NIGERIA AT 63!

As Nigeria hits 63, we are arguably at our most challenged state as a Nation. While Nigeria has been deteriorating on many fronts over the last 40 odd years, we seem to have taken a sharp turn for the worse over the last decade. The middle class that seemed to be growing in the early days of our democracy has been under severe attack in the last decade. Food prices have risen due to the triple whammy of lower food production due to insecurity, high cost of transportation due to escalating diesel prices and devaluation of the local currency – making imports more expensive. Besides food, the country is firmly in the grips of an inflationary wave. Transportation, rent, energy, house prices have all escalated, while incomes – legal incomes at least- have been constant or at best have seen marginal increases.
Therefore, on this day of Nigeria’s independence, I offer my thoughts on how to revamp the Nigerian economy. There are many aspects to the work that need to be done, but I would like to discuss it on the following themes. What is written here is just high level. In the interest of time and space, I will not delve into the finer details of the themes discussed here.

ECONOMY:
Private Sector Participation: While Nigeria claims to operate a capitalist economy, the government, particularly at the Federal and State levels holds undue influence over economic activity. In order to kick start economic activity, wage growth and productive money circulation, Nigeria needs to hand the reign of the economy to the private sector. The private sector can allocate capital more efficiently, will create better quality jobs, generate tax income for the government and ensure that critical infrastructure is far better maintained. Areas where the private sector will do a better job include managing our airports, managing the railway sector, managing high traffic roads, managing ports,
Therefore, the government should do the following:
• Concession our international airports
• Concession the newly constructed railways and allow private railway operators to run it.
• Concession critical road infrastructure, such as Lagos-Ibadan; Port Harcourt Enugu; Lagos -Shagamu -Benin; Abuja -Kaduna-Kano etc
• Concession Warri, Port Harcourt and Calabar ports
• Sell government properties across the nation, particularly in Lagos.
• Reduce NNPC stake in JV’s to a non-controlling stake. NNPC has held the oil sector back by not paying cash calls and slowing down on new oil and gas projects.

Revitalizing the Middle Class: Relative to our huge population of more than 200 million people, Nigeria’s GDP is relatively low. GDP is the Gross Domestic Product and in simple terms is the total value of goods and services produced in a country. When looked at this way, and we consider the number of companies and industries that have closed shop and/or left Nigeria in the last 20 years, its not surprising why our GDP is low relative to our size – Michellin, Dunlop, Shoprite, Mr Price, Exide batteries, Game, GSK, Procter & Gamble, WEMPCO Steel, Etisalat, Woolworths and many more have all left the country in recent years.

There are many factors for this, but one which I want to focus on is the disappearing middle class. If the ability of the Nigerian to purchase the goods and services of these companies continues to dwindle, then its not surprising that many if them cannot break even. One way to revitalize Nigeria’s economy is to bring back the middle class. One way to do this is to dramatically increase the wages of the lower-level public workers, whilst also reducing the number of staff to balance things out. I’ve always taken the view that it’s better to employ 5 people and pay N150k a month, than employ 50people and pay them N30k a month. Whilst prices of things have become expensive, its not always that these things are overpriced, but rather the wages of Nigerian workers are ridiculously low!

Therefore, the government should do the following:
• Implement the Orasanye report and reduce agencies, ministries and parastatals. Nigeria should target a 40% reduction in staff strength in the next 3 years. Of course, appropriate gratuities and severance should be paid where applicable.
• Convert many of these agencies and parastatals into limited liability companies owned by the government. That way they are self-managing and go off the government payroll. This will force efficiency and productivity. If they cannot ensure enough revenues to pay wages and operate, then they should do what other companies do – increase prices, reduce cost. If Arise TV and Channels can survive on their own, why can’t NTA!?
• Pay a better wage to those that remain. In my view, the national minimum wage should not be less than N150k net a month.

Civil Service Reform: Connected to the point above, even if we were able to reduce the over bloated civil service, even those why remain need to dramatically change their ways of working. The civils service must be run the way a private entity would manage its human resource. The organizational hierarchy must be very clear, with well documented job titles and job descriptions. Every position must be a box, with a clear mapping to the head of the organization. Recruitment must be based on these established job roles. Promotion also needs to be merit/performance based. My spirit is always grated when I hear the popular phrase “I am due for promotion!” How can anyone be promoted simply due to the passage of time!? There is no measuring of performance to agreed targets, ways of working, proactive contributions, solutions provided, policy papers written etc How can a supervisor of maintenance in the Southeast zone of FERMA be promoted simply because he has been a supervisor for 10years, when the roads in the zone are in shocking state! What then has he been maintaining in that time that deserves a promotion?

Therefore, the Nigerian government should do the following:
• Reform the civil service to a performance-based reward system
• Employment should be done to fill vacant positions based on an established organizational structure.
• The process of creating and changing that organizational structure should be very firm and approved only by the Federal Executive Council after initial approval by the Head of Service.
• Promotion should only be if a vacancy on the next level exists and based on good performance ranking against established metrics at the beginning of the year

Tax Reform: The Nigerian state’s reliance on crude oil for revenues and foreign exchange for the past 5 decades has created a lazy government. Now with revenues from crude oil dwindling for many reasons, the government is realizing it must focus on tax revenues. Again, there are many aspects to improving tax collection and administration in Nigeria. But a few things I’d like to point out here. First, the wealthy in Nigeria need to pay their fair share. The wealthy are prone to evading tax all over the world, but its much worse in Nigeria. Officials of the tax revenue agencies in Nigeria are usually either bullied or bribed by the elite. Interestingly a wealthy Nigerian with a house in the US or UK cannot get around not paying property taxes. A $350k house in Houston will set you back circa $6k in property taxes each year. Yet the same individual with a N1bln house in Ikoyi either pays nothing at all or a paltry sum.

Asides the wealthy though, tax administration needs to improve to bring more people into the tax net. The easiest way to do this is with technology. There are many types of income that are not taxed in this country – income from rents, fees paid to realtors, income earned by caterers at events, income earned by comedians, musicians, MC’s, income earned by Uber drivers and many, many more typically go under the radar. No doubt, Nigerians feel entitled to evade taxes, due to the infrastructural deficiencies in Nigeria, but that’s a topic for another day.

Therefore, the Nigerian government should do the following:
• Provide more structure around activities of the Nigerian economy. For eg every rental agreement must be registered to have legal effect
• Professionalize many sectors of the economy. Someone shouldn’t be able to come from the village to Lagos to be a property agent without becoming a licensed member of Realtors Association of Nigeria. And to continue to be a member
• Make every Nigerian’s NIN their Tax Identification Number. And make the NIN a requirement of every economic activity, so that every person’s economic activity can be better tracked.
• Make it impossible to engage in economic activity without filing personal income taxes every year.
• However, the process of filing tax returns should be made very easy online. For those in paid employment it should be easy because its already covered by PAYE, but filing tax returns becomes more important to folks outside of paid employment. I’d like to see a Davido or Whizkid filing tax returns.
• Focus on the online economy. Netflix, Amazon prime video, apps on apple store and Google play store that Nigerians subscribe to cannot be operating in Nigeria and not paying taxes.

Energy Availability: To move the Nigerian economy forward, it needs to be powered by energy, the most important of which is electricity. That 200mln+ Nigerians are managing 5,000MW, while South Africa with 58mln people produces 58,000MW shows the scale of the gap that needs to be covered. Even with 24hr electricity, Nigeria will struggle to compete due to our many other structural and infrastructural deficiencies, but at least, that should be the minimum foundation of a level playing field.

Therefore, the Nigerian government should do the following:
• Prioritize the construction of the Mambilla 3,000MW hydro dam.
• Prioritize private sector led large scale solar and wind in secure parts of Nigeria with abundant solar radiation and wind resources.
• Increase domestic gas capacity to ensure stranded gas power plants across the country can produce at full capacity.
• Decouple the national grid. Let a GENCo bypass the national grid and sell to a specific DISCo on a willing buyer, willing seller basis if the capacity of the grid to get the power to the consumers is a hinderance.
• Create a simpler tiered electricity tariff structure, that protects the poor, low electricity consumers, but ensures fair pricing for those who consume a lot of electricity and can pay for it.

Export – leveraging on Nigerians in Diaspora: The need for more foreign exchange inflows into Nigeria is undeniable. The lack of forex supply during crippling demand is the reason why the Naira is currently at $/N750 or $/980, depending on which market matters more to you. Whichever way you cut it though, the Naira has devalued by about 40 – 60% from the beginning of the year. Again, there are many ways to address this in the short, medium and long terms, but a short term one that I think is easy to set up is leveraging on Nigerians in UK, US Canada and South Africa. It breaks my heart when I go to US and buy a small tuber of Yam for $20 (N18,000), which would cost about N500 in Benue state and maybe N1,000 in Lagos! The prices of other Nigerian delicacies that our people in diaspora crave for is also quite high. How about if the government created a food export program focused on Nigerians in diaspora! It would provide jobs for farmers in Nigeria, foreign exchange for Nigeria and reduce the cost of Nigerian food for those in the diaspora – a win, win!

Therefore, the Nigerian government should do the following:
• Engage with Nigerians in diaspora through the various Nigerian Embassies and High Commissions. Map where Nigerian’s are and target African stores close to them for delivery.
• Liaise with agricultural ministries and agencies of foreign governments to establish food standards.
• Create a logistics infrastructure to move produce from the farms to ports for export in an efficient and effective manner.
• If necessary, designate specific farms as export farms to better monitor and ensure agreed food quality standards are being kept.
• Rather than export in raw form, we can create processing zones to convert raw yam into packaged, frozen yam slices and yam fries.

There is a lot more to unpack in terms of what Nigeria should be doing to drive economic growth going forward, but these are just snippets!

Even the various sub topics I touched on can be expanded into full position papers with a lot more detail.