Sir, congratulations on your election as the President of Nigeria. The purpose of this memorandum is to set out the key questions we need to answer in order to improve the welfare of Nigerians significantly during the next two decades. However, please let us look back before we look forward.
In 1914, the British merged the Colony of Lagos and the Protectorate of Southern Nigeria with the Northern Nigeria Protectorate to form a single colony of Nigeria. After a plebiscite in 1961, British Cameroons (parts of current Borno, Adamawa and Taraba States) voted to join Nigeria to make up the 924 thousand square kilometers that currently make up our country.
Before this period, this land area was inhabited by people of rich history. The north-east had the Kanem-Bornu Empire, which was established in the 8th Century AD and lasted until 1900. It was an example of wealth in pre-colonial Africa and covered parts of what is now known as Nigeria, Niger, Cameroon and Southern Libya. It was at the Southern end of the trans-Saharan trade, trading with Tripoli, Libya and the Ottoman Empire. The empire was renowned for its military strength through its calvary and trade flourished in a secure environment. The great Mai Idris Aloma aspired to make the empire so safe that “a lone woman clad in gold might walk with none to fear but God”.
In the north-west, we had the Sokoto Caliphate. At its height it linked over thirty emirates and enjoyed decades of economic growth throughout the region. Founded by Uthman Dan Fodio, a leader and scholar who encouraged literacy and scholarship for women as well as men. History has it that several of his daughters became scholars and writers. Although slavery was a large part of the economy, slaves reached high positions in government and the economy prospered based on Islamic tradition, market integration, internal peace and export.
In the south-west there was the Oyo Kingdom, at its height spanning about a hundred and fifty thousand square kilometers. The Kingdom was known for its outstanding organizational and administrative skills. Renowned for its checks and balances amongst the Alaafin, the Oyo-Mesi, and the Ogboni. It was perhaps the most important political state in West Africa from the 7th Century to the 18th Century. It became wealthy through its military strength and trade in cloth, ivory, horses, and slaves.
The south-central had the Benin Kingdom, founded in the 11th Century and still ruled by the Eweka dynasty. Their first contact with Europeans was with the Portuguese in the 15th Century. These Europeans marveled at the powerful sophisticated civilization they found. The Portuguese found a “vast city ringed by one of the largest earth work walls in the World.” The Kingdom is still known all over the World for its art – bronze castings and ivory works treasured all over.
In the south-east we had Igboland, a people republican by culture and therefore had few kings. They had powerful consultative assembly of elders who settled disputes and ensured equity and justice. Although politically fragmented, trade flourished and their people prospered particularly in Nri, Aro and Onitsha.
At independence in 1960, our political leaders were the best and brightest in our society. The public service attracted highly competent and honest Nigerians trained locally and abroad. Nigeria was also rich in agricultural and natural resources and her 46 million people were ready to conquer the World. Nigeria was the envy of a World that promptly labelled us as the “Giant of Africa”.
After five years of parliamentary democracy, Nigeria had a military coup in January 1966 and a counter-coup in July of the same year. The ensuing strife plunged us into a civil war that lasted until 1970. Military rule continued until 1979 but, after the civil war, Nigeria experienced a period of relative prosperity largely as a result of large oil and gas export revenues. The population was 73 million in 1980.
In 1979, Nigeria changed to a US-style presidential democracy and elected a President who lasted only four years. Weak crude oil prices had caused economic hardship and the military re-appeared on the political scene at the end of 1983. The 1980s and 1990s were characterized by debt accumulation, low growth in output, rising unemployment, and falling real wages. By the year 1999, the annual salary of a Nigerian graduate could no longer buy a small car. In fact, it was very difficult for him/her to find employment as the population had grown to 122 million by the end of 2000.
The year 1999 ushered in a newly elected democratic government with a lot of hope that with democracy, prosperity will once again become the lot of Nigerians. Initially, we had a period of rising crude oil prices, prudent management of our finances, and economic reforms aimed at improving the welfare of Nigerians. This resulted in debt reduction, strong growth in output, falling unemployment and rising real incomes for our workers. Crude oil prices started falling in the Summer of 2014 and has remained significantly below the US$100+ per barrel that we enjoyed from 2010 to 2014. Our economy started to struggle, output slumped, unemployment rose and real wages fell but population rose above 200 million at the end of 2020. Even the most ardent fan of Nigeria will agree that the last sixty two years have been a period of unfulfilled promise. How then can we make our country great again?
What do the next twenty years hold for Nigeria? How can we improve the welfare of our people significantly during this period? Mr. President, I understand that you plan to set up a Committee to help our Nation to evolve a long-term strategy. I believe that this Committee should help us answer the following questions.
What is the overall objective of this effort? Is it improving the welfare of our people?
What is the purpose of government? Levy and collect taxes? Secure life and property? Support the development of critical infrastructure? Help the poor and weak in society to access basic services? Help businesses in key industries to thrive?
What is the average income per person per year that we desire in 2043? What are the key components of income per person? Output and population. What will the population of Nigeria be in 2043? What should the size of our output be, in USD, in 2043 to enable us achieve this objective? What do we want income distribution to be like amongst our people? (Gini coefficient)
Which industries will help us fulfilll our ambition? Education? Healthcare? Electric Power? Railways? Oil & gas? Agriculture & Agro-processing? ICT?
How can we make goods and services produced by these industries of the right quality and cheaper than imports?
What kinds of skills will these industries employ? How are we going to help our people acquire these skills?
Which infrastructures are critical to the development of these industries? Electric Power? Railways? How are we going to develop these sectors quickly?
What should the tax strategy of Nigeria be over the next 20 years? What are the principal taxes that we should levy? Who should collect these taxes? Which ones should provide the bulk of government revenues? How are we going to make our tax rates competitive relative to those of other countries competing with us for investment? How are we going to ensure compliance with our tax laws?
How should we spend our tax revenues? Which are the principal areas we should spend on? Should we relate government spending to the purpose of government? How much should we spend in each area?
How do we ensure that the FGN is not overleveraged (does not borrow too much money)? How do we define overleverage? Is it in relation to the size of the economy or in relation to the size of FGN revenues?
Has the demand for crude oil peaked? What is the outlook of demand for oil & gas export revenues over this period given the size of our unexploited reserves and the impact of electric cars and other efforts to protect the environment?
Which countries should we partner with to develop the key sectors that will help us fulfil our ambition? What form should this partnership take? During this period, there will be intense rivalry between China and the USA, must we choose one of these two or should we partner with each in their respective areas of strength?
What do we import? Why is Nigeria a chronic net importer of goods and services? What should we do to reverse this trend? How will reversal of this trend impact inflation and exchange rates?
What is the principal cause of inflation in Nigeria? Is it too much money? Is it rising cost of inputs (e.g. labor)? Is it rising demand for goods and services (due to a rapidly growing population) not matched by growth in domestic supply?
How should we tackle inflation? Price controls? Increase supply? Reduce demand?
Why is the NGN/USD exchange rate important? Why does the NGN always depreciate relative to the USD? What are the enduring things that we can do to at least ensure that there we stop experiencing severe currency devaluations?
How do countries manage their exchange rates? Peg to the USD? Float? Crawling peg? Is there a fourth option? Which one should Nigeria adopt and why?
When there are short-term conflicts between stable exchange rates and the prosperity of our people, which one should take precedence?
Going forward, how should we choose our leaders? Should they be the best and brightest or should it be based on religion, ethnicity or sex?
How should we organize ourselves such that a larger part of government revenues is spent on fulfilling the purpose of government and a lower portion is spent on the day-to-day running of government?
Mr. President, evolving a long-term strategy for a country starts with framing the right questions. These, in my opinion, are the key questions we need to answer in order to improve the welfare of our people significantly over the next twenty years.
During a twenty-year period, China has improved the welfare of her people significantly, are there things we can learn from them? According to the World Bank, the output of China grew from US$1,211 billion in 2000 to US$14,343 billion in 2019. This represents a twelvefold increase in output. During the same period, the country’s population grew by 10% from 1.27 billion to 1.40 billion. This means that the average income per person grew from under US$1,000 per person per year to over US$10,000 per person per year during this period. All this growth was achieved by keeping average inflation over the twenty-year period to a mere 2.2% per annum. Low inflation meant low-interest rates, businesses were able to borrow to grow their outputs and households were able to borrow to acquire homes. It also did not require large increases to ensure that wage levels kept pace with inflation.
Mr. President, I can see a clear path towards increasing our output tenfold during the next twenty years. It starts by arming our teeming young population with skills that are valuable and marketable and helping them get employed or self-employed. Next step is to help our businesses become more competitive in the World so that they can attract more investment, employ more people and grow their output.
However, how are we going to keep our population to not more than 250 million in twenty years’ time, if we want to emulate China? According to populationpyramid.net our population is projected to be 350 million in 2043. Shouldn’t we emulate China and actively manage our population to ensure we do not exceed 250 million in 2043?
Finally, in recent history, I have not seen a single country that has been able to improve the welfare of her people without taming inflation (keeping it below 3% per annum). According to the World Bank, Singapore, our example of a small city-state that has moved from the Third World to the first World kept inflation at an average of 2.6% per year between 1962 and 2020! What are things that we need to do to keep average annual inflation to not more than 3% per annum over the next twenty years?
Assuming we grow output tenfold over the next twenty years, keep the population to not more than 250 million, and inflation to not more than 3% per year, the output will be about US$4.6 billion in 2043. The average income per person per year would grow from the current US$2,000 per person per year to US$18,000 after twenty years. If we also employ our tax system to ensure a fairer distribution of income, helping the poor and weak in society, peace and prosperity will reign in our country.
Is this dream achievable, or is it simply “pie in the sky”? In order to grow output tenfold after twenty years, we need compounded annual growth of around 12.5% compared to the 14.0% that China achieved between 2000 and 2019. I believe that this rate of growth is achievable because we are starting from a very low base. In addition, if we can put a large number of our 22 million unemployed people to work quickly, we can raise output significantly in the near term.
Bode Agusto
August 2022
Sources of information – World Bank, Wikipedia, Population Pyramid and OPEC.
COPYRIGHT NOTICE
You may not, except otherwise with prior permission and express written consent by BODE AGUSTO, copy, print, extract, exploit, adapt, edit, modify, republish, reproduce, rebroadcast, duplicate, distribute, or publicly display any of the content, information, or material on this website for non-personal or commercial purposes, except for any other use as permitted by the applicable copyright law.