By Victor Ogiemwonyi
Borrowing to speed up development and grow the economy, will greatly benefit Nigeria at this time.
A country’s economy can be analyzed from an Accounting balance sheet perspective. A Balance Sheet, always has two sides. On one side are Assets of an Institution and on the other, are its liabilities. The relationship between the two, is what is managed.
The economy is no different, by expanding the capacity for asset creation, via debt instruments, can translate same, to accelerate the development that we need so badly. The 4th Industrial Revolution is upon us, yet Nigeria is still grappling from challenges of the second .
Our current revenues compared to what we need to get our population out of our slow growing economy, requires us to borrow . Government Revenues are too small for our needs, we will need to borrow, to do what we have to do. What people are worried about, is borrowing to fund corruption, padding our Budgets and inflating contracts, and ending up with nothing to show for it.
If managed right, we can choose to “grow big fast” to develop the needed infrastructure, that will help us grow our economy, while leveraging our comparative advantages.
We need to rapidly develop our Energy and Transportation infrastructure, like roads, Rail and Aviation, to help us properly connect and integrate the Country, thus facilitating the movement of goods, people and services.
This aspect of our development alone, can double our current economy and create its own growth levers, that will support whatever debt is incurred.
There are also other development areas that need urgent intervention to advance our economy. We are a nation in a hurry, some of what needs to be done today, cannot wait. If borrowing is what is needed to ensure rapid development, we must do it now. It is not going to be cheaper anytime soon and we will not have the budget allocations sufficient to get them done. We have to borrow now and pay later to stimulate the economy based on the value proposition of Keynesian economics. This is not a case of accumulating debt for our next generation. This is about building Assets for them, that will enable them live a better life in the future and in greater numbers. We can not wait to double our population before we tackle the problems that will come with it. If well planned, most of the debt, will be self liquidating from the expected double digit growth, that will come out of it, and this will take us out of our current poverty. This will be the result, of borrowing, that is grounded in sound economic logic.
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Social services like Education and health, with their own multiplier effects, need urgent attention. We must invest in them heavily. There is no alternative to making them the cornerstone of our development .
We must also ramp up growth in our other areas with Comparative advantage, such as Agriculture and mining, We need to de- risk these areas and make it attractive for the private sector to participate. Create the incentives and partner, where necessary. We may just find that, all we really need , are clear unambiguous rules, with an efficient Regulatory environment, where Regulators, will know that their role, is to enable participants in their sector, and not be a hindrance, playing police.
Recently, the media was
Reporting an Indian Minister, explaining India’s progress in the last two decades, lifting millions out of poverty and modernizing the economy. It was all planned, and we can do same here, if we are serious, and there is sincerity of purpose, at all leadership levels.
Indonesia has just proposed a policy, that will require everyone who wants to sell into their economy, to also invest in it. If you want to sell to us, make them here. That is a policy that Nigeria can also implement. What this means, is that countries, are realising where their strength is, and want to maximise them.
Both Nigeria and Indonesia have large populations and large consumer markets. We are learning from Trump… He says anyone who wants to sell to the “ beautiful US market,” must come and manufacture there. If it is good for the US, it should is good for us. We must do everything possible to rapidly increase manufacturing in our economy. We need to quickly replace those industries that have operated here for
many years, and still can not find the raw materials here to manufacture their products. What does it take to manufacture local soaps that can compete with OMO, LUX etc ? Those industries that are largely rent extracting and are not adding value, should exit.
Our huge import bills, will need to be upset with Exports. Our recently correcting Balance of Trade, must continue, until we earn enough FX to be self sufficient.
The low value of our currency the Naira, is mainly due to low productivity of the Nigerian economy. It is not helped, by those who insist on importing things we are producing here already, or we can make here. The Export of commodities, like cocoa, now doing well, was always here, we did not create the needed incentive to grow them for export . A market aligned Naira value, is one such incentive. I have previously stated in other articles, that we should let the Naira rest on the strength of our economy. When in December of 2023, when i said, i see the Naira trading at N1500 to the Dollar, when it first crossed the N1000 to the Dollar mark, my reasoning was , if the South Korea “ WON “ was trading at 1350 to the Dollar, with a bigger economy and smaller population, we should not expect anything different. We should worry more, about Naira’s stability, and what it can buy. It will also help us plan better.
The need to do everything rapidly, to develop the economy is paramount, and borrowing to do so,
will not be so wrong headed. We have capacity for debt, far more, than we know.
Victor Ogiemwonyi is a retired Investment Banker, and writes from Ikoyi, Lagos
