Nigeria’s economy faces danger as inequality rises
Despite the growth in the Nigerian economy which is being driven by the non-oil sectors, inequality has continued to rise, Ngozi Okonjo-Iweala, co-ordinating minister for the economy and minister of finance, said on Monday, adding that if the worrying trend was not reversed, it would portend danger.
According to Okonjo-Iweala, the two main challenges facing the economy are inadequate job creation and rising inequality, as only ten percent of the population enjoy the benefit of economic growth.
“The other aspect that is worrying, is that growth in Nigeria is unequal. Inequality is high and rising. Our GDP coefficient has gone from about 0.38 to where we are today, about 0.48. There is lack of inclusion. We are growing, but the small percent of the population is capturing most of this growth. In Nigeria, it is clear that the top 10 percent of the population is capturing most of the growth there is and the people at the bottom are being left behind.”
She added: “We have to create jobs, not just create wealth. If we don’t put our minds to this problem, the whole economy may be in danger. Inequality is highly concentrated in certain regions of the economy. And therefore we also need to pay attention to what we do to take care of regional disparity.”
She said GDP rebasing, which is currently in progress, could increase gross domestic product (GDP) substantially, but its impact on growth rates was yet uncertain.
The National Bureau of Statistics is seeking to change the calculations of Nigeria’s GDP, using a new base year of 2010 to give a better indication of the size and composition of its economy. Nigeria has not done so since 1990, suggesting that the previous GDP framework underestimated economic activity. The rebasing is expected to increase the estimated size of the Nigerian economy by 40 percent, which would boost the economy from about $273 billion to about $382 billion.
Okonjo-Iweala, speaking at a breakfast dialogue with the private sector in Lagos, organised by the Nigerian Economic Summit Group (NESG), said: “We are growing, but not creating enough jobs. That is a very big challenge. The rate of growth that we have is good, but could be better. We need to grow faster. I think it needs to grow at least 9 to 10 percent to drive job growth the way we want.”
She observed that the quality of growth was not as good as desired and stressed the need for better policies and structural reforms to drive inclusive growth.
She said GDP growth is expected at 6.75 percent in 2013, up from 6.61 percent in 2012, adding that it grew in the first quarter (Q1), Q2 and Q3 of 2013 at 6.56 percent, 6.18 percent and 6.81 percent respectively.
She stated that 1.6 million jobs have been created in the past 12 months in all sectors of the economy, largely driven by the private sector. “But this is less than what we should be doing. We should be creating about 2 million jobs in a year because we have a stock of unemployed people that has to be cleared.”
She said some of the government schemes like YouWIN, have been highly successful. “We have created 26,000 jobs so far. We are aiming for 80,000 at the minimum.”
Commenting on the 2014 budget, the minister said the government would direct the budget to those sectors that will give the most growth in the economy. “And that means that we will tighten but at the same time we will prioritise. So all the infrastructure sectors are top priority for the president and the budget will go towards supporting those sectors.
“ We are already channeling a lot of resources into power transmission. We will need $1.9 billion, emergency plan for transmission, and we have raised $1.5 billion already.”
“We need to make the power sector work now that it has taken over by the private sector. We need to work with them. The ports, the rail, roads, communication and technology, the structural reforms in each sector have to continue,” Okonjo-Iweala said.
She said the structural bottlenecks in the way of the private sector would be addressed so that the economy can expand and create more jobs, adding that there is need to continue to enact supportive policies for sectoral growth.
She said in 2014, government would continue the drive to remove critical bottlenecks, particularly infrastructure bottleneck, improve the business climate, fight corruption, strengthen institutions and put in place policies to increase social safety nets. “We need to redistribute the wealth being created to those at the bottom of the pyramid.”
“Agriculture is the biggest safety net the world over. It is three times more important in solving poverty problem than any other sector. In 2014, we expect to continue a very strong drive on agriculture, with supportive policies.”
She stated that government would focus reducing borrowing and keeping the economy stable in 2014, which she described as a very challenging one in terms of the elections and possible impact on the economy.
The minister said improved revenue collection is a top priority for government, adding that “75 percent of registered businesses do not pay taxes”. “We are not increasing taxes, but we are going to improve collection of taxes.”
By: FEMI ASU