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Nigeria’s six economies: Possibilities, challenges

Filed under: Insight |

OBODO EJIRO of BusinessDay’s Research and Intelligence Unit (BRIU) examines trends in Nigerian states’ budgeting and issues regarding the geopolitical zones

In the next few weeks, when Nigeria’s economic rebasing process is concluded, the outcome will likely reflect Nigeria as a country with a GDP of $405 billion, the biggest in Africa. Consequently, GDP growth rate will be adjusted downward frGSP 2012om the 6 to 7% it has maintained in the past 5 years, by half, to between 3.5 and 5% annually.

Before now, economists have pondered the true value and composition of Nigeria’s complex economy. The rebasing process is geared to address this, in the light of current developments in the economy.

Divided into six, Nigeria’s geopolitical zones (made of 36 states) inadvertently present unique demographic, economic and socio-political colorations which also reflect a mixture of budget disparity, uneven economic performance but spectacular opportunities.

Compressing 36 budgets

In 2014, the six geopolitical zones had a combined budget proposal of N6.4 trillion. (Representing a 1 percent rise over 2013 figure). Compared to the 2012-2013 period, growth in total budgeted sum for the states, dropped considerably. Between 2012 and 2013, budgeted sum rose by 13% while between 2013 and 2014, it rose by 1%. At the federal level, total budget for 2014 is N4.64 trillion, 7% lower than what was spent in 2013.

This year, thirteen of Nigeria’s 36 states will spend less than what they expended in 2013, with the highest vagaries coming from Akwa-Ibom (N161.21 billion lower), Delta (N80.49 billion lower), Imo (N60.67 billion lower) and Benue (N25.80billion lower).

The reduction in budgeted sums is occasioned by increasing uncertainty in global oil prices and local oil theft (since all budgets are inextricably tied to oil output and price). Also, indicted for the dip in budgeted sums is the fact that most states are winding up projects which were initiated in previous periods.

This year, among the zones, the South-South (6 states) has the highest budget, the zone intends to spend N1.82trillion, the South-East (5 states) has the lowest with N619.75 billion, while the embattled North-East (6 states) budgeted N700.05 billion.

Two zones have consistently posted the highest budget figures in the past three years: The South-West and South-South. Budgets in the South-West are buoyed by figures from Lagos, which has accounted for an average of 38% of budgeted sums in the South-West for the past 3 years.

This year, the South-West has a combined budget proposal of N1.8 trillion, which is N199.15 billion less than what it spent last year.

Based on our calculations, the South-South has a budget per capita which is equal to almost twice that of any other zone in Nigeria. At N90,794 the budget per capita of the South-South is much higher than those of the North-Central and South-West which have budgets per capita of N44,160 and N41,190 respectively. The North- East has the lowest budget per capita in Nigeria.

We believe that based on figures for the last five years, if funds which have been budgeted for the South- South continue to trickles down in form of investment in infrastructure and human capital development, the region should be the better for it.

The zonal economies

With a landmass of 923,768 sq. km and population estimated at 167 million, Nigeria’s states have consistently shown an endemic inability to effectively combine their human and natural resources to their best possible potential. It is alarming that while the population of Lagos exceeds that of Portugal, the GDP of Portugal is more than half of Nigeria’s, post rebasing.

Also, we note that the land mass of Japan, which has a GDP of $5.96 trillion (7 times that of Nigeria, post rebasing), is just 77% of the combined landmass of North Eastern and North Central Nigeria is. Clearly, the zones have strategic advantages which have been left largely untapped.

Based on data provided by the Economic Associates, an economic research consultancy, the South-South has the biggest economy in Nigeria with a Gross State Product (GSP) of N15,648 billion in 2012, the South East has the lowest GSP with N1,262 billion, other zones are in-between, see figure 1.

While Lagos is indisputably the commercial capital of Nigeria, accounting for most commercial and port activity (47 percent of port activity), estimates from the Economic Associates (EA) put the GSP of Lagos as the second highest in the country when observed by states.

According to EA estimates, in 2012 Rivers had the highest GSP in Nigeria, accounting for N6,154.06 billion in GSP. Rivers surpasses Lagos, which had GSP estimated at N 5,761.69 billion, because of the immerse value of

hydrocarbon exploration, agric, commercial and manufacturing activities taking place in the state.

It is interesting to note that apart from Lagos, the first four most productive economies in Nigeria are in the

South-South. Akwa-Ibom, Bayelsa and Delta fall in this category. At the bottom of the rung however are

Taraba and Ebonyi which have GSPs of N90.19 billion and N120.87 billion respectively. Nigeria’s most

populous state, Kano, ranks 7th behind all South-South states, Lagos and Niger (see figure 1 and table 1).

Because efficiency of tax collection mechanisms varies across the zones (and state), the Internally Generated

Revenue (IGR) figures do not exactly corroborate the GSP figures, none-the-less, we the correlation between both set of data is 0.55, which is high.

In 2010, Lagos had IGR valued at N185 billion; this grew to N202.76 billion in 2011 and was N219.2 billion by year end 2012. Just like Lagos, Rivers and Delta made effort to raise IGR. While Rivers grew IGR from N49.6billion in 2010 to N66.3 billion in 2012, Delta grew it from N26.9billion in 2010, to N45.7billion in 2012.

On zonal bases, as at 2012, the South-West had the highest IGR figure in the federation at N265.2billion (albeit, 83% of the sum came from Lagos). The South-South is a distant second, accounted for N160.58billion in IGR.

The least IGR generators are the North East and North West. They generate N19.38 billion and N29.95billion respectively.

The advantages of the zones are well known though not fully exploited. Nigeria’s southern states enjoy a combination of advantages from Agric, the coastal line, commerce or oil, while the Northern states have fertile lands, opportunities for commerce and massive deposits of solid minerals.

We believe that with its mass land masses, Northern Nigeria, which is home to Nigeria’s agriculture can be taken a step further by better institutionalizing produce exchange.

A sea of possibilities

There is potential for faster growth and development if all zones fire from all their economic cylinders. We believe that a deliberate expansion of the Fadama project can make a difference, increasing the yield on farmlands annually across Nigeria. But this will not do.

We believe that such initiatives as the Gombe grains silos project which are in the pipeline can be fitted into the Abuja commodity exchange to benefit small farm land holders in Northern Nigeria. One of the biggest fillips to agric production will be a ready market which guarantees price. More than this also, there has to be efforts that adds value to agric produce in form of manufacturing.

Our visit to the north opened our eyes to the fact that, as much as 25% of light agric produce is wasted because of lack of storage facilities and patronage in the North. There are also cases where livestock and cash crops are also wasted. We believe that mechanisms that show the north’s potential to the world should be pursued by authorities, in the midst of this there should be better guarantee for life and property across the country.

We were told on a visit to Gombe State that a Pakistani food processing company attested to the quality of beef from the state. The food processor acknowledged Gombe’s beef as better that what they have back home.

But agric is not the exclusive preserve of the North, all the coastal states have advantages. For instance,

Bayelsa also has some of the best lands for rice production in this country, even though oil exploration has destroyed a quantum of it.

There are opportunities for investment in Nigeria. If the right investment environment is created across the zones, the result will significantly affect the level of investment flows; our work across Nigeria gives us reasons to believe that most states are making the necessary effort.

By relaxing previously rigid laws, collaborating with private sector investors, Nigerian state governments are

wooing investors. A number of states already have brochures that are designed to showcase their attractiveness. Indeed, if these efforts are sustained and if the investments flow in, the local economies will be better for it.

7 Responses to Nigeria’s six economies: Possibilities, challenges

  1. Because of how Nigeria is set up, it is very hard to trust any data or analysis from Nigeria.
    Every data has very serious political implications, so are often doctored to fit the common political sermon and therefore cause no troubles. Believe Nigerian data at your peril.

    Kunle Oyenuga
    February 17, 2014 at 5:07 am
    Reply

    • This data is NOT true. It is politically motivated to continue to insult and portray the North as a parasite of the oil economy. It is false and is part of the psychological warfare against the North and Northerners. The geopolitical zones have no basis as they do not have authorities running or governing them as individual entities. Logically, it will remain rejected forever, at least by me.

      Salisu Saleh
      February 18, 2014 at 1:41 pm
      Reply

  2. Sir, all the facts and findings are well presented but in my candid opinion, Nigeria should wake up from sleep and live in the light to realize their dreams and be established in prosperity as ordained by God.

    Note that without light nothing, i repeat nothing meaningful can be done or archived. We should, as a nation emulate our creator, God saw the earth without shape or form, he releases his energy, his power, his spirit upon it and declare boldly ‘LET THERE BE LIGHT’ and it was when there was light that God was able to accomplished the works of creation.

    Let our country paused for awhile and think on this line.

    Bassey Emmanuel
    February 17, 2014 at 4:16 pm
    Reply

  3. Nice article, very insightful.Bur some These stats are very conflicting and many figures are wrong, for instance the japanese GDP is more than 10 times our $400 billion post rebasing GDP.

    The issue of GSP which i feel should be renamed GGDP(Gross geopolitical zone…)are also very suspect, the Data is telling us that in The north east and south east Government budget are approx 50% of GSP or more.Which would mean that GDP per capita of those areas would be far below Poverty level ($2 per day)(do the calcs yourself using 2006 census, plus ^20& pop Growth)

    Salihu dont get offended, some of those figures might be incorrect , but that doesnt nullify the correct ones.If you noticed the lowest “GSP” is the SE.

    BullStat
    February 18, 2014 at 3:26 pm
    Reply

  4. Good presentations. Next time, it should shed more light on the budget breakdown, such as what expenditures are for capital and recurrent, sources of the income, including what percentages of the income are oil and non oil related.

    Anikori
    February 24, 2014 at 3:45 pm
    Reply

  5. This report is good to justify Governor T A Orji’s bad leadership .
    If I may ask :where have all the oil allocations he received gone ?
    My fellow Abian’s are you sleeping ?

    Ugo ogbonna
    March 2, 2014 at 5:15 pm
    Reply

  6. The real question here is: are our leaders actually appropriating all these funds correctly and judiciously? With very few exceptions we have gross misappropriation cutting across all d geo political zones. Attentions of our leaders should be focused on channelling our money to yield good fruits that will impact on the populace.

    Omodele
    April 5, 2014 at 7:08 am
    Reply

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