Friday, March 02, 2018 11.01 AM / FDC
In 2009, the Federal Republic of Nigeria set some ambitious objectives. One of which was to be-come among the top 20 economies in terms of GDP size by 2020. With the end date of the vision 20:2020 plan fast approaching, it is imperative to evaluate the progress made so far.
Nigeria’s Vision 20:2020 focuses on two broad objectives:
1. to make efficient use of human and natural resources to achieve rapid economic growth; and
2. To translate the economic growth into equitable social development for all citizens.14
The strategies to achieve these objectives include:
Ø to urgently and immediately address the major constraints to Nigeria’s growth and competitiveness, such as: epileptic power supply, weak infrastructure and institutions among others;
Ø to aggressively pursue a structural transformation of the economy from a mono-product to a diversified and industrialized economy;
Ø to invest in human capital to transform the Nigerian people into active agents for growth and national development; and
Ø To invest in infrastructure to create an enabling environment for growth, industrial competitiveness and sustainable development.15
Two Years to go. Where are we?
As regards the vision’s overall goal, Nigeria’s position in terms of GDP size has risen compared to 2010, albeit remaining below 20th. While this shows an improvement and that the country is close to achieving its vision, an assessment of other economic indicators shows mixed results.
Based on the most recent nominal GDP data from the World Bank, Nigeria is not among the world’s top 20 economies with respect to GDP size. It was the 26th largest economy in the world in 2016. However, in 2010 when the vision 20:2020 was created, Nigeria was the 30th.
A look at how it has fared in terms of meeting its broad objectives shows mixed results. Firstly, the aim to achieve rapid growth did not materialize. While the Nigerian economy grew by 7.8% in 2010, economic growth has slowed and contracted by 1.5% in 2016. In a similar vein, the country has not been able to achieve significant improvements in terms of re-cords of social development. Nigeria’s progress on the Human Development Index (HDI) is also not encouraging.
Between 2010 and 2015, Nigeria’s HDI increased to 0.527 from 0.5 in 2010. In comparison to other economies, its ranking has not significantly improved. In 2010, it ranked 153rd among 188 economies; in 2015 it was 152nd.18 In a similar vein, the country’s gini coefficient, which measures income inequality, widened to 48.8 in 2013 from 43 in 2009.
These statistics demonstrate that the economy has not fared noticeably better after the adoption of the Vision 20:2020 in 2009.
Reasons for the sub-optimal performance
The reason for the poor performance is not farfetched as the government did not appear to take any concrete action to-wards the Vision 20:2020 goals. For example, the country allocated 6.54% of its total annual expenditure to the educational sector in the 2009 budget. By 2010, when the vision’s implementation was in-tended to have commenced, the sector’s allocation had declined to 5.4%.
This was despite the plan’s strategy of investing in human capital. However, in line with the strategy to develop infrastructure, the government increased its allocation for capital expenditure from 29% of the total budget in 2009 to 34% in 2010. Although this increase was commendable, relative to GDP, the total capital expenditure in 2010 was 2.5%, much below the international bench-mark of 70%. The Economic Planning Minister, Mr. Udo Udoma, further disclosed that infrastructure spending has declined to 0.5% of GDP as at 2017.
Furthermore, despite the fact that the vision did well by identifying some fundamental constraints (weak institutions and epileptic power supply) to growth and tackling them, little progress has been seen in this regard. Nigeria’s institutions have remained weak and largely corrupt. Its corruption perceptions index (CPI) has only improved slightly in the six years following 2010. In 2010, Nigeria’s CPI was 24 points (out of 100 - the closer to 0, the more corrupt) while it was 28 in 2016.
Similarly, the country’s rank in terms of en-forcing contract deteriorated. The index, reported by the World Bank, measures time and cost to re-solve a commercial dispute and the quality of judicial processes. Nigeria’s rank has declined from 90th (out of 181 economies in 2008) to 96th (out of 190 economies in 2017).
This suggests persistent weakness in the country’s institutions. In the same vein, there has been no significant improvement in the country’s power situation. On the average, on grid power supply was approximately 3,608MWh/hour in 2017. As at 2011, it was about 3,500MWh/hour. Meanwhile, the country’s population has grown faster by approximately 17.3% between 2010 and 2016.
Prospects - Vision 20:2020 vis–a-vis ERGP
Nigeria has had two different administrations since the adoption of Vision 20:2020, each having its own economic growth plan. Under President Jonathan the Transformation Agenda was the focus. With President Buhari, it is the Economic Recovery and Growth Plan (ERGP) and the focus seems to be squarely on the ERGP as opposed to the Vision 20:2020.
However, it is noteworthy that the three plans have been predominantly based on the bedrock of driving economic expansion and an inclusive growth i.e. growth that advances equitable opportunities for every section of the society.
Given a similar objective by the ERGP which is currently running, the implementation of the necessary reforms by the present administration could still lead to an achievement of the vision 20:2020 objectives. The ERGP is focused on achieving economic growth, but without the aim of placing the country among the largest 20 economies in the world.
The necessary reforms might therefore lead the country to its desired position of being among the top 20 economies by 2020, with noticeable improvement in the living standard of its populace.
To begin with, the current administration could harmonize the ERGP strategies with the Vision20:2020 objectives. One of the major objectives of the ERGP is to restore growth and diversify the economy. Strong growth (more than other economies above Nigeria on the GDP ranking) could help the country overtake others and get to the 20th position.
In 2017, the Nigerian economy remained largely dependent on oil. The economy grew 1.4% in Q3’17, mainly underpinned by a 25.44% growth in oil output. The government would have to significantly in-crease its infrastructural spending to drive growth in other sectors such as agriculture and manufacturing. Higher spending on road, rail and power projects will stimulate investment in other sectors and drive their growth. For instance, an improved transport system will facilitate the distribution of goods and services reduce congestion and improve productivity. Increased infrastructure spending is crucial to support growth in the economy.
The country’s budgetary allocation to capital projects has reduced to 28% in the proposed budget for 2018 compared to 29% in 2017 and 34% in 2010. The Senate, in the process of scrutinizing this appropriation bill would need to raise this significantly in order to support economic expansion and enhance living standards. In addition to a higher allocation, it is imperative that the budget is passed early to ensure timely implementation.
A complementary monetary policy is also needed for growth. Monetary authorities need to adopt a more accommodative monetary policy stance that would provide cheaper access to credit for the private sector. Cheaper and easier credit access would boost activities in the real sec-tor which will feed into the overall output of the economy.
The implementation of these reforms in the course of pursuing the ERGP objectives by the current administration would be positive for the economy. The economy may not only grow like the ERGP aims, but it could also take the position of one of the leading economies in the world and make ordinary citizens feel the benefits of these changes. As the economy grows, there would be more employment, higher income will be available to individuals and this would translate to a reduction in poverty rate.
To become one of the top 20 economies in 2020, Nigeria has to outperform other countries above it on the gross domestic product (GDP) ranking in 2018 and 2019. It must step up its efforts to improve economic growth. Al-though the present administration has been more focused on the ERGP, if it coordinates this strategy with robust annual expenditures and favor-able monetary policies, it will likely improve the performance of the economy overall. At 2020, it is hoped that the country would look back at 2010 and point to significant progress.
· 14National Bureau of Statistics, December 2010. “Nigeria Vision 20:2020, Abridged Version”, Federal Government of Nigeria. pp 2.
· 15National Bureau of Statistics, Ibid. pp. 3-4.
· 16World Bank. 2017. “Countries and Gross Domestic Product”. Available at https://data.worldbank.org/indicator/NY.GDP.MKTP.CD
· 17World Bank. 2017. “Gross domestic product ranking”. Available at https://data.worldbank.org/data-catalog/GDP-ranking-table
· 18United Nations Development Programme. 2017. “Human Development Indicators”. United Nations. http://hdr.undp.org/en/countries/profiles/NGA#
· 20Budget Office of the Federation. 2017. “Budget Document”. Federal Government of Nigeria. http://www.budgetoffice.gov.ng/index.php/resources/internal-resources/budget-documents
· 21National Planning Commission. 2017. “Nigeria’s current infrastructure stock and investment levels”. Federal Government of Nigeria. http://www.niimp.gov.ng/?page_id=1019
· 22Transparency International. 2017. “Corruption perceptions index 2016”. The Civil Society Legislative Advocacy Centre (CISLAC). https://www.transparency.org/country/NGA
· 23World Bank, 2017. “Doing business 2018”. pp. 183
· 24National Bureau of Statistics and Nigerian Electricity Regulatory Commission. 2016. “Power Generation Statistics 2010 – 2014”. Federal Government of Nigeria. http://nigerianstat.gov.ng/elibrary?queries[search]=POWER%20GENERATION%20STATISTICS%202010%20-%202014
· 26Ministry of Budget & National Planning. 2017. “Economic Recovery & Growth Plan”. Federal Government of Nigeria. pp 12
· 27National Bureau of Statistics. 2017. “Nigerian Gross Domestic Product Report (Q3 2017)”. Federal Government of Nigeria. http://nigerianstat.gov.ng/elibrary?queries[search]=q3%202017