19 YEARS OF DEMOCRATIC RULE: How Has The Economy Fared?
Last Updated on February 18, 2019 by mofsite
… during the 2nd and 3rd national development plan period of the military era, the Nigerian economy was rated as one of the fastest growing economies in Africa… Unfortunately, the economy only grew but did not develop because the investment in infrastructure was not sustained in the subsequent years.
I have noted time without number in some of my previous articles that appeared both in this magazine and in some other publications that a government is in once specifically for the purpose of managing the economy. I do not think that there is any political party that would want to be in power and would produce a manifesto that discusses how a section of the country could be destroyed or how crime and security could be promoted. No! I do not think there is any political party that would have such philosophy. All political parties do. therefore, package manifestoes that discuss how resources could be allocated in the economy to maximize social welfare.
The main purpose of democracy is therefore, about choosing a government through the electoral process that would efficiently harness the resources of the society to maximize the wellbeing of the citizenry. Even a purely capitalist democracy, such as the US, Germany etc, where the private sector assumes greater responsibilities in the economy, the government still has fairly wider responsibilities of providing those facilities that could support the private sector to drive the economy and accelerate its growth and development. But a government that is obtuse and lacks the foresight to grow the economy such as those in underdeveloped countries would, while shrinking its responsibilities of growing the economy, satisfy and console itself with the ability, that it is the private sector that does everything in the economy.
“Something must happen for something to happen” is a well-known aphorism in the circle of Pentecostal Churches. An economy is driven by the activities of the government in providing a Conducive environment and climate for the private sector to thrive in the first place. It is often said, however, that what happens in the economy is determined from the private sector. Agreed! This is so because majority of the economic activities would also depend on the extent the economy has been equipped or funded by the government. The public sector must, therefore, be very robust in the way it soothes the economy with investments. Quite surely, an economy that has a tenuous public as a result of insufficient investment in infrastructure would not have the private sector that can drive it. Unfortunately, the private sector cannot on its own invest in infrastructure because the public consumption of infrastructure does not generate the profit that could keep the investor in business.
The issue of infrastructure is so important that one of the parameters of assessing the growth of an economy is the rate of accumulation of infrastructure, otherwise called social overhead capital. For instance, between 1970 and 1980, which is during the 2nd and 3rd national development plan period of the military era, the Nigerian economy was rated as one of the fastest growing economies in Africa. that was because the nation had witnessed massive investments in infrastructure during the period. Unfortunately, the economy only grew but did not
…in Nigeria, infrastructural facilities are poor which increases the cost of manufacturing in the country. Home production is, therefore, low and the economy is not growing. We are now importing every imaginable thing we consume ad this is telling on our foreign reserves and by extension on the naira exchange rate.
Develop because the investment in infrastructure was not sustained in the Subsequent years. The big question that should now bug the mind of every right thinking Nigerian is: “How has the economy fared since the advent of democracy in 1999? It is widely acknowledged that there is a general decay in infrastructure which is aggravated by the slow rate of net investment in this important sector? Accordingly, there is pervading public outcry in the country over the poor road network; ill-equipped public hospitals and educational institutions; a malfunctioning public transport system, which is the direct result of the poor state of roads and rail network Without a well-pronounced government commitment in this sector, the economy would continue to falter. The high rate of turnover of business from the country has been attributed to the poor state of infrastructure in the country. So many multinational companies that were hitherto the darling of the Nigerian economy have relocated from Nigeria to either Ghana or Cote D’voire. It is not because those countries have better topographies or geographical climate nor do they have a better trained labor force than Nigeria to warrant such immigration of business into their economies. The fact remains that in Nigeria, infrastructural facilities are poor which increases the cost of manufacturing in the country. Home production is, therefore, low and the economy is not growing. We are now importing every imaginable thing we consume and this is telling on our foreign reserves and by extension on the naira exchange rate.
However, our foreign reserves have risen from $29 billion in 2015 to $46.7 billion in 2018. Yet this does not translate to improvement in social welfare in the domestic economy. That is, the high reserve does not translate to growth in production in the domestic economy because the macroeconomic environment at home is not conducive to allow the high foreign reserves to be used in funding production in the domestic economy. In a properly managed economy, this fabulous reserve would have been used in funding the real sector of the domestic economy by improving infrastructure and also subsidize lending to the manufacturing sector. But these are not done Rather, the CBN has continued to keep the monetary policy rate (MPR) – the rate of lending to commercial banks – at more than 10% to avoid inflation. This increases the cost of fund and further stifles the manufacturing sector. The foreign sector of our economy is strong quite all right, but the domestic sector is weak. The most we can do is to fritter away these reserves in importing consumer goods that we should ordinarily have produced at home. Part of the reserves are also repatriated to pay the jumbo salaries of public office holders and to fund the bureaucracy, which added to the high inflationary pressure already existing in the domestic economy .
Inflation now stands at 13.34% as at the time of going to press. Could somebody have believed a few years ago, that a salary package of N20,000.00 would not take a Nigerian worker home? It is for the reason of providing the incentives for the private sector to thrive and drive the Cross River State economy that Governor of Cross River State, Senator (Prof.) Ben Ayade’s policy thrust which is geared towards development of infrastructure should be applauded.
The state chief executive is so obsessed with this philosophy that he now moves around the major industrialized nations of the world to scout for worthy partners for the development of sublime infrastructure in Cross River State. Kudos to His Excellency for his development philosophy. I do not count too much on the establishment of public corporations as I do for the development of infrastructure. This is because although public corporations would generate employment and income for the citizenry and tax to the government, they can be abused or run aground by unscrupulous public officials. The aim of establishing them would then have been defeated. This does not apply in the case of infrastructure which play catalyst role in the economy and their operation cannot be abused. At the same time, they are inveterate assets of the economy. Surely, by the time the super high way, the deep-sea port and other projects still in the pipeline are ready, the Cross River State economy would have begun to be driven by the private sector and growth metamorphose into development.