NIGERIA: IN SEARCH OF AN EFFECTIVE ECONOMIC FORMULA FORNATIONAL DEVELOPMENT

Introduction: The organisers had asked me to discourse the topic Nigeria: in search of an

effective formula for national development. However, on reflection, I amended the topic by

striking out the political component to retain just the economic. I did this for the following

reasons, discussing economic and political formula for Nigeria in one paper is not something

that a one day colloquium is enough to espouse. Secondly, I have grown wary of theorising

on issues that pose a second level problematique given the fact that many suggested panaceas

may require constitutional amendments. Thirdly, there is enough in recent confabs and

commissions that have identified and provided solution to Nigeria’s political woes. All we

need is to distill them and find the will to apply them. And finally, I think that many Nigerians

who struggle with the daily issue of where the next meal will be coming from and how to live

a life that is worth living are not concerned about the political system you use in guaranteeing

them sustenance, just get the job done be any means necessary. This therefore means that

borrowing the words of one America’s formost political analysist, James Carville, it’s the

economy, stupid!

In 1985, Bright Chimezie released his hit track life of yesterday. In that hit single. Bright bemoaned

the fate of the ten kobo denomination. He wondered why 10 kobo which used to be enough to take to market and still had enough left to “booze” was no longer enough to support life. Well, if Mr Bright Chimezie is watching this, I want to break your heart further by telling you that while 10

kobo remains a legal tender in Nigeria, there are about 200million Nigerians that have not seen

that coin in over 30 years let alone be available to purchase anything. Two generations of Nigerians will not even understand what he is talking about. The economy is in such a bad shape that we have we been described as the poverty capital of the world. The implication is that any leader or policymaker worth their onions must know that yesterdays prescription for todays sickness is now obsolete and only a radical incision can cure this malignancy. Development for late developers can simply not follow the path of the received wisdom of liberal economic orthodoxy. I therefore argue in this paper that Nigeria and other Third World countries desirous of rapid economic development for their citizens must be ready to denounce and purge themselves of the Bretton Woods Institutions panacea for economic turmoil. But what is development?

Conceptualization of Development and its Importance

Development is a multidimensional process involving the reorganization and reorientation of the

entire economic and social systems (Todaro and Smith, 2009). It transcends beyond the

improvement in income and output to the radical transformation in institutional, social and

administrative structures. Although development is commonly seen in a national context, its

holistic realization may necessitate fundamental modifications of the international economic and

social system. Development is therefore a many-sided process. At the level of the individual, it

also connotes increased skill and capacity, greater freedom, creativity, self-discipline,

responsibility and material well-being (Rodney 1972).

Although the orthodox view of development assumes that growth in income will translate

automatically to improvements in the welfare of the citizens of any given country (lyoha et al.

2003), due to the experience of many less developed countries in the 1950s and 1960s, which

revealed the simultaneous existence of rapid growth and the general deterioration in the condition

of human life; attempts have been made to humanize the concept of development. In the thinking

of Seers (Todaro 2009), for instance, evaluation of developmental levels must be concerned with

what has been happening to poverty, unemployment and inequality. Besides, development is a

continuous process of generating and more efficiently allocating resources for achieving greater

socially satisfying ends (Aboyade 1973).

Theoretical Perspective

Literature on economic development is dominated by four theories:

(a) the linear stages-of-growth model

(b) theories and patterns of structural change

(c) international dependence revolution, and

(d) the neoclassical, free-market counterrevolution.

The linear stages of growth model of development, was propounded by an American

economic historian W.W. Rostow (1960). The identified stages of development are the

traditional society, the preconditions for take-off into self-sustaining growth, the take-off, the

drive to maturity and the age of high mass consumption. The theory also established that the

key strategy for take-off was the mobilization of domestic and foreign savings to generate

sufficient investment to accelerate economic growth.

The structural change model emphasizes the process by which underdeveloped countries

transform their economies from reliance on traditional subsistence agriculture to a more

modern, more urbanized and more industrially-diverse manufacturing and service economy.

The International–Dependence Revolution model which relies on the belief that developing

countries are beset by institutional, political and economic rigidities, both domestic and

international, and are caught in a dependent and dominant relationship with rich countries.

There are three streams of thought within this general approach: the neoclassical dependence

model, the false paradigm model and the dualistic development thesis. The neoclassical

dependence model attributes the existence and continuance of underdevelopment primarily to the

historical evolution of a highly marginal international capitalist system of rich country–poor

country relationships. It states that the co-existence of rich and poor nations in an international

system dominated by such marginal power relationships between the centre (the developed

countries) and the periphery (the LDCs) renders efforts by poor nations to be self–reliant and

independent difficult and, sometimes, even impossible.

The false-paradigm model attributes under-development to the faulty and inappropriate advice

provided by well-meaning but often uninformed international “experts” from developed country

assistance agencies and multinational donor agencies. The Dualistic-Development Thesis

postulates that the world is made up of dual societies, of rich nations and poor nations and, in

developing countries, pockets of wealth within broad areas of poverty.

These theories and many others like them are not without their shortcomings but, as is usual of

theories, they are merely representations of reality and not reality itself. The critical message from

them is that development is multidisciplinary and that notwithstanding their shortcomings, each of

them still captures some aspects, at least, of the challenges of contemporary developing countries.

Development Planning Trajectory in Nigeria

Before independence in 1960, the economy was characterised by the dominance of exports and

commercial activities, as there was no viable industrial sector. However, there is a disagreement in

literature that the first attempt at development planning in Nigeria started in 1946 with a ten year

plan of Development and Welfare (Okoli, 2004:160; Obikeze and Obi, 2004:232; Ugwu,

2009:201). The plan which was expected to run till 1956 came to an abrupt end in 1951 due to the constitutional changes that introduced federalism, thus the plan ran concomitantly with “other

plans for each of the then four regions of the federation viz: the West, East, North and the Southern Cameroons” (Okoli, 2004:161). The hidden objective of the plan was to meet the

perceived needs of the colonial government and not necessarily a conscious effort to influence the

overall performance of the Nigerian economy (Egonmwan, 2001).

The Structural Adjustment Programme (SAP) -1986-1988

Policy Making

The Structural Adjustment Programme (SAP) was introduced on 26 September 1986 with the

following objectives: To restructure and diversify the productive base of the economy in order to

reduce dependence on the oil sector and on imports; to achieve fiscal and balance of payments

viability over the period; to lay the basis for a sustainable non-inflationary growth; and to reduce

the dominance of unproductive investments in the public sector by improving public sector

efficiency and enhancing the growth potential of the private sector. Osifo-Whiskey (1993:15)

affirmed that SAP rested on a number of pillars namely: deregulation of the value of the naira

which was said to be over-valued; deregulation of interest rate which at SAP’s inception was below

10 percent; removal of subsidies on government-provided goods and services. A corollary of the

last pillar is the policy of privatization and commercialization which was considered necessary on

the dual account that government was already over-bloated and unwieldy, and that by extension,

its public enterprises and agencies were wasteful and inefficient.

Plan Strategy

As a matter of fact, the strong push given by the Bretton Woods institutions for Nigeria to

implement SAP was to galvanize the country to rapidly pursue its loan repayment obligations. The

emphasis on expenditure reduction was to ensure that there was adequate fund for debt servicing

and repayment. The economic reform programme under SAP appeared to have intensified

speculative and trading activities rather than increasing production. The proliferation of merchant

banks, finance houses, deregulation of interest rates, privatisation of the economy and the new

industrial policy did not bring in the needed foreign direct investments. The private sector did not

live up to expectations, despite the then favourable environment. The share of manufacturing in

GDP was still low, while capacity utilisation was a little above 30 per cent. Industry had to devise

strategies to cope with the various aspects of the new regime as well as a slump in effective

demand. There was deliberate shift to local raw material sourcing by industry as one of the ways

to cope with some of the challenges of this era. The increase in the cost of imports and pressure by government resulted in the rise of local raw material sourcing by industry from 38 percent in 1985

to 50 percent in 1988. Regarding privatisation and commercialisation, the public utilities had taken them to mean increased prices without corresponding efficiency and productivity. The unjustifiable price hikes (sometimes in the range of 500-2000 per cent) compounded problems for the industrial sector and the provision of social services. The increased prices paid by consumers further reduced the latter's already declining real wages. The reform programme had sought to encourage export promotion, but traditional exports could not bring in the much-needed foreign exchange. The persistent depreciation of the Naira vis-avis other major currencies created further distortions in the economy. The instability in the exchange rate created uncertainty and fuelled inflation. The external balance remained in disarray despite the devaluation of the domestic currency, while external debts mounted. The mismanagement of the foreign exchange market resulted in huge profits for the financial sector. This was due to the wide differential between the official and the parallel market rate. Consequently, there was a boom in the financial sector, although not in the other sectors of the economy. By the end of the 1980s it was readily apparent that the structural adjustment strategy was not delivering on its promises.

The country's industrial capacity utilisation, which was 73.6 per cent in 1981, declined consistently during the period such that by 1989, it was 31 per cent. Growth in manufacturing which was 14.6 per cent in 1981 dropped to 3.2 per cent in 1989. This poor performance occurred despite various stabilisation policies of the 1980s. The period witnessed escalation of poverty with the incidence rising from 28.1 percent in 1980 to 46.3 percent in 1985. After a slight decline to 42.7% in 1992, it climbed rapidly to 65.6 percent of the population in 1996 (UNDP 1998; FOS 1999; World Bank, 1999). The worst scenario of brain drain occurred during the period with deleterious effects on university education and the health sector. The problem of unemployment deepened and till today remains on top of the social disruptions and security threats facing the country. Interest rate deregulation under SAP remains one of the most anti-development policies of the time. It pushed the lending rate into the double digit level (where it has remained for over two decades) and this has stalled industrial expansion and meaningful development in the real sector in general.

ROLLING PLANS (1990-1999) AND VISION 2010

After SAP, Nigeria resorted to the use of (ad-hoc) short-term instruments for economic

management and as Daggash (2008:35) asserted, the era of Rolling Plans (1990-1999) which

he derisively tagged an era of “the Rolling stones that gathered no moss” had begun. He added

that in a bid “to have a long term National Vision on which development could be anchored, a bold attempt was made in 1996 to articulate a National vision document, the Nigeria Vision 2010”. This development effort had the vision of transforming the Nigerian Nation by 2010 into “ a united, industrious, caring and God-fearing democratic society, committed to making the basic needs of life affordable for everyone, and creating Africa’s leading economy” (Ugwu, 2009:203). The vision was to be achieved using a multi-tier medium term plans that are anchored on a fifteen year perspective plan. Under normal planning circumstances, the annual budget as the annual

operational plan is expected to be linked with the rolling plan, because the annual plan is the

controlling plan which matches resources with possible achievements. A rolling plan on a

continuous basis takes into account new information, improved data and analysis, and incorporates

periodic revision into the planning machinery. Each revision takes a look at the future which is

determined by the nature of factual circumstances.

National Economic Empowerment and Development Strategy (NEEDS) (Olusegun

Obasanjo 1999- 2007)

Policy Making

National Economic Empowerment and Development Strategy (NEEDS) was touted as a home-

grown alternative to the Poverty Reduction Strategy Paper (PRSP) endorsed by the World Bank to

be prepared by heavily indebted poor countries. It was designed for poverty reduction, wealth

creation, employment generation, infrastructural regeneration and value reorientation. The NEEDS

framework was built on four key pillars such as redefining the role of government in the economy,

creating an enabling environment for private sector growth, improving social services delivery,

and creating a new value system. The document recognized the multi-dimensional nature and

human focus of development with a medium-term implementation horizon. The need for

partnership among stakeholders was emphasized in the strategy and there were specific and

quantifiable targets against which the impact of its implementation could be measured.

In the implementation of NEEDS emphasis was placed on macro-economic management. Fiscal

and monetary policy measures were carefully managed to enhance macro-economic stability,which is critical for growth and economic development. A major component of the fiscal reform was the decision to smoothen the expenditure pattern, and thus the pattern of Gross Domestic Product (GDP) growth, by adopting an oil price based fiscal rule in which government expenditure was based on a prudent oil price benchmark. Despite rising oil prices, government revenue projection was based on conservative oil prices of US$25 per barrel in 2004, US$30 per barrel in 2005, US$35 per barrel in 2006, and US$40 per barrel in 2007. The adoption of the oil price based fiscal rule disconnected government expenditure from fluctuations in the oil price. Government fiscal balance moved from the previous 3.5 per cent of GDP deficits to a consolidated fiscal surplus

of about 10 per cent of GDP in 2004, and 11 per cent GDP in 2005. The external reserves increased from over $4 billion prior to May 1999 to $42 billion by end December 2006 and $43.59 billion as at May 4, 2007. The high reserves level came very handy in Nigeria’s exit of the Paris Club and London Club debts. The government paid $12.2 billion and $1.4 billion to exit the Paris Club and London Club debts. The money was taken from the Excess Crude Proceed account, a part of the reserves.

Plan Size

NEEDS was estimated to cost about $4.5 billion through 2007, much of which will have to come

from outside Nigeria. Overseas development assistance—in the form of grants, loans, and technical assistance—is being sought. As the reforms begin to change the perceptions of Nigeria abroad, about $1.5 billion in foreign direct investment can be expected in manufacturing, steel,

construction, solid minerals, and largescale farming. At the same time, the government will

increase its income by eliminating waste, selling assets, and reforming the tax laws.

Plan Implementation

The underlying planning framework was grossly inadequate. No resource envelope was articulated

to permit an assessment of the capability of the nation to finance the initiative. The document

lacked articulation of sectoral linkages which should have guided the prioritization of attention to

leading growth drivers within the economy. There was no identifiable strategy for managing the

distributional effects of growth under NEEDS thereby relying to a large extent on the trickle down

philosophy. At the end nothing tangible really tricked down to alleviate poverty in the country.

However, it was recorded that during this period, electricity generation in Nigeria doubled and the

number of telephone lines rose from just 400,000 in 1999 to about 3 million in 2003. According to the UN Food and Agriculture Organization, Nigerian agriculture grew an unprecedented 7 percent in 2003, Industrial capacity more than doubled, from 29 percent in 1999 to 60 percent in 2003. • Income grew at an average rate of 3.6 percent between 1999 and 2003—a significant increase over the 2.8 percent rate of growth during the 1990s. • Unemployment fell from 18 percent in 1999 to nonoil sector grew at an average annual rate of 3.6 percent between 1999 and 2003. Although the NEEDS document stated explicitly that it is Nigeria’s home-grown poverty reduction strategy and it appears to conform to what a country PRSP should be (World Bank 2010), it suffers from the shortcomings and inadequacies which Ohiorhenuan (2003) identified for African PRSP generally. Among the shortcomings he identified are weakness on poverty diagnostics; cosmetically descriptive rather than analytical approach and weakness in the setting of economic targets. However the most fundamental problem with NEEDS as a PRSP is its “trickle down” approach to poverty reduction instead of the ‘Rights Based Approach” now Internationally recognized as the most fruitful approach (AAIN 2005).

Iheanacho (2014) opines that the NEEDS programme which was a medium-term plan should have

achieved its objectives before the expiration of Obasanjo's administration in May 2007. But the

truth remains that those objections eluded Nigerians just like previous developmental plans in

Nigeria.

REASONS FOR FAILURE OF DEVELOPMENT PLANS IN NIGERIA

Given the high proliferation of national development plans in Nigeria, it has been observed that

several years of development planning in the country has failed to produce the much expected

sustainable development.

1. Lack of clear vision. This has been identified as the foundational basis for the

disjointed mission of development planning in Nigeria.

2. Absolute alignment to Western pattern and notion of development. Any development

plan and initiatives that does not encourage the disengagement of Nigeria economy

from the exploitative structural links with Western capitalist economy may not

succeed (2013).

3. Financial constraint is another factor facing development planning successes in Nigeria.

They argue that development plans are financed through multiple sources like taxation,other Internally generated revenue (IGR), external reserves, aids and loans, it has been

argued that these are not always adequate to fund the plans.

4. Conceiving development planning as a “big push strategy” which attempts to do everything

in one plan hampers development efforts as resources are overstretched and little or nothing

is achieved in the process.

5. Institutional/structural inconsistencies and discontinuity also result in plan failures. This

means that succeeding governments are not committed enough in continuing and

completing plans/programmes of their predecessors.

6. Other factors that are responsible for the failures include among other things, inadequacy

of professional planners due to institutionalized framework for planning; plan indiscipline

and unnecessary partnership; poor and inadequate feasibility studies in planning; lack of

accurate data; erratic and conflicting government policies which results in policy

summersault and abandonment, lack of proper project monitoring and revision of plans;

Abuse of office/corruption by public officials; High inflationary rate and geometric growth

in population defeating the essence of economic forecasting in plan formulation and

implementation.

EVALUATION OF DEVELOPMENT EPISODES IN NIGERIA

Policies are products of planning. Thus, the fundamental need for planning is to achieve the set of

macroeconomic objectives, which includes rapid economic growth and development, price

stability, maintaining favourable external balance, reduce unemployment and so on (Iyoha, 2004;

Aigbokhan et al, 2007). The connotation of the above is that planning is tailored towards driving

the set of macroeconomic variables to desirable positions.

The essence of any development program is often to reduce poverty among a people so that people would enjoy good living conditions. Development is the answer to poverty. A poverty stricken society can never be said to be developed. Thus poverty means under-development while

development means the absence or near absence of poverty. If poverty can thus be equated with

under development and development be equated with the absence of poverty it can therefore be

inferred that cut across the globe there are two major economic worlds thus: the developed worlds

of Europe and the underdeveloped worlds of the third world countries.

Until recently underdeveloped societies were mainly referred to as Third World Countries, and

Less Developed Countries. These Third World Countries or Less Developed Countries are usually

associated to countries of Africa, Asia and Latin America. Their major characteristics been a low

level of economic and political development, the tendency to keep themselves free from the

influence of the capitalist world; colonial experience which left them independent beginning

especially from 1945 after the outbreak of the 2nd World War when the clamor for self rule became intensified in most of the Third World Countries.

By 1945, after the World War II and when many of the colonized societies began to have their

independence, a lot of scholarly interest concerning development arose. This came about due to

the glaring picture which colonialism created thus making some societies very wealthy and leaving

some very poor. Scholars interest in comparative development caused the emergence of concepts

such as “underdeveloped” and “developed”, “metropole” and ‘satellite’ “centre” and “periphery”

in an attempt and classifying societies according to the level of their economic development. While

“developed”, “metropole” and “centre” connote the developed economies, “underdeveloped”,

“satellite” and “periphery” implies undeveloped economies. However, at the end of the cold war

in 1991, the concepts of Global North and Global South were introduced in the comparative study on development among nations. While the Global North implies the developed economies, the Global South implies the underdeveloped economies. Four broad indicators distinguish global

north economies from global south economies. These include politics, technology, wealth and

demography. While Global North are democratic, technologically inventive, wealthy and aging, as their societies tend towards zero population growth, Global South economies posses the opposite of the above. (Todaro and Smith, 2006) The Global North is made of the USA, UK, Japan, France, Spain, Belgium, Israel, South Africa, Norway, Italy and Sweden. The Global South on the other hand comprises the rest of Africa, India, Mexico, China, Brazil, Indonesia etc. Learning from the development experience of its peer countries will be vital to Nigeria’s future success.

Performance Trends for Selected Countries

Average Growth Rate of GDP

The Nigerian economy has been in a state of comatose since the 1960s. After averaging 2.9% in

the 1960s, GDP growth increased to 7% in the 1970s, fuelled by increased crude oil production.

This high growth era was followed by a period of economic crisis that led to a negative growth of

-1.4% in the 1980s, on the back of declining global crude oil prices. The Nigerian economy

recorded average GDP growth of 2.6% in the 1990s, rising to 7.9% in the next decade due to rising crude oil prices and the liberalisation of the telecoms sector, which attracted investments into the remained agriculture, wholesale and retail trade, and services sectors.

From 2011 to 2020, GDP growth averaged 2.6%, with a negative growth rate of -1.6% recorded in 2016. Indeed, the last decade has been a period of rebirth as affirmed by almost all macroeconomic indicators but the growth rate has not been high enough to push down the poverty profile.

A review of the statistics from comparable countries shows that Malaysia, Indonesia and India can be used to bear a remarkable resemblance to today’s Nigeria. In terms of the structure of the economy and economic policies, Malaysia in the 1960s, Indonesia and India in the 1980s were similar to today’s Nigeria. Based on GDP per capita, all three countries trailed behind Nigeria

before the 1980s but overtook it one after another after reforms delivered a more diversified

economy. Much like today’s Nigeria, Malaysia in the 1960s and Indonesia in the 1980s heavily

depended on natural resources, which were the primary source of their government revenues and

foreign exchange earnings. Malaysia’s natural resources were in the form of agricultural

commodities, with rubber and tin being most important. Indonesia in the 1980s produced about 1.5 million barrels of crude oil per day and its oil sector accounted for about 10% of GDP. Both oil

production level and its contribution to GDP were almost the same as in Nigeria today. Oil revenue

accounted for about 70% of government revenue in the early 1980s, also on par with

Nigeria’s current oil revenue to total revenue ratio in the early 2010

Indonesia enjoyed remarkable economic growth between 1960 and 1989 as GDP growth increased from an average of 3.5% in the 1960s to 7.2% in the 1970s, before dropping to 5.9% in the 1980s. 2016), meaning Indonesia became the fourth largest economy in East Asia, just behind China, Japan, and South Korea. Nominal GDP had risen to $932 billion in 2016, making Indonesia the 16th largest economy in the world, according to the International Monetary Fund (2017), with a contribution of 1.5% to global GDP. Indonesia’s economic progress can be traced to its government’s efforts since the mid1980s to pursue widespread industrialisation supported by expanding role of the oil industry was accompanied by a rise in the production of industrial goods. In the 1990s, the latter accounted for more than half of the added value of the secondary sector.

During the import substitution period, Malaysia, Indonesia and India all featured assertive state

intervention in the form of trade and industrial policies. The Pioneer Industries Ordinance of

Malaysia in 1958 provided incentives and tariff projection for manufacturing. Indonesia’s

industrial policies in the early 1980s were pursued through restrictive and discretionary investment

procedures. Sectors were rarely chosen based on economic feasibility but on those deemed of

strategic importance, such as petrochemicals and auto parts (Tijaja and Faisal, 2014).

India’s industrial licensing before the 1990s set quantitative constraints on industries. The

government could dictate the location and scale of the plant (Felipe, Kumar and Abdon, 2013).

In the 1970s, promotion of foreign direct investment in manufacturing, through free-trade zones,

tax incentives, and education of its workforce, as well as emphasis on technological upgrading

were most important factors in Malaysia’s diversification of the economy. The decisive reforms

introduced in Indonesia in the 1990s included customs reforms that significantly reduced clearing

time and import costs, import liberalization and trade deregulation that dismantled quantitative

restrictions and reduced non-tariff barriers for importers substantially. Such reforms laid the

foundation for Indonesian exporters to gain competitive inputs from international markets.

Indonesia has become an export-oriented and internationally competitive economy since. India’s

New Industrial Policy and the export-import policy in the early 1990s eliminated industrial

licensing, relaxed foreign investment rules, and introduced sweeping trade liberalizations. While

liberalization in the manufacturing sector was limited, the liberalization in the service sector alone

led to the dawning of a period of rapid diversification and improvement in living standards.

INFLATION

Source: Author’s Computation using World Bank Data

Inflation in Nigeria has been a complex and challenging issue throughout its history. The nation’s

heavy reliance on oil revenues, inadequate diversification of the economy, policy mismanagement,

and global economic dynamics have all played significant roles in shaping inflation trends.Before

Nigeria gained independence in 1960, the country’s inflation rate was relatively low, primarily due

to its agrarian economy and limited industrialization.

The 1970s marked a period of rapid economic growth fueled by oil exports, which led to a

significant increase in government revenue. However, this period also witnessed rising inflationary

pressures as the influx of petrodollars and increased government spending drove consumer demand

and importation. The 1970s oil boom brought immense wealth to Nigeria, but it also led to

economic imbalances. The nation became heavily reliant on oil exports, leading to a neglect of

other sectors and creating vulnerabilities to oil price fluctuations. In the late 1970s and early 1980s, Nigeria experienced double-digit inflation, soaring to a peak of over 23% in 1984. The

government’s mismanagement of fiscal policies and its inability to diversify the economy

contributed to this inflation surge. In response to the severe economic challenges, the Nigerian

government implemented the Structural Adjustment Program (SAP) in 1986, which aimed to

address the economic imbalances and encourage private sector growth. The program involved

liberalization, privatization, and fiscal discipline. As a result, inflation gradually declined through

the late 1980s and the 1990s. However, Nigeria still faced relatively high inflation rates \ compared to some other developing countries during this period, primarily due to continued over-reliance on oil revenues and structural deficiencies in the economy. The transition to democratic governance in 1999 brought about greater economic stability. During the 2000s, Nigeria made efforts to combat inflation and achieve price stability through prudent fiscal and monetary policies. Inflation rates fluctuated but generally remained in the single digits, aided by increased foreign investment and economic reforms.

The global financial crisis of 2008-2009 impacted Nigeria’s economy, causing a temporary surge

in inflation due to reduced global demand for oil and other commodities. Inflation reached a peak of 15.6% in 2010. To counter this, the Central Bank of Nigeria (CBN) implemented tighter monetary policies and continued its efforts to diversify the economy: From the mid-2010s until 2021, Nigeria faced several inflationary challenges, often caused by internal and external factors. Inflation fluctuated between single digits and double digits during this period, influenced by factors such as fluctuating oil prices, security concerns (including attacks on oil facilities), foreign

exchange rate instability, and occasional supply chain disruptions. These factors affected the prices

of goods and services, leading to inflationary pressures.

INEQUALITY

Source: Author’s Computation using World Bank Data

Income inequality is a global problem as it affects most countries of the world as indicated in the

diagram. However, increasing income inequality and poverty continue to be the most challenging

economic trend facing most developing countries, particularly Nigeria. There are enough

evidences to show that poverty and income inequalities are on the increase. Inequality was

established by an increase in Gini coefficient from 38.1 percent in 1985 to 44.9 percent in 1992.

The Nigerian economy is characterized by a large rural agricultural-based traditional sector that

encompasses about two-third of the population in the low-income class. Most of these people at

the bottom of the income distribution chart are living in abject poverty. Also, a high rate of

unemployment and under employment, a large public sector, low wage and poor working

conditions characterized the labour market in Nigeria. Also, varying degree of income inequality

compounded by a keen middle class has continued to exhibit a strong influence on the nature and

pattern of income distribution in the Nigerian economy (Alayande, 2003). In the 1960s and 1970s, the Nigerian economy provided jobs for its teeming population and absorbed considerable imported labour in the key sectors of the economy. Following the oil boom of the 1970s, there was mass migration of people, especially the youth to the urban areas seeking for jobs. This movement worsened the employment situation in the urban areas as the employers of labour found it difficult to accommodate this massive influx of rural dwellers who are mostly youths. The reason however, was not unconnected with the shortage of funds to pay the income of the prospective job seekers. However, following the downturn in the economy in the 1980’s, the problem of unemployment started to manifest, precipitating the introduction of the Structural Adjustment Programme (SAP), the rapid depreciation of the naira exchange rate and inability of most industries to import raw materials required to sustain their output levels (Nnnanna et al., 2003). A major consequence of the rapid depreciation of the naira after SAP was the sharp rise in the general price level, leading to a significant decline in the real income. The low income in turn aggravated a weakening purchasing power of income earners and declining aggregate demand. Consequently, industries started to accumulate unintended inventories and all sectors in the economy started to rationalize their work force thereby compounding the problem of unemployment and income inequality in the country. As a corollary to this, the public sector of the Nigerian economy placed an embargo on employment due to lack of the required capacity to pay their income. With the simultaneous rapid absorptive capacity of the economy. Thus the avowed government objective of achieving full employment failed to materialize. Income distribution is central to the development of any nation.

GDP/CAPITA

Source: Author’s Computation using World Bank Data

The average real GDP per capita was about US$ 1222 between 1950 and 1959. Since the

independence of Nigeria in 1960, the average growth rate of its per capita GDP has been 1.7 percent per year. The GDP per capita reached a peak of about US$1804 on average between 1976 and 1979 during the military period of Olusegun Obasanjo. After the Obasanjo’s military regime, the declining trend of average real GDP per capita was observed . Prior to the adoption of 1986 Structural Adjustment Programme (SAP) in the country, the average per capita was almost US$ 1544 between 1960 and 1985. However, a decline in real GDP per capita was experienced after the SAP era.

The real GDP per capita on average stood at US$1446 when the country was under the military

regime. Since the adoption of a democratic system in the country, there was an improvement in the

real GDP per capita. This might reflect the positive effect of democracy on the economic growth

identified in the literature. Also, the highest annual growth rate of Nigeria’s GDP per capita was

observed between 1999 and 2007. The least growth rate in the country was attributed to the period before the democratic system of government. In the same vein, the rate of GDP per capita growth in the post-SAP era was higher compared to the pre-SAP era.

Compared with other African and Asian countries, especially Indonesia, which is comparable to

Nigeria in most respects, economic development in Nigeria has been disappointing. With GDP of

about $45 billion in 2001 and per capita income of about $300 a year, Nigeria has become one of the poorest countries in the world. As of 2000 it had earned about $300 billion from oil exports since the mid-1970s, but its per capita income was 20 percent lower than in 1975. Meanwhile, the country has become so heavily indebted - external and domestic debt amount to about 70 percent of GDP— that it has serious difficulty servicing debt. Regional and sectoral unevenness in growth performance is high. From the foregoing, it is simply clear that to raise 200 million Nigerians out of poverty as this current administration has resolved to do within the next decade, it would take more than just making it a campaign mantra but a radical departure from economic orthodoxy of the Global North evinced in the Washington Consensus model.

Role of the State in Economic Development

There is currently great pressure on developing countries from the developed world, and the

international development policy establishment that it controls, to adopt a set of ‘good policies’

and ‘good institutions’ to foster their economic development. According to this agenda, ‘good

policies’ are broadly those prescribed by the so-called Washington Consensus. They include

restrictive macroeconomic policy, liberalization of international trade and investment, privatization and deregulation. The ‘good institutions’ are essentially those that are to be found in developed

countries, especially the Anglo-American ones. The key institutions include: democracy; ‘good’

bureaucracy; an independent judiciary; strongly protected private property rights (including

intellectual property rights); and transparent and market-oriented corporate governance and

financial institutions (including a politically independent central bank).

However, therein lies the hypocrisy of the West. History has shown that most developed countries

did not achieve their current level of development through the policies and the institutions that they

recommend to developing countries today. Most of them actively used the policies they termed

‘bad’ trade and industrial policies, such as infant industry protection and export subsidies –

practices that these days are frowned upon, if not actively banned, by the WTO (World Trade

Organisation). Until they were quite developed (that is, until the late nineteenth to early twentieth

century), they had very few of the institutions deemed essential by developing countries today,

including such ‘basic’ institutions as central banks and limited liability companies. (Karl Polanyi’s

The Great Transformation is highly recommended for insights into the origin of the so-called free

markets and the role played by the state).

The nineteenth-century German economist Friedrich List (1789-1846) who is commonly known

as the father of the infant industry argument, is of the view that in the presence of more developed

countries, backward countries cannot develop new industries without state intervention, especially

tariff protection. His masterpiece, The National System of Political Economy, was originally

published in 1841.

Both economists and policymakers have accepted that the orthodox neoclassical model has

limitations, acknowledging that liberalised markets are not always efficient and market failures

can be significant. They have recognised the need for greater government intervention, in fields

such as labour market and regional policy, and in monetary and financial policy. In many of these

fields, and others, the OECD has been in the forefront of these new analytical and policy

developments. These shifts have been important. But in the face of the challenges and problems

our economies now face, we do not believe they have yet gone far enough.

Over a period of about thirty years up to the financial crisis of 2008, the dominant model of

economic growth in developed countries rested, to a considerable extent, on a very particular form of neoclassical economic theory. This made relatively simple assumptions about how economic

actors behave, and the implications of this for the functioning of the economy as a whole. In turn

these led to a variety of ‘orthodox’ prescriptions for economic policy which, while by no means

universal, were widely adopted in both developed and developing countries. At the heart of this

theory was an assumption of ‘rational’ economic behaviour. Individuals maximised their utility,

based on preferences formed outside of the economic process. Businesses sought to maximise their

profits.

At the level of the whole economy, most macroeconomic models before 2008 were constructed

using the tools of neoclassical economics. Such models typically assumed that households and

businesses behave in homogenous ways, so could be modelled as ‘representative agents’. Though

individual markets might involve frictions of various kinds, the long-run tendency of the economy

was towards an equilibrium state, generally assumed to be at full employment. Shocks were

regarded as exogenous, coming from outside the system, rather than from within it. At the level of

policy, the neoclassical framework encouraged a view that high levels of government debt ‘crowd

out’ private investment, so fiscal deficits should be limited, and monetary policy (adjustments to

interest rates) should play the primary role in controlling inflation and managing overall demand.

The relationship of theory to policymaking was never straightforward. Academic economics was

always complex and varied, and policy never followed simply from theoretical analysis.

With the advent of new data sources, economics has become a much more empirical social science.

Macroeconomic models, meanwhile, have been modified to include different kinds of financial

institutions, and rigidities and shocks of various kinds. In critical fields, from the financial crisis

to the growth and impact of inequality, from the rise of environmental degradation to the slowdown

in productivity growth, economists have had to acknowledge that orthodox approaches had done

a poor job of anticipating or explaining key developments. In turn, many economic policy

institutions – often led by the OECD – have acknowledged the limitations and failures of the more

simplistic free market prescriptions of the pre-crisis period. It has been generally accepted, for

example, that financial regulation needs to go beyond individual firms to the systemic risks which

the financial sector as a whole can generate. As a consequence, various forms of ‘macroprudential

regulation’ are now being implemented and considered. Similarly, it is now widely accepted that

free trade and deeper integration into global markets can have persistent adverse consequence on particular groups of workers, sectors and geographical communities, and that counter-balancing

policies are therefore needed.

What then for Nigeria and other developing countries?

In espousing a growth trajectory for Nigeria and calling for a rejection of the world bank/IMF

backed strategy for development, this paper leans heavily on the role of the development state and

anchors this bias based on Hajoon Chang’s critique of the prevailing economic development

strategies by providing a historical analysis of how currently developed countries achieved their

economic status. Here are some key points that elaborate on this position regarding development

strategies for developing countries:

1. Historical Context of Development shows that many of today’s developed countries, such

as the United Kingdom and the United States, achieved economic growth through strategies

like tariffs, subsidies, and regulations to protect their nascent industries. This historical

perspective contrasts sharply with the free-market, liberalization policies they now promote

for developing countries.

2. The neoliberal policies advocated by institutions like the World Bank and the International

Monetary Fund (IMF) – such as rapid liberalization of trade and investment, privatization,

and deregulation – are not consistent with the historical experiences of successful

development. In fact, these policies might even hinder the growth of developing nations

by exposing them prematurely to global competition.

3. Role of State in Development: This paper describes as total rubbish the Washington

Consensus model that says the “state has no business in business”, in fact, business is the

business of the state. The minimalist role of the state in business as proposed by

neoliberalism must be challenged. The state must play a significant role in guiding

economic development, similar to the way it was utilized by now-developed countries

during their own developmental stages. This includes the use of tariffs, subsidies, and other

forms of government intervention to support budding industries. Shall we forget hastily

how former president Donald Trump used tariffs to effectively protect the American

economy from the onslaught of the Chinese trade practices.

4. Developing Countries should have the autonomy to choose policies that best suit their

unique economic conditions and developmental stages. This contrasts with the one-size-

fits-all approach often prescribed by international economic organizations.

5. Developing countries are encouraged to learn from the historical experiences of developed

nations, understanding that the path to economic development is not linear and varies

significantly based on a country’s specific context.

6. Developing countries must challenge the current Intellectual Property Rights (IPR)

Regimes protected by the WTO and enforced as part of globalization, not doing this may

stifle innovation and development in the Global South.

By providing this historical and critical analysis, I dare Nigeria’s leaders and economic

policymakers to not be afraid to challenge conventional economic wisdom and call for a more

nuanced and historically informed approach to economic development policy, especially for

developing countries. There is now an urgent need for policy diversity and experimentation,

making it incumbent on policymakers to acknowledge that strategies successful in one country

may not be universally applicable.

In essence, this paper is a call for a more equitable global economic system that recognizes the

varied paths to development and respects the sovereignty of nations in charting their economic

courses. My critique of the ‘one-size-fits-all’ approach to economic policy is a reminder that

development is a complex, multifaceted process that cannot be reduced to simple formulas or

models. I end this paper by reminding leaders of the third world especially Nigeria that in the

words of Frantz Fanon “each generation must, out of relative obscurity, discover its mission, fulfill

it, or betray it.” The lives of millions of Nigerians are at stake, you cannot afford to betray this

mission of economic emancipation. Thank you for listening.