China and India: Much of
sub-Saharan Africa, particularly Nigeria, has failed to share in the
success. A decade ago, Nigeria had far fewer people in extreme poverty
than either China or India; today, according to data compiled by the World
Data Lab, it has more than both combined. The count stands at more than 90
million, and has risen both in absolute terms and as a share of the total.
Nigeria’s young and fast-growing population is projected by the United
Nations to double in size by 2050, making it the world’s third-biggest.
Even assuming that the proportion of Nigerians living in extreme poverty
stops rising as quickly as it has in recent years, it’s on course to
remain extraordinarily high for the foreseeable future.
Nigeria’s success or failure in confronting extreme poverty will be
pivotal for the rest of Africa, too — partly because of its huge
population but also because of its outsize influence over its neighbors.
The government led by President Muhammadu Buhari, recently re-elected to a
second and final four-year term, bears a grave responsibility. One wonders
whether a politician known as “Baba Go Slow” is up to the task.
His record over the last four years is discouraging. Economic growth has
barely recovered following the 2014 crash in the price of oil, which
remains Nigeria’s biggest export and source of government revenue. Per
capita gross domestic product is less than it was when he took office.
Joblessness has more than tripled. Efforts to spur agriculture and other
non-oil parts of the economy have failed. Foreign direct investment has
fallen by more than half since 2010.
Islamic extremists such as Boko Haram and Islamic State remain a serious
threat, violence persists in the oil-rich Niger Delta, and environmental
pressures due to climate change have stoked clashes between herders and
farmers. All told, more than 2 million Nigerians have been displaced by
conflict. The country also has the world’s second largest number of people
suffering from HIV/AIDS, and faces huge burdens from tuberculosis, malaria
and other diseases. Governance remains weak, corruption and crime rampant.
Despite everything, Buhari retains a reputation for personal integrity and
the commitment to fight graft. But he needs to give equal weight to
economic revival, without which there will be little progress in quelling
conflict and radicalism. This in turn means moving away from the statist
mindset that he’s displayed since the 1980s, when he became head of state
following a military coup.
In particular, he has steadfastly resisted devaluing Nigeria’s currency,
likening a depreciation of the naira to “murder” because of its impact on
the prices of imported fuel and food. Nigeria maintains multiple official
exchange rates for different transactions. This stops the price system
from allocating resources to their best uses, and draws the government
ever more deeply into managing the anomalies and inefficiencies that
ensue. To promote domestic manufacturing and farming, for instance, Buhari
has restricted access to hard currency for importers of more than 40
categories of goods, including cement, fertilizer and textiles. The result
is predictable: more smuggling, more shortages, and a thriving black
market in currency.
In the longer term, Nigeria should aim to float its currency, as proposed
by the International Monetary Fund and Atiku Abubakar, Buhari’s challenger
in February’s election. In the short term, unifying the exchange rates and
liberalizing access to hard currency would be a big step forward.
Economic reform could also lure more foreign direct investment — which is
sorely needed, especially in infrastructure. Nigeria’s decrepit refineries
force Africa’s biggest oil producer to import 90 percent of its petroleum
products. Its electricity-generating capacity is less than one-sixth of
South Africa’s, though its population is three times bigger. Access to
power and good roads would be a big help to agriculture, which employs
two-thirds of Nigeria’s workforce. Lacking cold-storage facilities and
efficient transport, Nigeria’s tomato farmers, for example, must sell to
traders at harvest when prices are low, and can suffer losses of up to
half their production. Most recently, gridlocked ports are holding up
exports of cashews.
To fund public investments, Buhari’s government will need to boost non-oil
revenue through better tax compliance and enforcement. Until the tax
system is fixed, further reliance on debt would be unwise, even though the
country’s debt ratio looks modest at roughly 25 percent of GDP. The
problem is that Nigeria collects relatively little revenue, so debt
service eats up most of the budget. It already accounts for 60 percent of
federal revenue, and the figure is expected to rise to more than 80
percent by 2022 — a level the International Monetary Fund calls
“unsustainable.”
Buhari’s priorities are understandable: Fighting Boko Haram, restoring
safety and security, and curbing corruption are essential if Nigeria’s
prospects are to improve. But reviving the economy is no less urgent.
Consider that nearly 2 million Nigerians enter the workforce every year,
while unemployment stands at more than 20 percent. The country that could
be Africa’s dynamo is instead its biggest demographic time bomb. Before
it’s too late, Baba Go Slow needs to hurry up.
—Editors: James Gibney, Clive Crook.
To contact the senior editor responsible for Bloomberg Opinion’s
editorials: David Shipley at davidshipley@bloomberg.net, .
Editorials are written by the Bloomberg Opinion editorial board.
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