Politeia Blog


Interest on debt grows without rain: or so the old chestnut goes. This has certainly been the case for Nigeria over time and it seems no lessons have been learnt for all the angst and anguish debt and debt servicing have caused in the past.

Nigeria has been doing a lot of borrowing in recent times and between 2015 and 2020, Nigeria’s debt profile rose from US$9.7 billion to US$27 billion. Interestingly, these figures only show the amounts taken up as debt, the principal, and do not depict the full picture which should include the amount that the country has to pay as interest on loans.

Interest on loans is most times overlooked and not given the proper consideration it ought to receive as discussions on loans by the government and indeed the entire country is always at net price. This is less than ideal for a country like Nigeria which is neck-deep in debt. Take for instance, the P&ID case which was not properly handled and ended up costing the country an additional US$3 billion, in addition to the initial amount of US$6.6 billion, on interests accrued.

Borrowing to fund infrastructure projects is not itself wrong but it is important for the government to study the feasibility of loans taken up, and consider the interest that will be owed as an important aspect of the transaction, looking at the entire picture in a holistic manner and understanding the real implications of what it is getting into.

Earlier in the year, Nigeria entered into an agreement with Chinese lenders to fund a big gas pipeline project estimated to cost US$2.5 billion known as the AKK natural gas pipeline. This pipeline when complete would be a full 614km long and would pass through Ajaokuta- Kaduna- Kano hence the name AKK. The Ministry of Finance stated that the loan required for the project was US$2.51 billion, at a 3.75% interest rate over a period of 12years; in other words, the total sum the country will need to pay is actually approximately US$3.15billion. And that is the figure which should be talked about in the public space, because that is what the project will cost the country directly.

A similar approach should be taken to all project loans, so the country knows exactly where it stands in the real scheme of things. Yet strangely it is not. Consider the current loan in contention in the public space namely the US$500 million from China’s Exim bank for railway construction and other transport-related infrastructure. There is public outrage because of a clause in the agreement waiving immunity as a sovereign state. The Minister of Transport has tried to downplay the enormity of the implication of defaulting asserting that FG has the capacity to repay the loan within the 20-year timeframe as the incredibly low interest rate of 2.8 percent is favourable to Nigeria.

However, if one does the maths, at the 2.8% interest rate, repayment of the loan would mean payment of a total of US$659.79 million, factoring in annuity of US$32.99 million and interest of US$159.79 million. This might not be the most pragmatic of decisions as there is no guarantee that the railway would recoup even its operating costs (ticket prices have just been hiked by 100%, which can be read as a sign of the difficulties) and government would have to subsidize the project from oil revenues, further diminishing the treasury.

That is a discussion for another day- the possibility of the rail infrastructure paying for itself. Whilst the public worries about the sovereign clause it would do well to have the entire picture, as interest always mounts up over time and if ignored will at some point in the future invariably take the nation by surprise.

Last week SHOPRITE announced it was pulling out of Nigeria and looking for local investors to take over the business. While the news may have caught some completely by surprise, others who have followed the difficulties the chain has had to contend with may have already seen the writing on the wall. To name one such difficulty: epileptic electricity supplies, a major problem for shopping malls that rely on freezers 24/7 and massive air conditioning during opening hours.

The withdrawal should be of great concern to us all. After all, retail business sector as at 2018 accounted for about 16% of the Nigerian GDP. In an era characterized by a drive for diversification, the withdrawal is alarming. It is a well-known fact that Nigerian shoppers prefer and want to see, feel, and try on products before making a purchase thus, having a variety of products under one roof helps to address that aspect of the shopping flair in Nigeria.

To jog everyone’s memories: Shoprite is a South-African owned chain which started operations in Nigeria in 2005 and now boasts 26 retail stores across eight states in Nigeria, making it the biggest retailer in the country. It offers its customers a variety of food products, household goods and small appliances at affordable prices. Moreover, it has structured the retail business in Nigeria to international standards to deliver a world-class shopping experience. Indeed, it has a minimum payroll of 2,000 with 99% Nigerian staff strength. It should be noted that about 80% of sales in Shoprite Stores in Nigeria consists of domestic goods which encourages local products. Shoprite has built relationships with over 300 leading Nigerian suppliers, small businesses, and farmers, securing a wide assortment of local brands. It is an example to follow. And it is renowned for its staff training. In a nutshell: SHOPRITE are the pacesetters of structured retail business in Nigeria!

No other retail company in Nigeria has been able to achieve what Shoprite has done in Nigeria in the last 15 years. In fact, none has achieved anything similar in terms of branch outlets, staff strength and establishing an immense network of suppliers, let alone maintaining such standards. This begs the question whether a successor company will keep things moving so well.

The intended discontinuation of SHOPRITE in Nigeria is not surprising, because, for some time, the retailer has been grappling with the twin evils of weak sales revenue due to logistics concerns (one needs think only of clearing goods at Apapa) and the economic downturn in Nigeria – which has been worsened by the COVID-19 pandemic lockdown and social distancing. Customer patronage subsequently fell by 7.4% owing to the pandemic lockdown.

Another reason responsible for the challenges that Shoprite is currently facing is the difficult and hostile environment it finds itself: Beyond COVID-19 economic consequences and fall of oil price, there are other factors that made the decision inevitable, some of which are:

Exorbitant rents and high taxes, costs that have to be passed on to customers along with energy costs.

Currency devaluation, as this eats into profits that want to be repatriated, with currency-induced inflation putting another nail in the coffin.

Fast dwindling consumer purchasing power which automatically resulted in a dip in sales of most businesses.

Lack of access to local credit finance given the unrealistic 20-plus percent interest rates demanded by banks

Infrastructure deficits (transportation, energy), making getting produce to the malls and keeping them operating and customers cool – incredibly challenging and/or very costly.

Xenophobia – Some Shoprite stores were looted and destroyed in Nigeria in response to the xenophobic attacks on Nigerians in South Africa, sparking an 8.1% loss in sales in H2 of 2019.

All these factors added up to making it unattractive to the would-be investor, be it foreign or local to invest in Nigeria. It is in this context that the Chief Executive Officer of Shoprite, Pieter Engelbrecht, noted: “…we have taken a number of immediate operational actions, all of which are on-going and include rent reductions, store closures, productivity improvements and de-dollarising costs. We are confident in the absence of further currency devaluations and any unforeseen circumstances that these operational measures will positively impact profitability.”

From the foregoing, it is obvious that the exit of the chain-store will adversely affect not just the staff, but the numerous suppliers and farmers. It is conceivable that some of these small business holders will go out of business. In other words, the exit will have a ripple effect on the economy. There  is also no assurance that new owners, assuming such are found, will want to retain the old staff. And who knows what the situation will be as regards the real-estate investors who developed the shopping malls and own the respective sites.

A 2013 McKinsey report estimated that from 2008 to 2020, Nigeria offered a $40 billion growth opportunity in food and consumer goods. Evidently, with the SHOPRITE announcement, at the latest that bubble has burst. In fact, in 2019, according to a survey released by A.T Kearney, a global management consulting firm, Nigeria’s global ranking in retail development dropped to 30th position out of 30 countries with the total national sales dropping from $109 billion the prior year to $015 billion. Yet if one looks at the above factors closely, then it emerges that at leave five of the six are open to influence by good policymaking (on import duty regimes, red tape, infrastructure, etc.), which can definitely positively affect the cost of doing business in Nigeria. Remember, government is there to enable business to take place, not to do business. In this case, it would seem to have failed in its enabling role.

Government should already be going into action. After all, there the risk of contagion effect. What will happen to Game and other foreign companies directly and indirectly involved in the retail sector? It is no longer news that one of the clothing brand retailers, Mr. Price, a popular affordable clothing, sport and home wear brand has already closed shop and left with all their investments while citing difficulties and challenges, such as repatriating profits. With the attendant consequence of the COVID-19 pandemic on the Nigerian economy and its populace which is resulting to massive job losses and decreased income, it is only a matter of time and will not be a surprise if other similar foreign retail stores follow in Mr. Price’s and Shoprite’s footsteps.

Retail business in Nigeria is viewed by many as a new frontier of growth and holds significant opportunities for local and international investors and if fully harnessed, the opportunities it avails the economy are vast. These include job creation, spurring industrial growth, infrastructure development, and thus ultimately contribute to GDP growth. So, if we keep allowing these investors to close shop and leave, it portends a huge loss to the economy. In this context, it should be of great concern to the Nigerian government that the Nigerian economy is growing slower than its population growth due to the hostile business environment.

On the other hand, neither the government nor the populace need worry about the exit of one or more foreign investors if there are no impediments to healthy competition, markets function efficiently, and if the decision to close shop is based solely on corporate decisions – and has nothing to do with the systemic challenges facing the retail sector. If this were the case, then the departure of Shoprite from Nigeria could spell more business growth for Nigerian retail supermarkets and businesses. It is a big ‘if’ as it assumes quite a lot being in place: appropriate competition policies and legislation; insignificant barriers to entry and exit; open borders; easy repatriation of profits and capital; ease of doing business; low transaction and indirect costs; favourable macroeconomic conditions (taxation, fiscal policies, interest rates, access to finance, and exchange rate regime); improved security and infrastructure. And last but not least, effective sector-government liaison (to convey challenges and feedback).

Now that is a hefty set of homework assignments for government… And we can comfortably contend that it is only once those issues plaguing the Nigerian business environment are tackled squarely and openly and appropriate policies put in place that government can sit back and no longer worry if a major company, be it foreign or local, closes shop.

Nigeria is in the news again. Not for anything remotely positive or suggestive of a nation going through rebirth but for corruption and financial crimes. When going through news regarding Nigeria and Nigerians on any medium, one is bombarded with reports on cybercrime, misappropriation, and looting of public funds by the very individuals who are meant to safeguard them. As the nation was coming to terms with the shocking allegations of graft leveled against the head of the Economic and Financial Crimes Commission (EFCC), it was only for its senses to be assaulted yet again by mind-boggling revelations of corruption made by the erstwhile head of the Niger Delta Development Commission. The supervising minister of the commission, perhaps having been implicated in the rapacious looting of public funds in the agency under his charge or wanting to distract attention or show how they have democratised looting, lifted the lid with the claim that beneficiaries of the wanton looting of NDDC were mainly NASS members. Without a doubt, the crimes get more brazen within each news cycle, which leads one to invariably conclude that corruption and financial crimes are much more deeply entrenched in the public place than one might suspect.

Take the ongoing scandal of the Acting Chairman of EFFC who was hauled before a committee set up to investigate allegations of corrupt practices, detained and suspended for alleged looting of public funds – recovered as looted funds in the first instance. This allegation shocked the public due to the sheer audacity and irreverence of the head of the agency that is meant to fight corruption, secure, and return looted funds to the treasury. Much of this outrage stems from the fact that the current administration came into office with a hard stance on corruption. Indeed, the fight against corruption was an integral part of its campaign to address the ills plaguing the country including stemming insecurity and reviving the economy. There was resonance with the electorate as factors attributable to corruption had combined to slow down economic activities and retard gains made in socio-economic development.

As things stand, Nigeria has lost more than its fair share to looting, Chatham House estimates that US$582 billion has been stolen from Nigeria in the decades since its independence in 1960, which translates into approximately 19 times the current national budget. This is not taking funds lost through other illicit means into consideration. Imagine what Nigeria would have been in terms of development if those resources were at its disposal to address mammoth problems in education, health, infrastructure provision and so on. Due to decades of theft alongside mismanagement and other challenges, the Nigerian economy is in very bad shape, the country should not have to continue contending with theft and crime that make it difficult to attract foreign investment, to create jobs and prosperity, and get millions of people out of poverty.

Corruption and its attendant consequences are incredibly corrosive, the impact on the polity, on social mores, on socio-economic development are pernicious and far reaching, likewise its impact on international relations, international trade and commerce, and diplomacy.

Given the economic challenges they are having to contend with, Nigerians must at this juncture pause and ask difficult questions: questions that may throw up responses that are uncomfortable and unpalatable. Why has tackling this pervasive phenomenon, which every administration has sought to achieve, not had any impact? If anything, it seems to be getting worse. Does this mean the country is going about it the wrong way? What is the right way? Why is Nigeria not as effective and successful in tackling this crime as its peer countries? Or is Nigeria as ‘fantastically corrupt’ as suggested by a former UK prime minister?

For Nigeria to make progress, it must delve into the problems and understand the nature, issues and challenges that need to be tackled beyond chasing a few people and recovering looted funds only for the looted funds to be re-looted again, a paradox of unparalleled proportions. A recent report by PriceWaterHouseCoopers (2017) estimates that corruption could cost the Nigerian economy 37% of its GDP by 2030. Urgent reform of the anti-corruption landscape is therefore imperative. Nigeria has a multiplicity of agencies (Nigeria Financial Intelligence Agency (NFIA), Independent Corrupt Practices Commission (ICPC), Code of Conduct Bureau (CCB) and the more widely known EFCC), legislation, regulations and so on and so forth to suggest unambiguous resolve to fighting corruption. Unlike the other anti-corruption agencies, the EFCC possesses the most extensive collaborative mandate: firstly, the composition of the EFCC Board is wider than the others and comprises representatives of about 16 law enforcement agencies with a strategic mandate to combat economic and financial crimes. Secondly, unlike others – with the exception of the ICPC – it is understood that EFCC is the only agency that is statutorily mandated to liaise with others, hence more bureaucratic overlap requiring competence and integrity provide more room for the likely internal corruption going on now. Also worthy of note is the jurisdictional overlap between the powers of the anti-corruption agencies particularly between EFCC, the Special Fraud Unit and the Financial Malpractice Unit of the Nigeria Police Force (NPF), and overlapping jurisdiction amongst the EFCC, NPF, ICPC and CCB in respect of public-sector corrupt crimes. This overlap of functions cause abuse of legal process and lack of direction within the agencies.

Much has been made about political interference being the bane of the EFCC. It stands to reason that since politicians constitute the bulk of people prosecuted, they will try and unduly influence the office of the Attorney General which oversees the EFCC and other anti-corruption agencies. After all, the Minister for Justice who is appointed by the President is also the head of public prosecution. It would possibly make a lot of sense for the country to therefore carve the Office of the Attorney General of the Federation, and its attendant responsibilities for public prosecution, from the Ministry of Justice. A standalone office, similar to the Office of the Auditor General, would be independent, minimising   direct political interference. Otherwise the anti-corruption fight looks set to remain a pipe dream.

Another major challenge is that there is no protocol for efficient administration of confiscated assets. This is strange as it can be easily rectified with the passage of the ‘Proceeds of Crime’ bill into law.

Other capacity deficiencies have been identified as obstacles to the efficiency of the EFCC, such as lack of technical capacity of staff in terms of training and expertise that enables crime detection and the conduct of credible and forensic investigations; and operational incapacity which is supposedly due to insufficient funding. Some of these shortcomings have apparently made it difficult for international counterparts to interact with the EFCC.

Ultimately, these challenges give rise to a rather muddled and weak system which clearly does not work. The question this begs is how can Nigeria get rid of corruption? A close look at peer countries show that corruption is indeed not peculiar to Nigeria as so many other countries battle with it, albeit in varying and higher degrees of success. A 2018 World Bank study showed that in countries such as Sierra Leone and Paraguay the poor pay as much as 13 percent and 12.6 percent respectively of their income in bribes.

Developing countries are not entirely left to their devices in the fight against corruption. The World Bank acknowledged that corruption is a major threat in the realization of sustainable development goals and it routinely gives support to developing countries combating corruption, it assists member developing countries via e-procurement, forensic and biometric support. In 2015, Guinea, for the first time since the country’s independence, documented all employed civil servants with the assistance of the World Bank by implementing a biometric identification system to conduct a census of civil servants to eliminate fictitious and fraudulent positions and potentially save more than US$1.7 million through the discontinuation of salary payments. This has by no means entirely solved the corruption problem, but it is certainly a step in the right direction. Perhaps it’s time for Nigeria to start thinking in terms of simple solutions such as how the Bank Verification Number, which is already in place, could be given relevance alongside other solutions. Also to be utilized is the National Identification Number scheme which essentially aims to capture every Nigerian on a master database, because how does one embark on such a task if people are not documented and as such cannot be easily traced when solving these crimes.

For effective tackling of the corruption problem, a concerted effort led by a combination of the government, the private sector, civil society organizations and the very populace is imperative. Often, corruption to the average Nigerian is understood in terms of theft or misappropriation of public funds by those who are at the helm of affairs. However, corruption comes in different forms and if this pervasive phenomenon is to be tackled, these forms should be understood and distinguished. As stated earlier, corruption seems deeply entrenched in the society, looking at more common-place and as such seemingly acceptable forms of corruption such as the police officer who expects you to pay for your right of way, establishments producing and selling counterfeit drugs, government agencies who rather than practice meritocracy reserve top paying jobs for children of the elite, it is clear that stamping out corruption is not solely an issue of ‘political will’. Rather, it requires all stakeholders working in synergy because this problem quite simply exacerbates the gaping inequalities amongst the populace which lead to resentment and distrust of authority, which in turn lead to violence, instability and a general breakdown of social order. Maintaining the status quo is not an option to be considered as the situation is clearly degenerating, urgent reform is imperative. The constitution and all legislation setting up these agencies must be amended to address modes of appointment, structural issues within the agencies, institutional overlaps, accountability, and so on.

Moreover, given that financial crimes have evolved, it is key that we adopt up-to-date technologies to capture, prevent, detect, and deter corrupt practices. It is an indictment on the country that most of the high-profile fraud cases that have been brought to light have been conducted by international investigative agencies. From the much celebrated case of James Ibori, a one time governor, to the case of a former Minister of Petroleum Resources, even the more recent case of the fraudster apprehended by the Dubai authorities – each instance involved the use of high-tech tracking and forensic tools.

To effectively and sustainably fight corruption the country needs to focus on building strong institutions with proper structures in place, cultivating public trust and credible leadership. Nigeria can certainly turn the corner on this endemic phenomenon, but it must start by understanding it in its entirety.

Image by Gabriel Miguel Bero from Pixabay

As the tempest of the pandemic rages, leaving carnage in its wake with healthcare sectors and national economies being the worst hit, there is no disputing that the world will never be the same again, a sentiment, echoed by many observers during these unsettling times. The pandemic and its scourge on humanity has made certain of that.

Right across the globe, there is a general all-pervasive air of uncertainty. Undoubtedly, everyone from all walks of life has been directly or indirectly affected by the COVID-19 pandemic and, as is the case with every devastating crisis, the already disconcerting disparity between the middle class and economically disadvantaged is set to be more glaring as the latter (with less access to resources, infrastructure and social services) grapple to cope with the situation. This crisis has revealed the inadequacies in African social infrastructure. Going forward, if we are to be prudent with a view to preparing for the next pandemic and make adequate provisions – history has shown us that there will most certainly be others – then it is incumbent on us to address these systemic issues.

With every major global crisis, there are shifts in received wisdoms and paradigms that had hitherto reigned supreme, that result in policy changes for the overall good of society. We have seen this to be the case after both world wars and, more pertinently, after the 1918 Spanish flu pandemic. Likewise, with the toll this current pandemic is taking on the global population and economy, one would not be wrong to equate it with other world-altering events.

Devastating as the Spanish flu was – the global death toll is estimated to have been between 50 million and 100 million – it acted as the much-needed catalyst for the Global North to revolutionize their health systems and change preconceived notions about healthcare. Being unprepared and susceptible to dire consequences of future pandemics was not something they wished to contend with. This determination led to the emergence of centralised health systems with the concept of universal access to healthcare elevated in public policy considerations.

A century on, centralised and extensive health coverage is the norm in the Global North, with governments spending significant portions of their budgets on free healthcare for all citizens. Russia was the first country to put a centralised public healthcare system in place after the Spanish flu, closely followed by countries in Western Europe. Eventually the idea spread across the developed world and came to be adopted as the standard. The US was the exception as it opted for an insurance-based corporate sponsored health scheme.

Although the Spanish flu also affected Africa on a significant scale infecting up to 80 percent of the population with a 15 percent death toll, a corresponding health revolution was muted on the continent afterwards. Possibly this was because the nation states were in the hands of colonialists and their priorities in terms of administration were different compared to what we would expect if the wellbeing of the citizen was at the centre of public policy. That notwithstanding, this pandemic has revealed weaknesses not only in our health systems and economies but has likewise highlighted the gross inadequacies of our education sectors. On one level, these inadequacies have combined to dampen the efficacy of measures adopted to combat the pandemic, and on another, they have undermined our abilities to join the race to develop a vaccine or therapeutics to contain the virus as our global counterparts are doing. Sadly, this has proved to be a tall order as universities and research centres on the continent are inadequately resourced. This fact is borne out by the inability of African countries to undertake widespread testing, as most are struggling with expertise and equipment. Even the production of reagents necessary for testing for the presence of the novel coronavirus, have proved beyond us. To put it bluntly: We have university teaching hospitals, but we do not have enough labs.

Looking beyond our dilapidated health systems, the staggering levels of illiteracy across the continent are alarming. The poor who are, more often than not, illiterate will presumably be hardest hit by the pandemic because of the combination of a lack of comprehension of the disease, the inability to safely isolate due to their deplorable living conditions, and a lack of access to information and basic utilities such as water.

It is perhaps because of this that a good number of the population believe the pandemic to be untrue and an elaborately orchestrated lie to cause hardship on them, or see it as a test of their faith. As such they are more susceptible to make decisions or engage in activities that will exacerbate their exposure and vulnerability to the novel coronavirus. From popular media, we have seen vulnerable people taken advantage of by their faith leaders who peddle miracle cures for COVID-19, people trying on cloth masks in open markets- completely defeating their intended purpose, disregard for social distancing rules with crowds pushing and shoving to get into public buildings or access ATMs, rural and urban dwellers alike overcome by mirth at the thought of “a common cold” being a killer, and so on. Equally as disturbing perhaps is the demographic of the supposedly enlightened who espouse disturbing views and rehash far-fetched conspiracy theories relating to the pandemic. It would seem that our education, where present, is devoid of critical reasoning.

We can perhaps be forgiven for not having developed our health systems when the rest of the world did. In our current situation however, we can no longer claim ignorance of the sheer importance of having proper education systems alongside other social infrastructure in place. This pandemic should serve as a clarion call to improve on both healthcare and education infrastructure for posterity.

Therefore, as we plan for life after COVID-19, we must take the whole gamut of social infrastructure into consideration as central to our development and wellbeing in the future is having robust systems in place. Critical as they are, it is our contention that preparedness is more than just about adequate health systems. Increasing awareness amongst the populace of the impacts of pathogens, efficacies of measures to combat epidemics or pandemics, mean that education must be given necessary condition. Preparedness means an educated populace, only with education would our society be able to lift itself out of poverty and its attendant complexities and hardships, and be able to provide necessary healthcare and public health measures that are currently lacking.

While the world is focused on healthcare and the debate concentrates on life and sustaining livelihoods as different countries are emerging from their lock-downs, Africa must focus on building both its health and education sectors. Only such an approach will result in an enhanced state of wellness, improved standards of living, improved employment opportunities and economic independence on a sustainable basis.

Image by Pete Linforth from Pixabay

In the midst of the COVID-19 pandemic, the Federal Government has just announced that it is cutting the primary healthcare budget by 42% to N 25.5 billion. As published by the International Centre for Investigative Reporting ICIR on Tuesday 2 June, “according to the revised document seen by Dataphyte, the Federal Ministry of Health had a downward cut of ₦15.17 billion.” By contrast capital expenses not touched include ₦6 billion for OSSAP: Special Projects and ₦10billion for Office of the Senior Special Adviser to the President (OSSA).” The news has predictably been greeted by public outcry.

Research undertaken by TAPI shows that the alarm bells should have started ringing much earlier as the cut is just the most recent example of how national healthcare has been consistently deprived of resources.

Nigeria committed to Sustainable Development Goal 3 ostensibly to “ensure healthy lives and promote wellbeing for all at all ages” by 2030. Yet a look at the financing of the healthcare sector suggests that the commitment is vacuous and swiftly becoming a pipe dream. Back in 2001, the Federal Government in concert with other major African nations signed the famousAbuja Pledge to spend 15 percent of each annual budget on healthcare. Fast forward to today: Were the primary healthcare budget just announced to constitute all government healthcare spending, then it would mean the total Federal budget was only N170 billion! That is how far short of the mark spending has fallen.

Facts are sometimes painful to accept, and one such fact is: The Federal Government has never since 2001 met its pledge. Paper, as the saying goes, is patient, and once the ink had dried on the pledge it evidently simply became another piece of paper in a drawer. A quick glance at other international benchmarks for the public healthcare financing such as ratios of expenditure to GDP or staffing levels, which are crucial for provision of primary healthcare, shows that the Nigerian picture is dire.  

The first set of statistics evaluating Nigerian government healthcare expenditure is the absolute figures for federal budget allocations, whereby we distinguish between recurrent costs and capital costs. The Ministry of Health budgets over the last six years are captured in the graph below

In absolute terms the budgeted figures thus increased, whereby the rise has not been nearly as significant for capital spending as it has been in recurrent expenditure. However, the figures gloss over reality. Actual budget releases for capital expenditure were nowhere near as high. (For simplicity’s sake, we have excluded allocations to National Primary Health Care Development Agency and National Health Insurance Scheme because they together formed a negligible ratio of the whole of less than ten percent.)

If we assume a 100% performance for recurrent expenditures as actual recurrent releases always trail the budget, and focus on the 2014-2019 time series, we see that only in 2016 was the budget volume released anything near the figure actually budgeted.

If we aggregate the numbers, a total N191.65 billion was released for capital expenditure over the six years, or on average N31.94 billion p.a. for an average population of some 175 million (starting at 161.5 million in 2014 and rising to 190 million in 2019). Put differently, annual per capita capital expenditure for the period was a mere N 182.49.

When population growth and inflation are factored in, a better of idea of the real budget figure emerge. The National Bureau of Statistics (NBS) database gives average year-on-year inflation rates for the years 2014 to 2019 inclusive, as 8.0%, 9.0%, 15.62%, 16.55%, 12.15% and11.39%, respectively. The difference between the Ministry of Health budgets for 2014 and 2019 is therefore 40.9% in nominal terms. Discounting for average inflation of 11.39% in 2019 implies that government expenditure for health over the period dropped by 0.4% in real terms. Let us further assume population growth of 3% per annum., population growth over the 2014-2019 period of 15.9%.Health expenditure per capita in real terms thus amounted to N 1,407, down from N 1,638 in 2014. In other words, government health expenditure per capita fell between 2014 and 2019 by 14.1%! Moreover, this fall does not even factor in the significant change in the Naira-Dollar exchange rate during the same period… (it fell from N 164 to N 305). Since many of the drugs and medical equipment have to be procured abroad, the value of the health expenditure dropped 47%,

To shed some light on the benchmarks and the pledges, attention is turned to FGN health expenditure in relation to GDP and FGN Revenue over the same period. The story that emerges is bleak: The last five years have not seen growth in healthcare spending, they have seen a decrease. Meaning that the system lags ever further behind the targets.

 FGN RevenueGDPHealth / FGN RevHealth / GDP

The figures fall far short of the benchmarks discussed above of the Abuja Pledge of 15% or the 4-5% of GDP recommended by WHO to achieve universal health coverage.

Turning attention from financing to staffing levels does not yield grounds for optimism. The WHO reports and other peer-reviewed studies reveal that the growth rate in staff per 10,000 members of the populace has flatlined since 2004. In absolute terms, the number of doctors, midwives or nurses in Nigeria are grossly inadequate to provide primary healthcare at the level WHO recommends. For this to be achieved, staffing levels must grow at an annual growth of 7.5%.

Another expression of the fact that government healthcare expenditure has actually dropped in the 2015-2019 period with dire consequences is in regards to infant, under-5 and maternal mortality compared to many of its peers. This is one of the areas investigated in the TAPI research – Nigeria is compared to Ethiopia, Indonesia, Kenya and South Africa. When attention is turned to death rates attributed to malaria and tuberculosis, the picture that emerges is the same. With government’s avowed determination to create jobs, it stands to reason that addressing incidence of malaria estimated at 57 million cases of malaria per annum would positively impact productivity.

Equally worrying, healthcare in Nigeria today is mainly something accessible only to those who can privately afford it as an out-of-pocket (OOP) expense. A glance at the figures for the period covered in this study from 2014-2016 reveals the following:

OOP expenditure compared to combined spending by the states and local government authorities (S&LGAs) for 2015 show that total S&LGA expenditure came to a mere 10.43% of OOP. In 2016, the comparable figure was only 6.51%, and the relationship was clearly skewed even further toward OOP healthcare spending. If we include the Ministry of Health budget alongside the S&LGA outlays, then total public-sector expenditure for 2015 and 2016 still mounted to only 21.03% and 15.4% of the respective OOP expenses.

This shows that the Nigerian populace is directly paying for healthcare. Evidence suggests this has been the case since 2006. Since then, out-of-pocket spending has increased by almost 20% over the period reviewed, government spending fell by close to 7.5%. For a large section of the population such payments amount to “catastrophic health spending”, meaning they constitute more than 10% of the household’s possible spending. The household then faces a catastrophic decision: Choose between healthcare or other necessities in life.

Note also thatless than 5% of those eligible are signed up to the NHIS. TAPI research shows that many rural communities are starved of primary healthcare facilities, as the health centres are located in main towns in the relevant ward or LGA. The situation is compounded by the fact that as the World Bank has outlined, the cash primary healthcare centres have at their disposal tends to stem from “user fees” (even for services that the 2014 National Health Act says should be free).

As one of Nigeria’s main lenders the World Bank offers a sobering assessment of Federal Government health financing:

“Low government health spending over the last two decades has limited the expansion of highly cost-effective interventions, stunting health outcomes and exposing large shares of the population to catastrophic health expenditures.Nigeria spends less on health than nearly every country in the world. … Funding for primary health care is especially affected as the bulk of spending occurs at the central level and is focused on tertiary and secondary hospitals.

Coverage of promotive, preventive, and primary health care interventions is low with the universal health service coverage index – defined as the average coverage of tracer interventions for essential universal health coverage – at just 39 percent.”

Primary health centres receive little to no operating budget.Primary health centres are meant to receive cash and in-kind support through the various fund flow arrangements … However, the 2016 National Health Facility Survey (NHFS) confirmed that on average providers received salaries with a two-to-three-month delay and only a third of facilities received any form of cash grants to meet their operational costs.” (World Bank 2018)

And now the Federal Government of Nigeria has further cut the primary healthcare budget. When what it should be doing is massively increasing it if it is to provide primary healthcare to all the country’s citizens as per SDG 3. Before the cuts were announced, Nigeria was already spending well over three times its healthcare expenditure on debt servicing. We can therefore only assume a general lack of political will to achieve SDG 3 is the cause of the malaise.

The conclusion can only be that government has not dared prioritize healthcare over other sectors and that unless it does the situation will not change and funding will continue to fall. Alternatively, government must look for alternative sources of financing. To say that there is already a state of emergency in the Nigerian healthcare sector as regards financing is to understate the magnitude of the problem. Capital and operating expenditures need to be radically increased (infrastructure, drugs and medicines, human resources). The original commitment to 15% of budget as stated in the Abuja Pledge would be a minimum starting point in light of the number of years of ‘negative’ investment in healthcare when compared to population growth. To paraphrase the old chestnut: If there were political will then there would be a way.

Image by Arek Socha from Pixabay

The old adage “Money makes the world go around” is apt in describing one of the fundamental problems of the Nigerian electricity industry. The problem revolves around inadequate revenues, which undermines performance and viability. In a nutshell, the industry, as presently operated and regulated, is incapable of generating enough money to pay for: (a) gas used by the generating companies to produce electricity, (b) transmission facilities used in transporting the electricity from the power stations to distribution companies’ networks, and (c) distribution assets used in ultimately getting the electricity generated and transported to the final end users, namely, households and factories. The ensuing inadequacies and inefficiencies wreak havoc on gas supply, transmission, distribution and marketing businesses that are interlinked in the production and supply of electricity. 

So what causes revenue shortage in the industry?

The production chain alluded to above implicitly traces costs of electricity services to respective sectors involved in the production and supply process. The cash paid by end users for the electricity they consumed is the only source of cash flow for the companies involved along the electricity industry supply chain. Any shortage in that cash flow will invariably reduce the cash available to some or all of the companies. In such a case, the implication is that they will not, in the short-term, be able to cover their operating expenditures, and in the long-term, capital expenditures for expansion and asset replacement will be negatively impacted. In short, as a result of energy losses along the supply chain, revenue collected is inadequate to meet the expenses incurred in the generation and onward supply of electricity. The expenses can be categorised as either energy or capacity costs. The former refers to direct cost of generating electricity and the latter to the gamut of equipment costs involved in the generation and supply of electricity to end users.

On the output side, what is observed in Nigeria is a significant discrepancy between electricity generation and consumption. This discrepancy, termed system losses, is above 25 percent. What NERC refers to as aggregate technical, commercial and collection (ATC&C) losses, is comprised of line losses across transmission and distribution networks, and commercial and collection losses, with respect to the energy delivered to the transmission network. When the latter set of losses are added to the network losses, the aggregate losses exceeds 55 percent – this compares unfavourably with global best practice of approximately 7 percent. ATC&C losses, according to figures published by NERC, range between 32 and 71 percent.

First, let us put the problems associated with losses in proper context. Total system losses at present stand at around 55 percent of electricity injected into the transmission network. What this implies is that on any given day, if the generating companies inject 3000MW into the transmission network, it is likely that revenues collected will only cover 1350MW of the total generation (compared to 2790MW if the system were operated in line with best practice). It follows that either the service providers bear the losses and accept non-payment of 1650MW or the incidence or burden of the losses is transferred to the end users by way of tariff increases. From a monetary perspective, the value of lost electricity, assuming 3000MW output and average end user tariff of N25/kWh, is approximately N360 billion per annum. For emphasis, that is about N1 billion per day. If tariff increase is opted for as the means to deal with this shortfall, 1350MW must be effectively rebased to amount to 3000MW by over 200 percent to make good the positions of generation, transmission and distribution companies – and by extension, the gas suppliers. Tariff increase as an option is fraught with issues such as regulatory lag (delay) as rate determination is a protracted process: the authorities have to balance increases with affordability, and the industry must contend with reduction in consumption by end users in response to higher prices. The overall impact is reduction in electricity consumed, which normally sets off a cycle of tariff increases. The implication of either tariff increase or poor financial performance are dire: reduced profitability and financial viability for the service providers and/or higher cost of electricity services to end users. The long-term result: inadequate and unreliable electricity services make it difficult for service providers to raise the capital required for investment to address losses and improve services.

This begs two questions: What is the source of the losses? Who bears the burden of the losses? The answer to the first question can be found in the ubiquitous revenue formula of price multiplied by output. If the regulated tariff is low or the discrepancy between electricity generated and consumed is significant, then revenues will be lower than expected.

What can cause tariff to fall below cost of service? Regulatory lag or poor calculation of unit costs, ex post production and cost inefficiencies. Since our focus is on losses, and given the importance of pricing, we will return to issues surrounding non-cost reflective tariffs in a different paper.

Another way of looking at losses is in terms of technical and non-technical categorisation. Losses ascribed to the former are as a result of the physics and engineering involved in transporting electricity. Losses ascribed to the latter category are caused by human omission or commission. By omission we mean inadequate energy accounting – especially in the aspects of billing, metering and collection. By commission, we mean wilful acts of circumventing and undermining legitimate services such as theft, tampering with meters, non-payment of electricity consumed etc.

Since privatisation in 2013, the way revenue shortfalls have been dealt with by government is to avail the market participants of direct tariff  support. The total sum expended since 2015 is in excess of N1 trillion. Put differently, government continues to plough cash into a predominantly privatised sector to address a problem that hitherto was non-existent. In addition to this, which effectively amounts to income redistribution, current regulatory practices compound the situation by allowing service providers to recover their entire asset base rather than what is actually used in supply of electricity. This practice encourages service providers to engage in “gold-plating” in the knowledge that all their assets will be included in the tariff determination thereby putting upward pressure on electricity tariffs. For instance, no more than a quarter of the total transformation capacity of distribution networks that is in excess of 20,000MW is used in distributing power to end users, yet the distribution companies, in principle, get paid for all. Apart from the fact that end users have to contend with higher tariffs, this practice impacts negatively on government’s fiscal position through tariff/market support and high-cost energy purchase obligations demanded by IPPs and gas suppliers.

The simple point is that the losses are just too high and neither make a good story for investment nor improvement in electricity services. This position is simply not sustainable – not for the government, not the service providers and certainly not for the end users. Something must be done urgently.

Slay the monster before it consumes everything in its path

The distinction along technical and non-technical lines gives insights into how the problem can be approached. Technical losses consistent with best practice (design and network operations) are considered to some extent to be non-discretionary due to the characteristics of electricity. Non-technical losses, on the other hand, are within the discretionary control of service producers. Some allowance is usually made for losses in rate setting but not to the extent we see in Nigeria. The level of ATC&C losses we see in the Nigerian electricity industry is essentially rewarding inefficiencies and poor practices. It effectively provides a disincentive to the distribution companies to undertake necessary loss reduction programs that will boost quantity and quality of power, and ultimately provide cheaper electricity. One of the reasons why residential customers dominate power consumption in Nigeria, contrary to what is observed in other countries, is that apart from the epileptic supply, the losses have amplified the vicious cycle of incessant tariff increases and have indirectly made industrial customers uncompetitive, which have made many of them close down or relocate to neighbouring countries, while those that remain are buffeted by hostile operating conditions. These have combined to exacerbate socioeconomic problems and challenges such as unemployment, poverty, rural-urban development etc.

Another way of looking at losses is from an accounting perspective. The industry burns more gas than required, this is a resource that otherwise would be sold to enhance government revenues and fiscal position, not to mention ensuing environmental degradation. More investment in transmission and distribution facilities is required to address the losses as ultimately, high technical losses translate into losses to the nation, and high non-technical losses are corporate losses to the service providers. This situation is further compounded by a moral hazard problem on the part of the service providers as the losses are borne by end users and government.

What must be done?

The good news is Nigeria is not the first to contend with high losses as other nations who were in similar positions have successfully curbed and reduced them to tolerable levels. The bad news, however, is the attention of the industry is yet to be properly trained on losses – ATC&C performance targets ranging between 21 and 38 percent set by NERC are not stringent enough and performance of the distribution companies come nowhere close to those targets. This needs to change given the significance of electricity to economic growth and development. Irrespective of the argument that energy consumption drives economic growth or vice versa we subscribe to, the dragon must be slain if the nation is to see electricity play its rightful role as the engine of growth and development. Policymakers must take cognisance of the fact that simply committing public funds to transmission and distribution networks, or providing financial backing for the development of generating plants will not alter the fundamental problem caused by technical and non-technical losses.

Macroeconomics and all its attendant jargon are not the métier of most and so we can perhaps be forgiven occasionally for overlooking glaring red flags. As a consequence, we do not notice causes of great concern and as such government’s shortcomings and illogical decisions. In this article, we will avoid esoteric terminology and focus on some of the key issues, be they logical or not, behind decisions of government that affect all of us.

The Federal Government of Nigeria (FGN) is on a borrowing spree, ostensibly to fund a budget resolved in very different times. Essentially, the budget has been adjusted by removing capital expenditure and the new borrowing requirement is estimated at over N4 trillion. Out of this, N1.94 trillion will be sourced externally (US$3.4billion from IMF, US$1.5billion from World Bank, and US$500million from Africa Development Bank). The balance of N2.06 trillion will be raised in the domestic market. The FGN has already sought and received approval from NASS to convert the N850 billion foreign borrowing in the 2020 Approved Budget into domestic borrowing.

N4 trillion amounts to about US$11.4 billion.

Based on findings by the World Bank, Nigeria loses about US$10 billion in revenue annually because of inefficiencies in the agriculture sector. Moreover, the Nigerian Electricity Supply Industry (NESI) losses significant sums on an annual basis as a result of so-called system losses. The power plants produce electricity but the revenues collected by the distribution companies cover only a fraction of the cost of the electricity produced, which is why the FGN regularly has to bail the sector out by way of monetary releases. In 2017, N213 billion was given to the industry, and as of 2019, N500 billion was approved for the sector.

The question all these numbers beg is: Why borrow to fund recurrent expenditure and increase the nation’s debt burden (and thus annual long-term debt-servicing bill), instead of plugging these leakages that cut across various sectors of our economy and saving much more in the process?

If we juxtapose these losses to FG’s voracious appetite for borrowing, in the present climate exclusively to fund non-capital expenditures (salaries, government cars, etc.), the absurdity becomes clear. If borrowing were dedicated specifically to fixing sectors of the economy where avoidable losses in tens of billions of dollars are incurred then it could be justified. In fact, we could even find it laudable owing to the fact that these sectors, if addressed and properly administered, have the potential to generate considerable revenue for government while diversifying the economy and driving economic growth sustainably.

The Nigerian landscape is littered with such losses and such potentials, but let us focus simply on the two sectors mentioned above, namely, agriculture and NESI. As stated, the agriculture sector in Nigeria loses US$10 billion annually as a result of “wastage”. This wastage is a direct consequence of inadequate transport and energy infrastructure to convey agriculture produce post-harvest to markets, to store them and to convert them into higher-value goods. It goes without saying that were government to invest strategically in this sector, addressing the challenges holistically, creating and implementing policies to support this sector, then agriculture would grow and thrive, contributing substantially more to GDP and generating revenues by way of taxes.

Agriculture as a sector is perhaps the most baffling as it has huge potentials but continues to underperform, despite the FGN reportedly ‘throwing money at it’. If properly harnessed, Nigeria’s agriculture has the potential to become a force to be reckoned with in the global food supply chain. In fact, in addition to the above losses due to wastage, there’s another major negative: only 48 percent of arable land is being cultivated. According to the World Bank, “The value of agriculture in Nigeria is projected to grow to US$256 billion by 2030. The growth is expected to come from yield expansion (about 44 percent), area expansion (about 33 percent) and diversification into high value crops (about 23 percent)”. However, this will not be achieved if the wastage is not first addressed, which in turn requires losses in the power sector and the significant shortfall in transportation infrastructure serving agriculture to be fixed. 

The power sector consistently records high system losses, which are comprised of both technical and non-technical losses. The former are line losses, which are inevitable but can be minimised, whereas the latter, also known as ‘commercial losses’ refers to theft, billing irregularities and non-payment of electricity consumed. Total system losses run at as much as 50%. In other words, the country is simply tolerating half the power generated either not being used or not being paid for. Socio-economic development is impossible without electricity as it is a significant input for various other sectors.

If the issues and challenges in these two sectors are addressed, then we could expect a surge in economic growth. Multiplier and spill-over effects would heighten the positive outcomes. In power for instance, the more losses that are eliminated, the more electricity there would be to extend those poorly served and the greater the number of paying customers the lower the resulting cost of service and lower prices all around, which would make NESI more competitive – and the industries using the power. In agriculture, the higher the quantity of food available in the market, the lower the cost would be and the faster we can attain food security. All of this would spur higher economic growth and generate government revenue that could then be devoted to areas such as rural healthcare, education and development, which would in turn spark further growth, and so on…

In light of the above, surely it would make sense for the FGN to focus on taking up loans to address the losses in the above two sectors – with a view to garnering the revenue that can be derived from them. This way it would address the perennial losses and ensure that the gains from reversing the losses contribute to debt defeasance. It of course goes without saying that were wastage to be addressed, the US$10 billion would not accrue to the FGN. What will flow to government would be revenue by way of taxes, interest and other statutory charges. For the sake of this argument we shall assume it would not exceed 10 percent which amounts to US$1 billion a year – more than enough to service the loans required. To put things in context, a billion dollars every year for the past four decades since government has been spending on the agriculture and power sectors would be in the excess of US$40 billion and that is from agriculture alone. It stands to reason that this money would have gone a long way in addressing all the infrastructure deficits that continue to cause wastage and revenue losses.

It is pertinent to note only two sectors were highlighted in this discourse, if one were to take cognisance of losses in other sectors across board such as gas flaring in oil exploration and petroleum product subsidies, the potential would be much more higher and encouraging.

Precisely in times when revenues are tight, it would be logical for the FGN to devise policies, strategies, and programmes that prioritize eliminating losses. The country can simply not afford to ignore such potential revenues and borrow at significant cost to the economy and the next generation without addressing one aspect of the problem that got us into the situation in the first place. The current situation is simply not sustainable.

The agriculture sector in Nigeria employs no less than 70 percent of the labour force and accounts for 21 percent of GDP. Despite this level of importance, the sector has not received the attention it deserves. Possibly, this explains why it has remained so underdeveloped over the last several decades.

Considering the current state of the economy and negative socio-economic indicators, the question that should occupy policymakers ought to be how to develop the agriculture sector, alongside other significant contributors to GDP, such that it increases economic growth and promotes sustainable development. In recent times, there has been significant attention by government to diversification, with development of the agriculture sector at the centre of the discourse. Is this solely because revenue from oil is becoming increasingly unreliable and uncertain and the country needs an alternative cash cow? Or is diversification being pursued for the right reasons, namely, to develop the Nigerian economy to address unemployment, income disparities and poverty on an inclusive, sustainable basis?

Sadly, the development focus of government has not significantly impacted on the economy, and agriculture is not an exception. Perhaps the reason why development has not yielded the expected improvement in the lives of Nigerians could be due to the lack of content, proper planning and sustainable initiatives. If government is pursuing development initiatives but the citizens are not seeing the dividends, could it be that both have different ideas of development? What comes readily to the mind of the average person when government pronounces this word? To the average government official, it would possibly mean more physical infrastructure such as rail lines and road networks crisscrossing the country, more power stations, more schools, hospitals etc. To the average person, it probably, by contrast, means a better (paying) job, more electricity, more food on the table and clothes for the children, better housing and more disposable income.

Is there a universal definition of development? It is simplistic to see development purely in terms of physical infrastructure. Development is a more nuanced concept, as the UN’s definition shows: “Development is a multidimensional undertaking to achieve a higher quality of life for all people. Economic development, social development and environmental protection are interdependent and mutually reinforcing components of sustainable development”. It is arguable that not much thought has been given to development in this sense and this could explain the state of the Nigerian economy. The agriculture sector has fared poorly from the dizzy heights of the 1960s when production and export of cocoa, oil palm, groundnut, and cotton dominated international trade. Much has changed since: Oil has taken centre stage and the result is an agricultural sector in an abysmal state with 90 percent of output being attributable to subsistence farmers and over 70 percent of farmers living below the poverty line.

Clearly, the jump from agrarian to modern economy was ill-conceived and poorly planned. As a matter of fact, one could say agriculture development was truncated. The consequences of this, which the nation still grapples with, are unemployment, poverty, social dislocation, exclusion, and widening income disparity. Development policies and programmes should be framed as pathways to increased growth and sustainable development and that requires looking at the entire panoply of issues and challenges in creating an integrated plan to address and reform agriculture. After all, it definitely has the potential to be a leading driver for a more diversified economy. The idea is not to abandon the oil sector and focus solely on agriculture; real diversification requires transformation of a diverse range of sectors. To achieve this, linkages should be established with the oil sector and other sectors that can readily create value and jobs taking cognizance of our starting conditions (resources, labour preparedness etc.). If government had sufficiently invested oil earnings in enablers for increased agriculture productivity such as transport, energy infrastructure, superior farming techniques, the agriculture sector would have supported and spurred the development of the manufacturing sector with food for urban population and inputs for agro-allied and light manufacturing sectors. This in turn would spur additional investment in energy and transport infrastructure as industrial activities ramp up. Development in all three sectors would create jobs and drive economic growth and development.

How do we achieve all this? We have to start from where we are, which is an agriculture sector dominated by smallholdings and subsistence farming. A clear plan must have at its centre the transformation of the low-yield subsistence farmer into a productive commercial farmer with clear goals of increases in output, productivity and food security. Also, the development plan must be explicitly formulated as an expansion plan for exports and improved trade balances. Finally, the plan must also include a component to deepen agriculture value chains, to increase the benefits and returns that would accrue to the economy.

In investing in inputs that would drive sustainable growth in the agriculture sector, government will not be reinventing the wheel. Several developing countries have adopted this approach in transforming their agriculture sectors as engines for job creation, growth, and prosperity. Given that Nigeria’s agriculture sector in its current state absorbs two thirds of the labour force, it stands to reason that were deliberate investments and policies made to improve this sector, productivity gains and employment generation would, to a large extent, address the plethora of socio-economic challenges and problems Nigeria contends with.

Attention must likewise be paid to complementary issues and challenges that influence agricultural output albeit indirectly, but substantially. For instance: (i) health – we need to assess the impact of illnesses on agricultural output and productivity, ensuring better primary healthcare outreach to  rural dwellers; (ii) education – we need to improve basic education and skills acquisition facilities to boost the use of superior farming techniques and augment interfacing with input and output markets; (iii) energy and transport– we need to provide the infrastructure to drive the transformation and efficient conveyance of input and outputs; and (iv) climate change – we need to promote conservation, proper land management and practices to reduce the adverse consequence of global warming. All of this combined will no doubt help subsistence farmers emerge from poverty and make their mark in a world of bi-seasonal crop production.

With the right amount of planning, investment and industry, achieving all this is possible; after all, this is a well-trodden path that transformed a good number of developed and emerging economies. According to a 2017 report by McKinsey, “almost every industrialised nation began its economic assent with an agricultural transformation. Recent examples include Brazil, China, and Vietnam, each of which at least doubled the value of its agriculture sector within 20 years of starting its transformation”. For Nigeria, diversification must go beyond the quest for supplementing government’s revenues and expending large quantities of scarce resources on politically expedient but unsustainable social investment programmes – and must instead be grasped as an opportunity to transform the economy for enhanced inclusive growth and balanced development for the nation.

Seven months ago, the world seemed a steady place. Christmas holidays upon us. President Trump was ramping up for his re-election bid. Boris Johnson had just won a thumping majority. Brazil’s agro-industry was receiving massive government support. The Federal Government of Nigeria was gearing up to borrow US$30 billion for massive infrastructure projects: mainly railways, a smattering of main roads, a huge dam, (but no hospitals) blithely turning a blind eye to the already fast-falling oil price and the ever-contracting market for black gold. Suddenly, news started to seep out of Wuhan, and China, that premier destination of Nigerian wholesale traders of consumer electronics who then fly home with Emirates, Ethiopian, Qatar, or Turkish, seemed less alluring. Four months later flights from the US, UK and mainland Europe started to seem like a way of importing possible death rather than goods.

At the same time as it has reaped death on a large scale, COVID-19 has also ravaged economies. Just as it sent US unemployment figures through the roof, so it sent the price of oil – so key to Nigerian government revenues – from fast fall into free fall, and then straight through the floor. Gone are the days of borrowing US$ 30 billion – as the Senate approved – Abuja has now scaled back its loan requests by a factor of 10 and is being granted a loan in order to survive – promising the IMF to behave, much as it had to back in IBB’s day. The IMF insisted “The focus should remain on medium-term macroeconomic stability, with revenue-based fiscal consolidation essential to keep Nigeria’s debt sustainable and create fiscal space for priority spending. Implementation of the reform priorities under the Economic Recovery and Growth Plan, particularly on power and governance.”

Fast forward to now. The Coronavirus has shown populist leaders to be ineptly disposed to handling a highly complex crisis. Or rather in some cases, the leaders showed themselves to be staggeringly foolhardy. Be it the maverick praise by Trump for self-injecting disinfectant, or an ignorant attitude toward testing and locking down London, or even Bolsonaro commenting “So what?” when being asked what he thought of the pandemic’s death toll in Brazil. Indeed, Trump ignored early warnings and thus by the time the White House swung into action, the virus was fast spreading. Johnson felt initially that it sufficed to simply recommend that the ‘vulnerable’ stay at home and No. 10 placed its faith in ‘herd immunity’. When it became clear that the death toll of such would be extremely high, he switched strategy in mid-stream. In Brazil, when confronted by the facts of a spreading virus, Bolsonaro simply sacked his health minister as the harbinger of bad news.

Indeed, it is fair to say that the virus has savaged single-slogan political solutions – be it “Make America Great Again and Drain the Swamp”, “Get Brexit Done” or “Let’s Make Brazil Great”. Such populist appeals to the people (along with the claim that they are being hoodwinked by an ‘elite’), do not deter virus spread. Nor, for that matter, does our own homegrown, broom-waving “Sweep out Corruption”. After all, populism is all about pandering to the people’s purported will, rather than imposing constraints on them, which is what the pandemic calls on governments to do. Pakistan’s PM Imran Khan openly said the matter of lockdowns was so very complex as it entailed a dilemma of striking an intricate balance between locking down and stopping the poor among the people from starving to death.

Let’s look at the planning behind those simple solutions to the crisis a little more closely as this may cast some light on what went wrong in the crisis response centres of Washington, Westminster, and Brasilia, as opposed to Berlin, Madrid or Paris. The United States, the United Kingdom, and sadly Nigeria share key policy weaknesses: They are all guilty of testing too little and too late. And then failing to introduce widespread tracing and quarantining in time. To be fair, the US and the UK have an advantage and thus even less excuse: They have far greater health infrastructure in place. The Nigerian healthcare system has been neglected for years, so retrospective action is to upgrade hospitals is at best to gloss things over (again, the SDG recommendation is 15%, the reality in Nigeria 4.5%). In this regard, for Nigeria, with its dwindling resources, the rush to buy ventilators/ICU beds was a race to the bottom, in that the baseline was max. 0.6 beds per million inhabitants as compared to a figure of 1 per 10,000 in the main EU Member States. To be equally fair: Nigeria had an advantage it wasted: If it had closed its airports at an early date, or at the very least introduced testing (and not thermometer guns) at the entry points, it would have been in a better position to control the spread.

Regardless in such a situation you must mass test, isolate; mass test, isolate, and ensure people maintain personal hygiene methods. On the testing front: In Germany as many as 400,000 people are being tested a day (the actual capacity is 800,000 a day), in Nigeria the total number tested is 17,500, with 2,500 of that number testing positive (1 in 7). In the US, 7.1m have been tested with 1.15m positive (roughly 1 in 7), in the UK 1.2m with 187k positive (1 in 6.4). What of Europe’s “front-line” states. Italy has tested 2.1million 210k were positive or a 1-in-10 ratio), Spain 1.93million (217k were positive meaning 1-in-9)  – and in Germany 2.5million have been tested with 165k positive (1 in 15).

Put bluntly, Europe has been very strong on testing and has, despite the awful number of deaths, kept the number of persons testing positive for Coronavirus down in percentage terms. That is the product of careful, methodical planning to ensure best use of resources under tough conditions. In Germany’s strongly federal system, coordination between the states has been an absolute priority to make sure everyone was on the same page, even if state policies differ. Remember, all three countries in mainland Europe imposed stark lockdowns as quickly as they could in line with existing plans for pandemics (for the record: Trump had disbanded the US agency responsible for drawing up such plans) and are only now starting to think of easing the regulations.

Not so Nigeria. Here the policy initially seemed to be ‘wait-and-see’. And when the response came it was not based on a prior plan, but a copycat of the lockdown Modi had ordained in India. (causing a massive migration from urban areas to the villages and thus potentially spreading the disease very thoroughly). What did not go well in India was perhaps doomed to fail in Nigeria. Indeed, busy wrestling with a fiscal meltdown the government seems to have wilfully overlooked the fact that over 30% of the population are day-wage earners in the informal sector – and, therefore, if you ‘lock them down’ you condemn them to starvation. In other words, here advance planning should have involved not raising donations for new ICU beds but organizing a widespread system of getting food to people – and making certain there was fresh water everywhere so people could ‘wash their hands’.

Abuja’s strategy is also surprising because it flies in the face of the experiences we can assume the administration has garnered from both the IDP camps and the extensive social investment programmes; after all, the one field most definitely entails emergency/crisis management, while the other has hinged on the distribution of palliatives. Alternatively, we could conjecture that lockdown coordination has been so poor precisely because it was based on those experiences, and that precisely those programmes must therefore be deemed to have largely failed.

Be that as it may, in one thing there has been policy consistency: The incoherence of the initial lockdown has been matched by the incoherence in lifting it again although numbers of persons testing positive is starting to increase fast. Once again, a simple “open on Monday” may be sweet to the ears of those left starving by the earlier “We are closing on Thursday”, but it doesn’t help you plan and implement marketplace layouts that ensure social distancing, educate the populace on the right temperature at which to wash masks, etc. Allowing two people on the backseat of a taxi and one person in the front passenger seat may lower possible contact numbers, but few are the VW Golfs or Toyota Corollas where you can maintain a minimum of 1.5 metres between the front and the back. Likewise, reopening buildings with shared a/c systems is tantamount to encouraging the virus to buzz around…

What could have been done or should be done, even if some of the horses have long since bolted? The virus has illuminated the power of individual will and autonomy and its effect on health security. People have been asked to self-check, report their symptoms, self-quarantine, self-isolate in their homes, and self-connect themselves to public health authorities. This they have tried to do – in Nigeria, too. If the authorities cannot test, then home-testing must become the new norm, and indeed home self-testing, enabled in an affordable manner rather than as something only a very slender proportion of the population can afford. At the same time, government must effectively educate, explaining what the protocols must be, starting with how to wash masks properly, which test kits should be used, and which rejected, etc. And government should be ramping up pharmaceutical production capacity to enable it to produce the 10-minute test kits the Senegalese and British are busy developing together.

Nigerians, let’s also us remember, are telco natives and tech-savvy. What do we all have smartphones for in a time of crisis? No, not for sending texts or instant messaging but likewise to report test results. Here, the mobile phone companies of this world can do far more than simply donate to hospitals. They can surely be involved in creating the special hotlines for free text-messaging. And then the phenomenon of citizens having to wait, in places for over a week, for government to ring them back, will become a thing of the past. Iceland has paved the way here, with Mrs Jakobsdóttir, the country’s Prime Minister, stating a few days ago: “We have introduced a tracing app, but use of it is voluntary. And the app we have provided is under the strict supervision of the Institution for Personal Privacy. In back-tracing infections, we have found out where the infected persons have been infected in 93 percent of the cases.”

It is time to allow data to deliver mass-testing, to allow and enable individuals to exercise their autonomy to self-test, in an technology-driven, inter-connected manner with the public health authorities elected and appointed to serve them. To put it bluntly, to implement a lockdown that is ineffective because of a lack of data and leaves more deaths through starvation than would have been caused by COVID-19 is to put a population through trials and tribulations to no avail.

Lessons to be learned: Plan before you act. Plan on the basis of data and analysis. The more data we have, the safer we can be. The more we test, the more we can trace and isolate. The virus has not gone away simply because the lockdown has been eased. Here, data is the soap that helps stop the spread of the virus. Remember, never before have citizens stayed in their homes, waiting for contact from the government, be it testing or education. Yet we all have bank verification numbers that could be used to trace, isolate… and save lives.

A unique opportunity to restructure the Nigerian economy in favour of inclusive growth to address growing unemployment and poverty

The coronavirus pandemic is causing mayhem and serious havoc with public health and economies around the world. Less-developed countries (LDCs) with inadequate health infrastructures and less robust economies that are behind the incidence curve are bracing themselves, waiting with bated breath as predictions of the full impact range from bad to grave. The low cases reported by Sub-Saharan African (sSA) nations are met with reservation given the very low levels of testing in the region. The picture that emerges when adjustments are made for low testing and the limited resources at the disposal of authorities to mount a meaningful campaign against the scourge of the pandemic is one that leaves little room for optimism. For a number of resource-rich countries, the pandemic has made a dire economic situation worse as the oil price collapse buffeted governments’ fiscal positions.

The pandemic has laid bare some unpalatable truths about sSA nations: fragility of health sectors and skewness of the economies, which can be said to reflect the political economies of these countries with economic power concentrated in a very few rent-seeking hands. Moreover, governments with threadbare fiscal positions have not been able to articulate or mount any convincing responses to the pandemic.

Implications of Covid-19 Pandemic and Oil Price Crash

Beyond Covid-19, a number of LDCs are in real dire straits, with public health and their economies exposed most to the ravages of the crises. While the novel coronavirus pandemic has put its finger on the weaknesses in the health sector, the problems have been further compounded by poor public health responses rooted in inadequate preparation, public education and infrastructure inadequacies. What the crash in oil price has shown is the lack of depth in the economy and headroom for governments to manage the crisis. Dealing with the pandemic will have to focus on rebuilding systems and the economy.

For this reason, therefore, the crises, which will irreversibly impact economies, should be viewed as presenting an opportunity to reset the political economy and reengineer economies to promote inclusive growth and development for the vast majority and not just the few. For Nigeria, the largest country in Africa, despite the gloom the pandemic portends, the authorities should perceive a silver lining and urgently start addressing the crisis as an opportunity to commence a reformulation of economic policies to reset the economy and recast the economic and social agenda. The questions that should be at the forefront of politicians’ and policymakers’ minds should revolve around the nature and scope of the reset.

The economic indicators are, without a doubt, unsettling and a source of deep concern: 60 percent of the country’s earnings go into debt service; falling oil prices caused government budget to be cut by 30 percent, and may shrink further due to declining oil prices; a largely inefficient informal sector that accounts for more than 60 percent of the economy; very low tax-GDP ratio (5.7 percent compares unfavourably to average of 17.2, 22.8 and 34.2 percent for 26 African, Latin American and Caribbean and OECD countries, respectively);  agriculture, which accounts for almost a quarter of the national GDP and engages between two-thirds and three-quarters of the labour force, is characterised by low yield, high wastage and lack of food security; capacity utilisation rate of the manufacturing sector stands at 55 percent; general and youth unemployment rates in 2018 estimated at 23.1 and 20 percent, respectively, were quite high. Factoring in population growth rate of 2.7 percent, which outstrips economic growth, indicates a situation that is unsustainable and in need of urgent transformation.

Transformation of the economy must start with overhaul of health and education

In this context, government must urgently focus on developing the social and economic infrastructure if medium to long term impacts on health and economy are to be muted. The key sectors that would need to be addressed are health, education, energy and transportation – these are enablers for inputs for enhanced economic growth and balanced development.

We can say that the novel coronavirus pandemic shows the importance of public health and its economic impact, a realisation that has been made more poignant under a strained economic environment caused by persistent downward trend in price of oil. The buoyancy of high oil prices distracted successive administrations from making good the commitment required for tackling poverty and promoting human development as enshrined in UN inspired MDGs and SDGs, which Nigeria signed up to.

WHO rightly emphasizes the interdependence of MDGs, namely, that all the MDGs influence health, and health influences all the MDGs. It posits that better health enables children to learn and adults to earn. Gender equality is essential to the achievement of better health. Reducing poverty, hunger and environmental degradation positively influences, but also depends on, better health.”

While some LDCs have made progress, others especially sSA nations have not fared well in achieving MDGs, lagging behind in health and poverty metrics. This remains true for Nigeria where despite growing poverty and dilapidated social infrastructure, the priorities have been different, as reflected in allocation of resources. On average, Nigeria allocated 4.6 percent of its annual budgets to health between 2016 and 2019, and slightly more on education at an average of 8.13 percent between in the same time frame. Our neighbours in West Africa fared much better: Ivory Coast and Ghana spent more in excess of 80 percent more over the same period. In comparison, OECD countries spent on average 15 and 11 percent on health and education, respectively. Even at that, their health infrastructures have not held up well against Covid-19 pandemic.

Moreover, health and economic growth go hand in hand. The importance of economic growth is underscored in a DFRI/OECD report in which economic growth is posited as the most powerful instrument for reducing poverty and improving the quality of life in developing countries, and that rapid and sustained growth is critical for achieving MDGs – and not just the first goal of halving the global proportion of people living on less than US$1 a day. A recent statement by Nigeria’s National Bureau of Statistics puts this clarion call into perspective: in a report about poverty and inequality from September 2018 to October 2019, the bureau stated that 40 percent of people in the continent’s most populous country lived below its poverty line of N137,430 (US$381.75) a year. This represents 82.9 million people.

It is only inclusive economic growth that can address unprecedented poverty levels in the short to long terms as it generates virtuous cycles of prosperity and opportunity that incentivise parents to invest in their children’s education. Strong economic growth is a catalyst for human development, which, in turn, promotes economic growth.  For growth to lead to poverty reduction the poor must perforce participate in the growth process and share in its proceeds.

Nigeria announcing a multibillion dollar package to address the health and economic impacts of the pandemic and oil price collapse would be welcomed – after all government disbursed at least N900billion between 2015 and 2019 to directly prop up electricity, an ailing market. Unfortunately, this is not possible as oil prices and the profligate public sector have blown a big hole in government finances. The fiscal position of government is precarious, and something urgent needs to be done. The war that must be fought is not just the transient one of the pandemic but the deep-seated socioeconomic ones that have blighted the country and its citizens for the past few decades. As this is not the last crisis the country would face, it is important to build resilience into the economy to minimise impact of subsequent future crisis.

While diversification is necessary, transformation provides compelling conditions

The Nigerian economy has been dominated by a few, and the state has struggled to build a society that produces equal opportunities for all citizens. Attempts to address this have not been sustained with any meaningful result to show. Indeed, recurring crises have shown that the country needs a root-and-branch change to address systemic issues and challenges that have skewed the economy. A radical departure from the old normal and different outcomes that will include and sustain the whole populace are what will enable effective buffering of future crises.

It is imperative that the zeal driving the war being waged against the novel coronavirus should be extended to addressing socioeconomic problems such as poverty and unemployment. While the general populace is clamouring for far-reaching changes to the economy, politicians and civil servants need to articulate appropriate strategies, policies and plans for comprehensive reform. Decision-makers must understand that in this war efforts must be visible and go far beyond piecemeal intervention.

With all the false starts we have had to transform the economy and address poverty, the current crisis should be regarded as an opportunity, a boon for a nation at a crossroads. To make good on the talk of alleviating poverty and economic transformation, there is an urgent need to change the current narrative, build a consensus with all social and political institutions, and come up with a New Nigerian Deal for social and economic reconstruction.

As the central backbone of a reset agenda the nation must formulate a comprehensive and sustainable plan, including financing, even if this means reallocating resources from traditional sectors and institutions that have gulped significant portions of the budget over the past two decades.

For the foreseeable future and as long as there is the spectre of an epidemic or pandemic even after we have successfully dealt with Lassa fever, Covid-19, cholera, tuberculosis, health is going to dominate public discourse. The readiness and efficacy of government responses to such hazards will hinge first and foremost on the robustness of the economy. One thing is clear: this is the time to rebuild systems and make them relevant to the people. When the entire nation is singing from the same hymn page, it makes for a compelling and harmonious rendition. This is a unique opportunity. It is imperative, therefore, that Nigeria as a leading light commence the formulation of appropriate policies and stimulate public discussions at home, across the region and the continent as most systems in sSA have been shown to be incapable of withstanding crisis. We should not let this opportunity go to waste or risk our economy emerging in a worse state, leaving us to limp forward into the new decade.